United Air Lines, Inc. v. County of San Diego, D012688

• Decision Date: 27 November 1991
• Docket Number: No. D012688,D012688
• Citation: 1 Cal.App.4th 418,2 Cal.Rptr.2d 212
• Parties: UNITED AIR LINES, INC. et al., Plaintiffs and Respondents, v. COUNTY OF SAN DIEGO, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

Page 212

2 Cal.Rptr.2d 212

1 Cal.App.4th 418

UNITED AIR LINES, INC. et al., Plaintiffs and Respondents, v. COUNTY OF SAN DIEGO, Defendant and Appellant.

No. D012688.

Court of Appeal, Fourth District, Division 1, California.

Nov. 27, 1991.

Rehearing Denied Dec. 24, 1991.

Review Denied March 12, 1992.

Paul, Hastings, Janofsky & Walker, Robert S. Span and Jeffrey G. Varga, Santa Monica, for plaintiffs and respondents.

Ajalat, Polley & Ayoob, Richard J. Ayoob, Terry L. Polley and Charles R. Ajalat, Los Angeles, for amici curiae on behalf of respondents.

Lloyd M. Harmon, Jr., County Counsel, Diane Bardsley, Chief Deputy County Counsel, and Andrew J. Freeman, Deputy County Counsel, for defendant and appellant.

Kelvin H. Booty, Jr., County Counsel, County of Alameda and James F. May, Asst. County Counsel, for amici curiae on behalf of appellant.

WORK, Associate Justice.

The County of San Diego (County) appeals a summary judgment in favor of certain air passenger carriers (hereafter referred to collectively as Airlines), refunding taxes assessed on what the County determined to be their taxable possessory interests in the use of the San Diego International Airport (Airport), a facility owned and operated by the San Diego Unified Port District (Port District), a tax exempt governmental entity. ¹ The County also appeals the denial of its own motion for summary judgment.

The trial court found: (1) the Airlines had no taxable possessory interest in the land since their use was not sufficiently exclusive; (2) the taxes were an indirect tax on the carriage of persons traveling in air commerce and prohibited by 49 United States Code Appendix section 1513(a); (3) the taxes unconstitutionally discriminated between taxpayers in the same class (commercial and general aviation); and, (4) the taxes violated federal statutes (49 U.S.C.Appen. §§ 2210(a), 1305(b)). For the following reasons, we hold the trial court's rulings are legally erroneous.

The Airlines reassert two additional grounds rejected by the trial court to support the summary judgment. First, they challenge the definitions of "change in ownership" in Revenue and Taxation Code section 61, subdivisions (b) and (c)--the section allowing property tax reassessment when a taxable possessory interest in tax exempt real property is created or renewed, regardless of the term of the interest, while only allowing reassessment upon lease of private property if the term is for 35 years or more. They contend this distinction between government and private property is an arbitrary and unreasonable interpretation of Proposition 13, or an unconstitutional discrimination against lessees of government land. ² Second, they argue the valuation method used by the County improperly included enterprise value. We reject both additional grounds.

Based on our holdings on these legal issues, we conclude the County is entitled to summary judgment. Accordingly, the judgment in favor of the Airlines is reversed, and the trial court is directed to enter summary judgment for the County.

FACTUAL AND PROCEDURAL BACKGROUND

After the San Diego County Assessment Appeals Board (Board) denied the Airlines' claim for a refund, they sued for refund of property taxes in the superior court. The facts relevant to the legal issues in their cross-motions for summary judgment are as follows.

The Airlines are commercial air carriers transporting air passengers for hire from and to the Airport. In the course of their air passenger transportation business, the carriers use landing areas and facilities ³ that are available for use by all aircraft, both commercial and private, limited only by FAA regulations and local ordinances applicable to all planes. Private, noncommercial aircraft operators also use the landing facilities, from which they obtain a valuable, private benefit.

A Port District ordinance requires that landing fees must be paid by every operator of an aircraft landing at the Airport for commercial purposes, which means any aircraft landing for revenue producing purposes for air transportation services. Airline operators who have a landing permit or agreement, which provides for landing fees, need not pay cash to the Port District upon landing. These Airlines have such agreements permitting them to pay accrued fees at regular intervals.

Under federal law, the general aviation public, both commercial and private, is entitled to land at the Airport regardless whether they pay the landing fees, and the Airport may not condition the use of its landing areas and related facilities on the payment of landing fees. Nevertheless, federal law authorizes the Port District to impose landing fees. (49 U.S.C.Appen. § 1513(b).)

In 1986, the Port District issued landing permits to the Airlines, which constituted agreements providing for landing fees. Regardless whether such agreements were in force, the Port District was required by federal law to allow the Airlines to use the landing facilities. The Airlines' operations at and use of the landing facilities were the same before and after the 1986 agreements. The 1986 agreements noted that the landing permits "may result in a taxable possessory interest and be subject to the payment of property taxes."

All private, noncommercial aircraft operators at the Airport paid flowage fees to the Port District, which are surcharges on fuel and oil dispensed at the Airport and which cover the costs associated with operating the landing facilities.

In 1986, in response to suggestions in a letter from the Assessments Standards Division of the State Board of Equalization, the County began for the first time to make possessory interest tax assessments against each Airline based on their use of the landing facilities. The alleged possessory interest was valued by capitalizing the income generated by the Port District from the Airlines' use of these facilities. ⁴

The County did not make possessory interest assessments against private, noncommercial aircraft users of the landing facilities, but did assess and tax these possessory interests of cargo airlines who used the landing areas in the course of their business of picking up and delivering commercial cargo.

EXCLUSIVITY OF THE AIRLINES' POSSESSORY INTEREST

Possessory interests in land are taxable pursuant to the constitutional mandate that with limited exceptions, all property is taxable. (Scott-Free River Expeditions, Inc. v. County of El Dorado (1988) 203 Cal.App.3d 896, 901-902, 250 Cal.Rptr. 504; Cal. Const., art. XIII, § 1.) The right to possess and use land or improvements "except when coupled with ownership of the land or improvements in the same person" is treated as a possessory interest and is subject to taxation. (United States of America v. County of Fresno (1975) 50 Cal.App.3d 633, 638, 123 Cal.Rptr. 548, and cases cited therein.) "Generally speaking, a possessory interest includes the right of a private individual or corporation to use government-owned tax exempt land or improvements, and this right is considered a private interest taxable by the state and its taxing agencies." (Id. at p. 638, 123 Cal.Rptr. 548; Rev. & Tax.Code, § 107, subd. (a).) The purpose of Revenue and Taxation Code section 107 is to protect the public domain from private profit without tax liability. (Stadium Concessions, Inc. v. City of Los Angeles (1976) 60 Cal.App.3d 215, 225, 131 Cal.Rptr. 442.)

For a possessory tax to be valid, the right of possession must carry with it "the degree of exclusiveness necessary to give the occupier or user something more than a right in common with others...." (United States of America v. County of Fresno, supra, 50 Cal.App.3d at p. 638, 123 Cal.Rptr. 548; Scott-Free River Expeditions, Inc. v. County of El Dorado, supra, 203 Cal.App.3d at p. 908, 250 Cal.Rptr. 504.) ⁵ Although one court has stated the exclusivity requirement means that the use "must not be one shared by the general public " (Freeman v. County of Fresno (1981) 126 Cal.App.3d 459, 463-464, 178 Cal.Rptr. 764, italics added), the shared use of property with others does not defeat the exclusivity requirement, but merely affects valuation of the taxable interest (Scott-Free River Expeditions, Inc. v. County of El Dorado, supra, 203 Cal.App.3d at pp. 908-910, 250 Cal.Rptr. 504).

As defined in California Code of Regulations, title 18, section 21, a possessory interest is an "interest in real property which exists as a result of possession, exclusive use, or a right to possession or exclusive use of land ... unaccompanied by the ownership of a fee simple or life estate in the property." Thus, either a right to possession or a right to exclusively use the Airport landing areas will give rise to a taxable possessory interest. California Code of Regulations, title 18, section 21 goes on to state that "exclusive use" is not destroyed by "[c]oncurrent use when the extent of each party's use is limited by the other party's right to use the property at the same time, as, for example, when two or more parties each have the independent right to graze cattle on the same land." (See also Board of Supervisors v. Archer (1971) 18 Cal.App.3d 717, 727, 96 Cal.Rptr. 379 [the court found that concurrent use of the same public grazing lands to generate private profits by multiple permit holders did not destroy the requisite exclusivity which allowed a county to impose property taxes on the possessory interest created].)

Clearly, under the state tax regulations, there can be multiple exclusive concurrent yet independent users of the same property. We see no functional difference between cattle grazing on the same acreage and aircraft making daily landings on the same airstrip and using the same support facilities. In some respects, successive cattle grazing the same land are unable to maximize their right because once a mouthful of grass has been swallowed it is not available for the next cow. However, once an aircraft has landed and...