Plaza Hollister Ltd. Partnership v. County of San Benito

• Decision Date: 13 May 1999
• Docket Number: No. H016763,H016763
• Citation: 72 Cal.App.4th 1,84 Cal.Rptr.2d 715
• Parties: , 99 Cal. Daily Op. Serv. 3540, 1999 Daily Journal D.A.R. 4515 PLAZA HOLLISTER LIMITED PARTNERSHIP, Plaintiff and Respondent, v. COUNTY OF SAN BENITO, Defendant and Respondent, Arnold Fontes, as Assessor, etc., Intervener and Appellant.
• Court: California Court of Appeals Court of Appeals

Page 715

84 Cal.Rptr.2d 715

72 Cal.App.4th 1, 99 Cal. Daily Op. Serv. 3540,

1999 Daily Journal D.A.R. 4515

PLAZA HOLLISTER LIMITED PARTNERSHIP, Plaintiff and Respondent, v. COUNTY OF SAN BENITO, Defendant and Respondent Arnold Fontes, as Assessor, etc., Intervener and Appellant.

No. H016763.

Court of Appeal, Sixth District, California.

May 13, 1999.

Rehearing Denied June 11, 1999.

Review Denied Aug. 18, 1999.

Coughlin, Paxton & Pipal David E. Pipal, Hollister, and Peter R. Spurzem, Boise, ID, Attorneys for Intervenor and Appellant.

Nossaman, Guthner, Knox & Elliott and Douglas J. Maloney, San Francisco, and Daniel E. Lungren, Attorney General and Joyce E. Hee, Deputy Attorney General, Attorneys for Amicus Curiae in support of Intervenor and Appellant.

Divelbiss, Divelbiss & Bonzell, Rod Divelbiss, Mark Divelbiss and Scott A. Bonzell and Robert S. Beach, San Francisco, Attorneys for Plaintiff and Respondent.

Steven R. Sanders, San Benito County Counsel, Attorneys for Defendant and Respondent.

ELIA, J.

This is a property tax refund action brought by Plaza Hollister Limited Partnership ("Plaza Hollister"), a California Corporation, against the County of San Benito ("County"). The property at issue was purchased by Plaza Hollister on December 31, 1984, and apparently was a federally subsidized apartment complex, which was operated under section 236 of National Housing Act (12 U.S.C. § 17152.1). The judgment was entered pursuant to a stipulation between Plaza Hollister and the San Benito County Board of Supervisors ("Board of Supervisors") on behalf of the County. Arnold Fontes, the San Benito County Assessor ("Assessor"), who was not a party to the judgment, appeals from the denial of his motion to vacate the judgment. (Code Civ. Proc., § 904.1, subd. (a)(2).)

The stipulated judgment reduced the base-year value of the property to $2,350,000 and ordered that value to be placed on the supplemental roll for 1984-85 and on the regular roll for 1985-86. It ordered the value of the property to be increased by a 2 percent inflation factor through 1990-91 and stated that this adjustment would result in a value of $2,594,589 for 1990-91. It ordered this revised value of $2,594,589 to be placed on the roll for the years 1990-91 through 1993-94. The judgment provided that Plaza Hollister would "receive refunds of taxes paid for each year from December 31, 1984 forward based on the preceding recalculations of value" and interest as allowed by law.

On appeal, the Assessor argues that the stipulated judgment "improperly invades the constitutional and statutory authority granted to the County Board of Equalization and to [the County Assessor's office] to establish and to equalize the value of property for tax purposes" and conflicts with the statutory procedures for challenging assessments and obtaining refunds. The California Assessors' Association and the State Board of Equalization each filed an amicus curiae brief in support of the Assessor. They both contend that the Board of Supervisors, not acting in its capacity as the San Benito County Board of Equalization ("Board of Equalization"), has no statutory or constitutional authority to determine property value and, therefore, no authority to settle this case without providing for a remand to the Board of Equalization to exercise its judgment as to value. The California Assessors' Association further argues that the County has a fiduciary duty to other local taxing agencies, which it breached, by stipulating to reduced values.

We reverse.

A. Background

Plaza Hollister purchased the subject apartment complex on December 31, 1984, for a purchase price of $4,060,000. The Assessor assessed the property at a value of $4,009,500 for 1985-86 fiscal year. For the 1986-87 fiscal year, the property was assessed at a value of $4,084,138. On September 15, 1986, Plaza Hollister commenced an assessment appeal by filing an application for changed assessment contesting the base-year value.

At the hearing before the Board of Supervisors convened as the Board of Equalization, Plaza Hollister argued that the nominal sales price should have been reduced by cash equivalent adjustments, citing REVENUE AND TAXATION CODE SECTION 110¹ and property tax rules regarding the value concept and the comparative sales approach to value. ² Plaza Hollister suggested a number of alternative values for the property, all involving cash equivalent adjustments ³ to the nominal sales price. ⁴

At the hearing, the assessor explained the basis for assessments for the 1985-86 and 1986-87 fiscal years. ⁵ The assessor submitted a letter from the State Board of Equalization to county assessors, which was dated December 24, 1986, and which stated the State Board's position that the selling price of a property constructed under section 236 of the National Housing Act was not subject to cash equivalent adjustments because of federal governmental financing subsidies. ⁶ The Board of Supervisors sitting as the Board of Equalization upheld the Assessor's valuation of the subject property at the close of the hearing on February 2, 1987.

On December 10, 1990, Plaza Hollister filed a written claim for a partial refund of property taxes on the apartment complex for "fiscal year 1986-87, plus all prior years whose taxes were affected by any Supplemental Valuation issued concerning this property and involved in the tax appeal referred to below...." The claim alleged that the Board of Supervisors had failed to apply and follow the mandatory statutory requirements of Revenue and Taxation Code and the rules of the State Board of Equalization "in determining the proper valuation methodology to be used in appraising the subject property, or in developing capitalization rates, or in discounting to cash equivalent values ... the mortgages and other non-cash consideration assumed or given by the purchasers of the subject or similar properties which were used as comparable sales in determining the value of the sale of the subject property or the capitalization rate to be applied to the income streams of the subject properties in order to determine their proper values." The County rejected the claim on January 22, 1991.

On July 18, 1991, Plaza Hollister filed a tax refund action. Plaza Hollister sold the property on or about January 14, 1994. The case was set for trial on May 30, 1996, and the administrative record and trial briefs were filed. The stipulated judgment was filed on July 19, 1996.

On January 3, 1997, the Assessor filed a notice of motion to vacate the stipulated judgment. The Assessor argued that the judgment was erroneous and void on various grounds. The Assessor contended, among other things, that (1) the conclusive presumption regarding base-year value, which is established by section 80, subdivision (a)(3), precluded the court from reducing that base-year value, (2) county boards of equalization, not the courts, are empowered by California's Constitution to equalize assessments and determine value, and (3) even if a court could validly review the base-year value upheld by the Board of Equalization and find it incorrect, the court was required to remand the matter to the Board of Equalization for a determination of correct value. The motion to vacate was opposed on procedural and substantive grounds. ⁷ The trial court denied the motion to vacate, finding that "the Board of Supervisors of San Benito County has the right and authority to settle law suits filed against it such as the one in question."

B. Authority to Settle Litigation

Government Code section 25203 provides that a county board of supervisors "shall direct and control the conduct of litigation in which the county, or any public entity of which the board is the governing body, is a party...." The Code of Civil Procedure authorizes courts to enter judgments to which the parties have stipulated: "If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement." (Code Civ. Proc., § 664.6.)

The Supreme Court "recognized a century ago that settlement agreements ' "are highly favored as productive of peace and good will in the community," ' as well as ' "reducing the expense and persistency of litigation." ' (McClure v. McClure (1893) 100 Cal. 339, 343, 34 P. 822....)" (Neary v. Regents of University of California (1992) 3 Cal.4th 273, 277, 10 Cal.Rptr.2d 859, 834 P.2d 119.) "Requiring parties to continue to litigate a matter over which there is no longer a real dispute 'is wasteful of the resources of the judiciary.' [Citation.]" (Ibid.) Generally, when parties decide to eliminate the risks of further litigation by stipulated agreement, "the courts should respect the parties' choice and assist them in settlement." (Id. at p. 280, 10 Cal.Rptr.2d 859, 834 P.2d 119.)

Nevertheless, a court "may reject a stipulation that is contrary to public policy [citation], or one that incorporates an erroneous rule of law [citation]." (California State Auto Assn. Inter-Ins. Bureau v. Superior Court (1990) 50 Cal.3d 658, 664, 268 Cal.Rptr. 284, 788 P.2d 1156.) The trial court has the duty to ensure that the stipulated judgment is just and cannot act as a mere puppet. (Ibid.) More importantly, a court cannot validly enter a judgment or order which is void even if the parties agree to it. (See In re Marriage of Goodarzirad (1986) 185 Cal.App.3d 1020, 1024-1027, 230 Cal.Rptr. 203; Summers v. Superior Court of Santa Clara County (1959) 53 Cal.2d 295, 298, 1 Cal.Rptr. 324, 347 P.2d 668; Reed v. Murphy (1925) 196 Cal. 395, 399-400, 238 P. 78.)

C. Motion to Vacate: Code of Civil Procedure Section 663

The Assessor's motion to vacate was made primarily under Code of Civil Procedure section 663. Respondents have suggested various reasons why appellant's motion to...