Prang v. L. A. Cnty. Assessment Appeals Bd. No. 2

Citation54 Cal.App.5th 1,268 Cal.Rptr.3d 376
Decision Date27 August 2020
Docket NumberB301194
CourtCalifornia Court of Appeals
Parties Jeffrey PRANG, as County Assessor, etc., Plaintiff and Respondent, v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD NO. 2, Defendant and Respondent; Downey Landing Spe, LLC, Real Party in Interest and Appellant.

Everett L. Skillman, for Real Party in Interest and Appellant.

Ajalat, Polley, Ayoob & Matarese, Richard J. Ayoob, Christopher J. Matarese, Glendale, and Gregory R. Broege as Amicus Curiae on behalf of Real Party in Interest and Appellant.

Lamb and Kawakami, Michael K. Slattery and Thomas G. Kelch, and Mary Wickham, County Counsel, Richard Girgado, Deputy County Counsel, and Justin Y. Kim, Deputy County Counsel, for Plaintiff and Respondent.

HOFFSTADT, J.

When a county reassesses real property within its boundaries based on a triggering event that occurred at some point prior to the current "assessment year," 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, 225 Cal.Rptr. 717 ( Trailer Train ).)1 Although our Legislature placed statutory caps on how many years’ worth of escape assessments an assessor may seek to levy (§ 532, subds. (a), (b)(1), (b)(2)), it also enacted section 532, subdivision (b)(3) that eliminates any cap and authorizes escape assessments for each year back to the "year in which the property escaped taxation" if "[the] property ... escaped taxation" due to a "change in ownership" of a legal entity and the taxpayer acquiring the legal entity did not file with the State Board of Equalization (the State Board) a "change in ownership statement" mandated by section 480.1. (§§ 532, subd. (b)(3), 480.1, subds. (a) & (b).) This case presents the question: Is the filing requirement set forth in section 480.1 satisfied—and, thus, may an assessor no longer levy escape assessments back to the year of the change in ownership pursuant to section 532, subdivision (b)(3)—when the taxpayer acquiring the legal entity recorded a document with less than all the information required by section 480.1 (namely, a Certificate of Merger certified by another state) in the wrong place (namely, the county recorder's office)? We conclude that the answer is "no" because taxpayers must strictly comply with those aspects of the notice requirements of section 480.1. Accordingly, we affirm the trial court's issuance of a writ of administrative mandamus.

FACTS AND PROCEDURAL BACKGROUND
I. Facts

The property at issue in this case is the Downey Landing Shopping Center on Lakewood Boulevard in the city of Downey (the Property). The Property has 376,645 square feet of "leasable improvement area" and this area was leased to a number of retailers, including (as of 2009) Old Navy, Pier 1 Imports, Bally Total Fitness and Bed Bath and Beyond. Prior to May 2006, the landlord and owner of the Property was Downey Landing, LLC (Downey).

In May 2006, Downey merged with Downey Landing SPE, LLC (Downey SPE). This merger was ultimately determined to have effected a "change in ownership," which triggers a reassessment of the base value of the Property now owned by Downey SPE.

A few days after the merger, Downey SPE filed a copy of the Certificate of Merger (the Certificate), certified by the State of Delaware, with the Los Angeles County Recorder's Office. The Certificate is silent as to whether either entity owns property in California. Downey SPE did not file anything with the State Board.

In 2009, some of the leases on the Property were renewed and the Los Angeles County Assessor's Office (the Assessor) evaluated whether to reassess the base value of those leasehold interests. (§ 104, subd. (a) ["real property" "includes" "possess[ory]" interests]; Seibold v. County of Los Angeles (2015) 240 Cal.App.4th 674, 681-682, 192 Cal.Rptr.3d 575 [possessory interests are taxable].) On a "Possessory Interest Appraisal Worksheet," the Assessor noted that the "Less[or]" had changed from "Downey Landing, LLC" to "Downey Landing SPE, LLC"; the "Remarks" section of the worksheet also noted, among other things, that "Region 28 is assessing the other portion of the Shopping Center." The Assessor did not at that time reassess the base value of any ownership interest in the Property.

In May 2013, Downey SPE filed a Form BOE-100-B with the State Board. The Form BOE-100-B is the standardized form taxpayers acquiring legal entities may file to satisfy the requirements of section 480.1. Downey SPE's form listed all of the parcels (and assessment numbers) for the Property.

In April and August 2015, respectively, the Assessor sent Downey SPE Notices of Assessed Value Change and Adjusted Property Tax Bills for each of the parcels comprising the Property.2 Through these documents, the Assessor (1) reassessed the base value of the parcels, as of 2006, for use on a going-forward basis, and (2) demanded payment of "escape assessments" reflecting the amount of property taxes that would have been collected on each parcel had the parcels been reassessed back in 2006, which corresponds with the 2007-2008 fiscal year. The total of the escape assessments came to $16,014,000.

II. Procedural Background
A. Administrative proceedings

Downey SPE filed an appeal to the Los Angeles County Assessment Appeals Board to challenge the amount of the escape assessment. Specifically, Downey SPE argued that the Assessor could collect escape assessments for only the four years prior to the reassessment (that is, for the 2011-2012, 2012-2013, 2013-2014 and 2014-2015 fiscal years); assessments for earlier years, Downey SPE urged, were barred by a four-year limitations period. According to Downey SPE, the total permissible escape assessments came to $8,607,147.

The Assessment Appeals Board, Board No. 2 (the agency) sided with Downey SPE. In a written ruling issued in October 2017, the agency ruled that the Assessor was bound by the four-year limitations period generally applicable to escape assessments. The agency also ruled that the Assessor could not collect escape assessments all the way back to the 2007-2008 fiscal year under section 532, subdivision (b)(3) because (1) the Certificate recorded by Downey SPE "was the equivalent of [a] BOE-100-B filing," such that the prerequisite for the Assessor's reliance on section 532, subdivision (b)(3)—that is, the failure to file a "change in ownership statement" with the State Board under section 480.1—was missing, and (2) the Assessor also "had actual and constructive notice of [the] change in control/ownership in 2009," as reflected in the Possessory Interest Appraisal Worksheet and in conversations between Downey SPE and the Assessor's office.

B. Writ proceedings

The Assessor filed a petition for a writ of administrative mandate challenging the agency's ruling.

Following briefing on the merits, the trial court overturned the agency's ruling. The court ruled that section 532, subdivision (b)(3) applied and authorized escape assessments reaching back to the 2007-2008 fiscal year.

The court cited two reasons for its ruling. First, the court determined that section 480.1's express requirement that a "change in ownership statement" be filed with the State Board was to be strictly enforced. Strict compliance is warranted, the trial court reasoned, because (1) strict compliance is consistent with the Legislature's "very specific" and "detailed" instructions "about who was to receive the notice, where the notice was to be filed and what the notice must say," and (2) strict compliance facilitates "[t]he legislative scheme" that "makes the [State Board] the repository of entity change of control information" and then entrusts the State Board with "determin[ing] whether an entity's change of control—sometimes a complex transaction—results in a change of ownership of real property subject to reassessment" and, if reassessment is appropriate in any given case, "notif[ying] county assessors through an advisory letter." Here, Downey SPE had not strictly complied with the statutory notice procedures. Second, and in the alternative, the court determined that even if substantial compliance were enough, it was lacking here because the Certificate did not advise the Assessor "whether and to what extent, if any, [Downey SPE] owned real property in the County."

C. Appeal

Downey SPE filed a timely notice of appeal.

DISCUSSION

Downey SPE argues that the trial court erred in granting the petition for a writ of mandate allowing the Assessor to levy more than four years’ worth of escape assessments.3 Because a writ of mandate seeking review of an administrative agency's determination is appropriately granted when the agency has "prejudicial[ly] abuse[d] [its] discretion" ( Code Civ. Proc., § 1094.5, subds. (a) & (b) ), whether the writ should have been granted in this case boils down to two interlocking questions: (1) Whether the agency properly determined that the prerequisites for the Assessor to levy retroactive escape assessments under section 532, subdivision (b)(3) were not met, which hinges on (2) Whether the agency properly determined that Downey SPE had met section 480.1's filing requirements. Because these questions entail questions of statutory interpretation as applied to the agency's amply supported factual findings (that are not challenged on appeal) and because this case does not involve or substantially affect a "fundamental, vested right," we stand in the shoes of the trial court and review the agency's answers to these questions de novo. (Id. , subd. (b); Bixby v. Pierno (1971) 4 Cal.3d 130, 143-144, 93 Cal.Rptr. 234, 481 P.2d 242 ; TG Oceanside, L.P. v. City of Oceanside (2007) 156 Cal.App.4th 1355, 1370-1371, 68...

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