Sea World, Inc. v. County of San Diego

• Decision Date: 30 August 1994
• Docket Number: No. D017936,D017936
• Citation: 27 Cal.App.4th 1390,33 Cal.Rptr.2d 194
• Court: California Court of Appeals Court of Appeals
• Parties: SEA WORLD, INC., Plaintiff and Appellant, v. COUNTY OF SAN DIEGO, Defendant and Respondent.

Page 194

33 Cal.Rptr.2d 194

27 Cal.App.4th 1390

SEA WORLD, INC., Plaintiff and Appellant, v. COUNTY OF SAN DIEGO, Defendant and Respondent.

No. D017936.

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

Aug. 30, 1994.

Gray, Cary, Ware & Friedenrich, Gray, Cary, Ames & Frye, W. Alan Lautanen and Charles L. Deem, San Diego, for plaintiff and appellant.

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

HUFFMAN, Associate Justice.

In this action by Sea World, Inc. (Sea World) for refund of property taxes paid in 1989, we revisit the fascinating world of real Sea World appeals, contending section 51.5, the California Constitution, and principles of equity require an appropriate refund in this case. We disagree and affirm.

property reassessments after the passage of Proposition 13 ¹ to determine whether the trial court properly granted the County of San Diego's (County's) motion for summary judgment. The court held that Sea World had failed to exhaust its administrative remedy of seeking equalization of its 1989 supplemental tax assessment, thereby precluding Sea World from claiming a refund for that year. In so deciding, the court found the addition of section 51.5 to the [27 Cal.App.4th 1393] Revenue and Taxation Code ² in 1988 (added by Stats.1987, ch. 537, § 2) did not provide Sea World an avenue around the section 80 proscription against retroactive application of a base year value reduction. (See Osco Drug, Inc. v. County of Orange (1990) 221 Cal.App.3d 189, 272 Cal.Rptr. 14 [hereafter Osco ].)

FACTUAL AND PROCEDURAL BACKGROUND

This case was submitted to the court for decision based on the following stipulated facts: On November 30, 1989, Harcourt Brace Jovanovich, Inc., sold all of the stock of Sea World to Busch Entertainment Corporation. This sale resulted in a "change of ownership" (§§ 60, 64, subd. (c)), requiring the reassessment of Sea World's land and improvements to its real estate to their fair market value as of the date of change. Consequently, the county assessor reassessed Sea World's land and improvements at the value of $170 million as of November 30, 1989, allocating $41 million to Sea World's possessory interest and $129 million to its real estate improvements.

On June 22, 1990, the assessor mailed to Sea World a notification of supplemental assessment for 1989 which reflected this new base year value. Sea World received this notice, as well as a supplemental tax bill mailed September 14, 1990, and thereafter filed an application (No. 90-1240) for equalization of the 1989 supplemental assessment with the County Assessment Appeals Board (the Board) on September 24, 1990, challenging the assessor's valuation only as to the real estate improvements.

Meanwhile, on June 29, 1990, during the usual course of taxing matters, the assessor sent Sea World notification of taxable value for 1990, which showed the assessed value as $170 million, with $129 million allocated to real property improvements and $41 million to the possessory interest in the land. On September 14, 1990, Sea World filed with the Board an application (No. 90-584) for equalization of the 1990 assessment, challenging only the value of the improvements.

In each of its applications for equalization, Sea World stated it also constituted a claim for a refund of taxes paid as permitted by section 5097, subdivision (b). ³

On March 13, 1991, the Board held Sea World's application No. 90-1240 was untimely filed and denied its claim for a refund of the 1989 supplemental tax. A hearing on At that time, the Board heard evidence and argument concerning the 1990 assessment value of Sea World's real property improvements. The assessor's representative recommended a $109 million value for such improvements for the March 1, 1990 lien date, based upon the assessor's opinion of the fair market value of the improvements in light of information provided by Sea World regarding the November 30, 1989 acquisition and stock sale. Sea World asserted a fair market value for its land improvements at $67 million. The Board took the matter under submission.

Sea World's application No. 90-584 was scheduled for July 1991.

While the Board's decision was pending, Sea World filed the present action September 12, 1991, claiming a refund of a portion of the supplemental taxes it had paid pursuant to the 1989 supplemental tax assessment. ⁴ This action was stayed until after the Board reached its decision as to the assessed value of Sea World's improvements as of the March 1, 1990 lien date.

On February 13, 1992, the Board issued its decision on Sea World's 1990 application No. 90-584, determining the assessed value of the real property improvements as of the March 1, 1990 lien date was $89.5 million, based upon information provided by Sea World and the assessor concerning the November 30, 1989 acquisition and the fair market value of Sea World's improvements on that date. The Board specifically found the assessor's use of the income approach for valuation of the improvements was proper, but that the assessor had incorrectly reduced this amount by the allocated good will of 25 percent rather than 30 percent for the San Diego theme park. Neither Sea World nor the assessor appealed this determination or the findings.

On May 5, 1992, the County made the appropriate refund to Sea World of a portion of the 1990 property taxes. ⁵ The county, however, refused to refund any portion of the property taxes paid by Sea World with respect to the 1989 supplemental assessment.

After the Board issued its decision, the trial court lifted the stay in this case. Because the tax refund action raised no triable issues of material fact and merely presented questions of law, the parties agreed to have the trial court decide the legal issues on stipulated facts in a motion for summary judgment, which would be dispositive of the entire case. In accordance with that stipulation and order of the trial court, Sea World filed its motion for summary judgment on July 31, 1992.

Based upon the undisputed facts, the parties presented the trial court with the questions of whether Sea World had filed a timely assessment appeal, or application for equalization, of the supplemental assessment for 1989 and whether the 1990 Board determination of base year value constituted a "correction" entitling Sea World to a refund under section 51.5, subdivisions (b) and (d). ⁶ The On its timely filed appeal, Sea World renews its arguments on section 51.5 and the exhaustion of administrative remedies. Sea World asks that we reverse the trial court's determination. As the matter below was submitted on stipulated facts, the trial court was presented with purely legal questions and its statement of decision is not binding on us. (Bret Harte Inn, Inc. v. City and County of San Francisco (1976) 16 Cal.3d 14, 23, 127 Cal.Rptr. 154, 544 P.2d 1354.) We are thus free to draw our own conclusions of law from the undisputed facts. (Jongepier v. Lopez (1983) 142 Cal.App.3d 535, 538, 191 Cal.Rptr. 131.) ⁹

court ruled Sea World's application for equalization and claim for refund of 1989 supplemental taxes was untimely and Sea World's [27 Cal.App.4th 1396] interpretation of section 51.5, subdivision (b) was inconsistent with section 80, subdivisions (a)(3) and (a)(5), ⁷ which precluded Sea World from seeking [27 Cal.App.4th 1397] a refund of the 1989 taxes. The court therefore denied Sea World's motion and ordered judgment entered in favor of County. Such judgment was entered November 10, 1992. ⁸

DISCUSSION

A. The Statutory Scheme

Preliminarily, we set out the basic statutory scheme concerning the assessment of property values in California. Before the enactment of article XIII A, a county assessor was required to annually discover and assess at its "full value" all taxable property within his county on the lien date (usually March 1), to enter that value on the assessment roll, and to deliver the roll to the county auditor on or before July 1. (§§ 110, 110.5, 401.3, 405, 601-617, 2192.) If after certifying the assessment roll the assessor discovered that a property had been assessed over or under its current fair market value, he could make appropriate adjustments, either by way of refund if the property were overassessed, or in the form of additional tax billings, called escape assessments, if the property were underassessed. (§§ 469, 531, 533; Bauer-Schweitzer Malting Co. v. City and County of San Francisco (1973) 8 Cal.3d 942, 106 Cal.Rptr. 643, 506 P.2d 1019.) These refunds or escape assessments could be issued for as many years, usually four, as permitted by the specific statutes. (§§ 532, 4831.)

Article XIII A changed the standard for determining the "full value" of real property, limiting it to the lower of fair market value or the property's "base year value," which was defined by the assessor's valuation of the property on the 1975-1976 tax bill or the fair market value as determined under previous law on the date of new purchase, new construction or change of ownership. (Art. XIII A, § 2, subd. (a); §§ 110, 110.1; see ante, fn. 1 at p. 1.) ¹⁰ Subsequent increases in the base year value once established were limited to a maximum of 2 percent per year. (Art. XIII A, § 2, subd. (b); §§ 51, 110.1, subd. (f).) Appropriate adjustments to the current roll values continued by way of escape assessments and refunds.

Commencing with the 1983-1984 assessment year, whenever a change in ownership occurs, the assessor appraises the property changing ownership at its full cash value on the date of the ownership change. (§ 75.10, subd. (a).) This value then becomes "the new base value of the property...." (§ 75.10, subd. (a).) "If the change in ownership occurs ... on or after June 1 but before the succeeding March 1, then the supplemental assessment placed on the supplemental roll shall be the...