Title Ins. & Trust Co. v. County of Riverside

• Decision Date: 27 February 1989
• Docket Number: No. S001002,S001002
• Citation: 255 Cal.Rptr. 670,48 Cal.3d 84,767 P.2d 1148
• Court: California Supreme Court
• Parties: , 767 P.2d 1148 TITLE INSURANCE AND TRUST COMPANY, Plaintiff and Appellant, v. COUNTY OF RIVERSIDE et al., Defendants and Appellants.

Page 670

255 Cal.Rptr. 670

48 Cal.3d 84, 767 P.2d 1148

TITLE INSURANCE AND TRUST COMPANY, Plaintiff and Appellant, v. COUNTY OF RIVERSIDE et al., Defendants and Appellants.

No. S001002.

Supreme Court of California,

In Bank.

Feb. 27, 1989.

Rehearing Denied April 5, 1989.

Wyman, Bautzer, Christensen, Kuchel & Silbert, Wyman, Bautzer, Rothman, Kuchel & Silbert, Allan B. Goldman, Susan J. Williams and Jerold Fagelbaum, Los Angeles, for plaintiff and appellant.

Thomas H. Steele, Charles J. Moll, III, Lucia M. Diamond, Morrison & Foerster, San Francisco, Ajalat & Polley, Charles R. Ajalat, Terry L. Polley and Richard J. Ayoob, Los Angeles, as amici curiae, on behalf of plaintiff and appellant.

John K. Van de Kamp, Atty. Gen., Edmond B. Mamer, Patti S. Kitching and Timothy G. Laddish, Deputy Attys. Gen., Gerald J. Geerlings, County Counsel, W.W. Miller, Peter H. Lyons, Chief Deputy County Counsel, Loyal E. Keir and James J. Brzytwa, Deputy County Counsel, Riverside, for defendant and appellant.

Adrian Kuyper, County Counsel, and David R. Chaffee, Deputy County Counsel, Santa Ana, as amici curiae, on behalf of defendants and appellants.

MOSK, Justice.

Under Proposition 13 (Cal. Const., art. XIIIA), ad valorem taxes on real property are limited to 1 percent of full cash value. (Id., § 1, subd. (a).) However, property that changed ownership after the 1975-1976 tax year is subject to reassessment. (Id., § 2, subd. (a).) ¹ In order to determine whether such a change has occurred as to property owned by various legal entities, including corporations, the Legislature enacted section 64 of the Revenue and Taxation Code. ² Subdivision (a) states that with certain exceptions set forth therein, the purchase or transfer of corporate stock is not a transfer of the property of the corporation. Thus, unless an exception to this general rule applies, a transfer of shares of stock does not result in reassessment of a corporation's property under Proposition 13. We are concerned with one of those exceptions, provided in subdivision (c) (hereinafter section 64(c)). ³ Our inquiry is whether section 64(c) applies, so as to require reassessment, where, as here, one corporation purchases all the shares of stock of another, and the real property allegedly subject to reassessment is owned not by the corporation whose stock has been purchased but by a wholly owned subsidiary of that corporation.

In 1979, Spicor, a wholly owned subsidiary of Southern Pacific Company (hereinafter Southern Pacific), merged into Ticor, another corporation, by the conversion of Spicor's shares of common stock into common stock of Ticor. As a result of the merger, Ticor became a wholly owned subsidiary of Southern Pacific. Ticor, both before and after the merger, held a wholly owned subsidiary, Title Insurance and Trust Company (hereinafter TI), which owned property in both Riverside and Merced Counties. The issue is whether this transaction resulted in a "change of ownership" of TI's property under section 64(c).

Shortly after the merger, the State Board of Equalization (the board) issued a letter to county assessors advising them that under section 64(c), the acquisition of a corporation through a stock transfer results in a change of ownership of real property owned not only by the parent company but by a subsidiary of the parent, and that, therefore, such a transfer requires reappraisal of the real property owned by the parent through its ownership of the subsidiary. A month later, the board made this advice explicitly applicable to the transaction involved here by a letter advising assessors that any real property owned by Ticor and its subsidiaries, including TI, was subject to reappraisal by reason of a change of ownership under section 64(c). In conformity with this advice, in 1980 the Riverside County Assessor reassessed two parcels of real property owned by TI and located in that county, resulting in an increase in the roll value of the property. The same course was followed by the assessor in Merced County as to real property in that county owned by TI.

TI sought to change these assessments before the assessments appeals board in each county, claiming that there was no basis for the reappraisals because the merger of Spicor into Ticor did not result in a change in the ownership of TI's properties under section 64(c). The applications were denied on the ground that the assessment appeals boards did not have jurisdiction to rule on the legal issue presented by TI. TI paid the additional taxes resulting from these reassessments under protest in December 1980 and April 1981. In July 1981, it filed complaints in the Superior Courts of Riverside and Merced Counties against the counties and the State Board of Equalization (defendants) seeking a refund of the alleged overpayments, and for declarations that section 64(c) did not apply to property owned by it. The cases were coordinated for trial and assigned to the Riverside County Superior Court. That court ruled in favor of TI, holding that section 64(c) does not apply to subsidiaries of acquired corporations, and that TI was entitled to a refund of taxes for 1980-1981. The Court of Appeal affirmed. ⁴

Section 64(c) incorporates the definition of "control" contained in section 25105. ⁵ The two sections, when read together, provide that when a corporation "obtains [direct or indirect control of more than 50 percent of the voting stock] ... in any [other] corporation ... through the purchase or transfer of corporate stock ... such purchase or transfer ... shall be a change of ownership of property owned by the corporation in which the controlling interest is obtained."

In interpreting the meaning of a statute we begin, as we must, with the language used. Under familiar rules of construction, words in a statute must be given the meaning they bear in ordinary usage (In re Rojas (1979) 23 Cal.3d 152, 155, 151 Cal.Rptr. 649, 588 P.2d 789); the meaning of the enactment may not be determined from a single word or sentence; the words must be construed in context, and provisions relating to the same subject matter must be harmonized to the extent possible (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1386-1387, 241 Cal.Rptr. 67, 743 P.2d 1323).

Turning to the language of section 64(c), the words used do not appear to us to be ambiguous. The section provides, in essence, that if one corporation either directly or indirectly obtains control over another by the transfer or purchase of stock, a change of ownership occurs as to the real property owned by the corporation over which it has obtained direct or indirect control. Here, Southern Pacific obtained indirect control of TI as a result of the purchase of Ticor stock, since the merger resulted in Southern Pacific's ownership of Ticor, a wholly owned subsidiary of Southern Pacific, and TI was Ticor's wholly owned subsidiary. Ergo, such indirect control over TI resulted in a change of ownership of TI's property for purposes of section 64(c). The fundamental requirement for a change in ownership under the section is the obtaining of control of the corporation that owns the property subject to reassessment, whether that control is obtained directly or indirectly. ⁶ The purchase of stock is the means by which the control must be secured, but, as we shall see, this does not, and in the context of the section cannot mean that the stock purchased must be the stock of the corporation over which indirect control is obtained.

TI's primary assertion is just that: it urges the words "through the purchase or transfer of corporate stock" in section 64(c) refer to the purchase or transfer of the stock of the corporation that owns the property in issue, so that the section requires TI's own stock must have been purchased by Southern Pacific in order to result in a change of ownership under the section.

The problem with this contention is that it conflicts with the language of section 64(c) and has the effect of reading out of the section the reference to section 25105, which provides that the term "control" includes indirect control.

Section 64(c) specifies two means by which a change of ownership may occur. The first is if one corporation, by purchasing stock, obtains direct control of another which owns the property allegedly subject to reassessment. In the present case this would have occurred if Southern Pacific had purchased the stock of TI. The second means by which a change of ownership may occur under the section is if one corporation obtains indirect control of the corporation which owns the property in question. (A change of ownership occurs "When a corporation ... obtains [indirect] control ... in any corporation ... through the purchase or transfer ... of corporate stock.") The most obvious way in which one corporation obtains indirect control of another by the purchase or transfer of stock is to acquire, through purchase or transfer, a majority of the shares of a corporation that owns a majority of the stock of the subsidiary corporation. This occurred here when Southern Pacific purchased all the stock of Ticor, which in turn owns all the stock of TI. Requiring Southern Pacific to purchase TI's stock in order to accomplish a change of ownership of TI's property under section 64(c), as TI contends, would eliminate the provision that a stock purchase resulting in indirect control of the corporation that owns the property constitutes a change of ownership of the property of the corporation controlled. Plaintiff's interpretation simply reads section 25105 out of section 64(c).

There is no merit in TI's claim that the words "purchase or transfer" of stock would be rendered surplusage if section 64(c) is interpreted to apply to the transaction involved here. Our construction of the section gives full meaning to the words quoted as referring to a purchase or transfer of the stock of a corporation (here Ticor) that...