La Live Props., LLC v. Cnty. of Los Angeles

• Citation: 61 Cal.App.5th 363,275 Cal.Rptr.3d 726
• Decision Date: 26 February 2021
• Docket Number: B298278
• Court: California Court of Appeals
• Parties: LA LIVE PROPERTIES, LLC, Plaintiff and Appellant, v. COUNTY OF LOS ANGELES, Defendant and Respondent.

61 Cal.App.5th 363

275 Cal.Rptr.3d 726

LA LIVE PROPERTIES, LLC, Plaintiff and Appellant,

v.COUNTY OF LOS ANGELES, Defendant and Respondent.

B298278

Court of Appeal, Second District, Division 3, California.

Filed February 26, 2021

As Modified on Denial of Rehearing March 17, 2021

Ajalat, Polley, Ayoob & Matarese, Richard J. Ayoob, Christopher J. Matarese, Gregory R. Broege and Andrew W. Bodeau for Plaintiff and Appellant.

Lamb and Kawakami LLP, Thomas G. Kelch and Michael K. Slattery ; Mary C. Wickham, County Counsel, Peter M. Bollinger, Assistant County Counsel, Richard Girgado and Justin Y. Kim, Deputy County Counsel for Defendant and Respondent.

EDMON, P. J.

This is a tax refund action brought by appellant LA Live Properties, LLC (LA Live) against respondent County of Los Angeles (County). In 2012, the County levied "escape assessments"—that is, "retroactive [tax] assessment[s] for years in which property was either not assessed or underassessed" ( Williams & Fickett v. County of Fresno (2017) 2 Cal.5th 1258, 1265, fn. 2, 218 Cal.Rptr.3d 362, 395 P.3d 247 ( Williams ))—on real property owned by LA Live. After paying the taxes due under the escape assessments, LA Live filed the present action, which seeks a refund of those taxes. LA Live claimed that when the Los Angeles County Assessor (Assessor) reassessed the real property in 2012, he failed to comply with the procedural requirements of Revenue and Taxation Code ¹ section 531.8, which required that "Notices of Proposed Escape Assessment" be issued ten days before the escape assessments were enrolled. Instead, the Assessor mailed the notices just five days before enrolling the escape assessments. LA Live contended that because too few days passed between the mailing of the notices and the enrollment of the escape assessments, the assessments were void and subject to refund.

The matter was tried in the superior court, which denied LA Live's claim for a refund. The court found, among other things, that the Assessor's failure to wait 10 days before enrolling the escape assessments did not render them void, and LA Live had failed to exhaust its administrative remedies before pursuing the present action. The court therefore entered judgment for the County.

As we discuss, the trial court correctly concluded that LA Live's claim is not reviewable on the merits because LA Live did not exhaust its administrative remedies. By statute, a taxpayer is required to file administrative requests for reassessment and refund before filing a refund action in court. The administrative exhaustion requirement is jurisdictional unless the assessment is a " ‘nullity as a matter of law.’ " ( Williams , supra , 2 Cal.5th at p. 1264, 218 Cal.Rptr.3d 362, 395 P.3d 247.) In the present case, the assessment was not legally null: Even if the Assessor failed to follow the statutory procedure set out in section 531.8, that failure did not render the assessment a nullity because the real property at issue was not tax exempt, nonexistent, or outside the County's jurisdiction. We therefore will affirm the judgment for the County.

STATUTORY FRAMEWORK

A. Regular and Escape Assessments

"The assessors in each of California's 58 counties have the authority—and duty—to levy taxes on all of the property within their boundaries. ( Cal. Const., art. XIII A, § 1, subd. (a); § 401.) The amount of the levy is the property's assessed value (referred to as its ‘full cash value’) multiplied by the applicable, one-percent tax rate." ( Prang v. Los Angeles County Assessment Appeals Board No. 2 (2020) 54 Cal.App.5th 1, 11–12, 268 Cal.Rptr.3d 376 ( Prang ).)²

An assessor may reassess real property "only if one of three triggering events has occurred—namely, (1) when the property has been ‘purchased,’ (2) when the property is ‘newly constructed,’ or (3) when ‘a change in ownership has occurred.’ ( Cal. Const., art XIII A, § 2, subd. (a); § 110.1; 926 North Ardmore Ave. LLC v. County of Los Angeles (2017) 3 Cal.5th 319, 326 [219 Cal.Rptr.3d 695, 396 P.3d 1036] ...; Osco Drug, Inc. v. County of Orange (1990) 221 Cal.App.3d 189, 192 ...)." ( Prang , supra , 54 Cal.App.5th at pp. 12–13, 268 Cal.Rptr.3d 376.)

Although county assessors in some cases reassess property in the same assessment year that a triggering event occurred, in other cases there is a delay between the triggering event and reassessment. In that circumstance, "the county assessor has the authority—and a constitutional duty—to levy retroactive assessments to recapture any under-taxation in the prior years that would otherwise escape taxation due to the delay between the triggering event and the reassessment. ( Rev. & Tax. Code, §§ 51.5, subd. (d), 531, 531.2 ; Trailer Train Co. v. State Bd. of Equalization (1986) 180 Cal.App.3d 565, 580 .)" ( Prang , supra , 54 Cal.App.5th at p. 8, 268 Cal.Rptr.3d 376.)

"If ... reassessment is appropriate, then the assessor has ‘a constitutional [and a statutory] duty to levy retroactive assessments’ ‘if [he or she] discovers property has "escaped assessment." ’ [Citations.] The duty to levy escape assessments springs from our Constitution's mandate that ‘[a]ll property ... be taxed in proportion to its full value’ ( Cal. Const., art. XIII, § 1, subd. (b), italics added), and this mandate obligates assessors ‘(1) to assess all property in [their] jurisdiction and (2) to do so on a uniform basis.’ [Citation.] ‘If any property subject to taxation should escape assessment in any year,’ ... ‘the taxation for that year would not be equal and uniform, nor would all property in this State be taxed in proportion to its value, and the behest of the Constitution would not be obeyed.’ [Citation.]" ( Prang , supra , 54 Cal.App.5th at p. 14, 268 Cal.Rptr.3d 376, italics omitted.)

B. Statutory Scheme for Challenging Assessments

The Legislature has established a three-step process by which a taxpayer may challenge a regular or escape assessment. ( Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1307–1308, 104 Cal.Rptr.3d 195, 223 P.3d 57 ( Steinhart ).) The first step is the filing of an application for assessment reduction (also referred to as an assessment appeal) under section 1603, subdivision (a), through a "verified, written application showing the facts claimed to require the reduction and the applicant's opinion of the full value of the property." (See Steinhart , at p. 1307, 104 Cal.Rptr.3d 195, 223 P.3d 57 ; Williams , supra , 2 Cal.5th at p. 1269, 218 Cal.Rptr.3d 362, 395 P.3d 247.) An application for assessment reduction is made to the "county board" (§ 1603)—i.e., to "a county board of supervisors meeting as a county board of equalization or an assessment appeals board." (§ 1601, subd. (a).) Applications for assessment reductions are resolved through an administrative appeals process that can involve a public hearing (§§ 1605.4, 1605.6), exchanges of information (§ 1606), examinations under oath (§ 1607), and the collection and introduction of additional evidence in support or refutation of an application (§§ 1609, 1609.4, 1609.5, 1610.2). (See generally Williams , supra , 2 Cal.5th at p. 1269, 218 Cal.Rptr.3d 362, 395 P.3d 247.) The county board "shall make a record of the hearing" and, if requested, shall make "[w]ritten findings of fact," which "shall fairly disclose the board's determination of all material points raised by the party in his or her petition and at the hearing, including a statement of the method or methods of valuation used in appraising the property." (§§ 1611, 1611.5.) Ultimately, " ‘the county board shall equalize the assessment of property on the local roll by determining the full value of an individual property, by assessing any taxable property that has escaped assessment, correcting the amount, number, quantity, or description of property on the local roll, canceling improper assessments, and by reducing or increasing an individual assessment ....’ (§ 1610.8.)" ( Williams , supra , at p. 1269, 218 Cal.Rptr.3d 362, 395 P.3d 247.)

The second step in the process is the filing of an administrative refund claim under sections 5096 et seq. (See Steinhart , supra , 47 Cal.4th at pp. 1307–1308, 104 Cal.Rptr.3d 195, 223 P.3d 57.) This step may be satisfied by application for assessment reduction under section 1603 "if the applicant states in the application that the application is intended to constitute a claim for refund." (§ 5097, subd. (b).) If the applicant does not so state, "he or she may thereafter ... file a separate claim for refund of taxes." ( Ibid. )

The third and final step for challenging a regular or escape assessment is the filing of a refund action in a superior court pursuant to sections 5140 et seq. (See Steinhart , supra , 47 Cal.4th at pp. 1307–1308, 104 Cal.Rptr.3d 195, 223 P.3d 57.) These sections provide that within six months of the date the county board makes its final decision, a taxpayer may bring an action in superior court "against a county or a city to recover a tax which the board of supervisors of the county or the city council of the city has refused to refund on a claim filed pursuant to Article 1 (commencing with Section 5096) of this chapter." (§ 5140; see also § 5141.)

FACTUAL AND PROCEDURAL BACKGROUND

A. The Property

LA Live owns and manages a sports and entertainment development in downtown Los Angeles known as L.A. Live (the development). The development, which surrounds the Staples Center and Nokia Theatre, is made up of several distinct buildings and structures that were completed in 2007 and 2008. Three are relevant to the present appeal: the Regal Building (Assessor's Parcel Number (APN) 5138-007-094), Building A (APN 5138-007-097), and Building B (APN 513-007-098).³

B. The "Escape Assessments"

On June 21, 2012, the Assessor mailed "Notices of Proposed Escape Assessment" (notices) to LA Live. The notices stated that the Assessor had reassessed the Regal Building, Building A, and Building B for the years 2008–2011, and intended to "enroll[ ]" the new...