Prang v. Amen ( 2020 )

Filed 12/7/20; See dissenting opinion
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
JEFFREY PRANG, Los Angeles B298794
County Assessor,
(Los Angeles County
Plaintiff and Respondent Super. Ct. No. BS173698)
v.
LUIS A. AMEN et al., as Trustees,
etc.,
Real Party in Interest and
Appellant,
APPEAL from a judgment of the Superior Court of Los
Angeles County, James C. Chalfant, Judge. Affirmed.
Greenberg Traurig, Colin W. Fraser and Cris O’Neal for
Real Party in Interest and Appellant.
Lamb and Kawakami, Thomas G. Kelsh and Michael K.
Slattery; Mary C. Wickham, County Counsel, Nicole Davis
Tinkham, Assistant County Counsel, and Richard Girgado,
Deputy County Counsel for Petitioner and Respondent.
Ajalat, Polley, Ayoob & Matarese, Richard J. Ayoob,
Christopher J. Matarese and Gregory R. Broege for Amicus
Curiae Ajalat, Polley, Ayoob & Matarese.
California State Association of Counties and Jennifer B.
Henning for Amicus Curiae California State Association of
Counties and the California Assessors Association.
McDermott Will & Emery and Charles J. Moll, III, for
Amicus Curiae Charles J. Moll III.
Xavier Becerra, Attorney General, Tamar Pachter,
Assistant Attorney General, Karen W. Yiu and Heather B.
Hoesterey, Deputy Attorneys General, for Amicus Curiae
California State Board of Equalization.
__________________________
The Revenue and Taxation Code provides that a transfer of
real property between legal entities triggers a reassessment of
the property’s value for tax purposes. Importantly for this
appeal, the code also contains an exception to this rule when the
proportional ownership interests in real property of the
transferor and transferee—”whether represented by stock” or
another measure—remain the same after the transfer. This
appeal raises the question of how we should interpret “stock” in
the phrase “proportional ownership interests of the transferors
and transferees, whether represented by stock, partnership
interest, or otherwise, in each and every piece of real property
transferred.” (Rev. & Tax. Code, § 62, subd. (a)(2).) Specifically,
does “stock” refer only to voting stock or all classes of stock?
Appellants, the trustees of the Amen Family 1990
Revocable Trust (Trust or Appellant), challenges respondent Los
2
Angeles County Assessor’s (Assessor) reassessment of property
the Trust received from a corporation that the Trust had partially
owned. 1 Although there were at least five owners of the stock of
the transferor corporation (including the Trust) and the
transferee was solely the Trust, the Trust contends the
proportional ownership interest exception applied because it had
owned all the voting stock in the corporation. In the Trust’s view,
ownership interests in real property held by a corporation should
be measured by voting stock alone, meaning that the Trust was
the sole owner of the real property held by the corporation, and
remained the sole owner after the corporation transferred that
property to the Trust. The Assessor measured ownership in the
real property held by the transferor corporation by all stock—
voting and non-voting.
According to the Trust, the term “stock” as used in Revenue
& Taxation Code section 62, subdivision (a)(2) (section 62(a)(2))
should be interpreted to mean only voting stock. 2 The Assessor
argues “stock” in section 62(a)(2) means exactly what it says—
stock—and applies to all classes of stock, including for present
purposes both voting and non-voting stock. Under this
interpretation, the Assessor was right to reassess the property
after the transfer because the proportional ownership interests,
1 The State Board of Equalization (SBE) and others filed
amicus curiae briefs at our invitation. Under California Rules of
Court, rule 8.20(c)(6) we provided the parties with an opportunity
to respond to the amicus arguments and each filed a
supplemental brief.
2 All further statutory references are to the Revenue and
Taxation Code.
3
as measured by all the stock of the transferor corporation, had
changed.
The trial court agreed with the Assessor and upheld the
reassessment. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Super A Foods, Inc. (the “Corporation”) held title to two
pieces of real property (the “Property”) in Los Angeles. All of the
Corporation’s voting stock was issued to the Trust. The
Corporation’s non-voting stock was issued to the Trust and
several other individuals, including a company employee.
On December 5, 2014, the Corporation transferred the
Property to the Trust whose beneficiaries did not include the
persons who had non-voting stock in the Corporation. The
Assessor determined the transfer constituted a change of
ownership from the Corporation to a separate entity, the Trust,
and reassessed the Property from approximately $5 million to
$10 million. The Trust appealed the Assessor’s change-of-
ownership determination to the Assessment Appeals Board
(Board).
The Board reversed the reassessment, concluding that no
change in ownership occurred when the Corporation transferred
the Property to the Trust. The Board reasoned that only voting
stock should be considered when analyzing whether the
proportional ownership interest exclusion applies under section
62(a)(2). As the Trust owned 100 percent of the voting stock of
the transferor Corporation and the transferee was the Trust
itself, the Board found that the transfer was excluded from
reassessment under section 62(a)(2).
The Assessor filed a petition for writ of administrative
mandate in the trial court and sought to vacate the Board’s
decision. The Assessor argued that principles of statutory
4
construction require that section 62(a)(2) be interpreted to
measure ownership interest using both an entity’s voting and
non-voting stock. The trial court agreed and granted the petition.
The Trust timely appealed.
DISCUSSION
1. Standard of Review and Statutory Interpretation
Principles
On appeal of a trial court’s ruling on a petition for writ of
administrative mandate, we review de novo issues of statutory
interpretation under Code of Civil Procedure section 1094.5.
(Anserv Ins. Servs. v. Kelso (2000) 83 Cal.App.4th 197, 204.) The
general principles that guide interpretation of a statutory scheme
are well-settled. (Rudd v. California Casualty Gen. Ins. Co.
(1990) 219 Cal.App.3d 948, 952.) “Our function is to ascertain
the intent of the Legislature so as to effectuate the purpose of the
law. [Citation.] To ascertain such intent, courts turn first to the
words of the statute itself [citation], and seek to give the words
employed by the Legislature their usual and ordinary meaning.
[Citation.] When interpreting statutory language, we may
neither insert language which has been omitted nor ignore
language which has been inserted. [Citation.] The language
must be construed in the context of the statutory framework as a
whole, keeping in mind the policies and purposes of the statute
[citation], and where possible the language should be read so as
to conform to the spirit of the enactment. [Citation.]” (Ibid.)
2. Property Tax Reassessments
“In 1978 the voters adopted Proposition 13, which provides
that until a change in ownership occurs real property may be
taxed at no more than 1 percent of its 1975–1976 assessed value
adjusted for inflation. When ownership changes, the property
may be reassessed at its current market value.” (Pacific
5
Southwest Realty Co. v. County of Los Angeles (1991) 1 Cal.4th
155, 158–159 (Pacific Southwest Realty); 926 North Ardmore
Ave., LLC v. County of Los Angeles (2017) 3 Cal.5th 319, 326 [a
“change in ownership triggers reappraisal and reassessment for
property tax purposes”].) “Because Proposition 13 did not
explicate the meaning of ‘change in ownership’ [citations], it fell
to the Legislature to define the phrase . . . .” (Pacific Southwest
Realty, supra, pp. 160–161.) The Legislature did so by codifying
the change-in-ownership test in Revenue and Taxation Code
section 60. (Id. at p. 161.)
Section 60 defines a “change in ownership” as “a transfer of
a present interest in real property, including the beneficial use
thereof, the value of which is substantially equal to the value of
the fee interest.” Section 62 lists various tax-exempt transfers as
excluded from the definition of a change in ownership.
At issue here is section 62(a)(2) which provides that a
change of ownership does not include “any transfer . . . between
legal entities . . . that results solely in a change in the method of
holding title to the real property and in which proportional
ownership interests of the transferors and transferees, whether
represented by stock, partnership interest, or otherwise, in each
and every piece of real property transferred remain the same
after the transfer.”
3. Facially, the Plain Meaning of Section 62(a)(2)
Proportionality is Measured by All Stock
In challenging the trial court’s ruling, the Trust argues the
plain meaning of “stock” should be disregarded. It contends
“stock” in section 62(a)(2) is ambiguous and, by applying various
forms of statutory construction, “stock” should be interpreted to
mean only voting stock. Construed in this fashion, the
proportional ownership interests of the transferor (the
6
Corporation) and the transferee (the Trust) remained the same
after the transfer of the Property. The Trust owned all the voting
stock in the Corporation and, as transferee, the Trust owned the
property outright. Accordingly, the Trust argues that no change
of ownership occurred when the Property was transferred, and
the Property should not have been reassessed.
a. The Common Meaning of Stock
The Assessor argues that the plain meaning of “stock” as
used in section 62(a)(2) includes stock of every class, not just
voting stock. The parties do not dispute that the commonly
accepted and ordinary meaning of the term “stock” includes both
voting and non-voting stock. 3
b. The Trust’s Ambiguity Argument
In arguing that “stock” in section 62(a)(2) is ambiguous, the
Trust relies on the principle that clear statutory language may be
“rendered ambiguous when the language is read in light of the
statute as a whole or in light of the overall legislative scheme.”
(People v. Valencia (2017) 3 Cal.5th 347, 360.) According to the
Trust, section 62(a)(2)’s use of the term “stock” is ambiguous
because other provisions in the “statutory scheme” use “stock”
when referring to “voting stock.”
3 See entry for “Stock” in Black’s Law Dictionary (11th ed.
2019) [defining the term and listing various kinds of stock,
including voting and non-voting stock; other examples include
common stock, preferred stock, and treasury stock].
7
The Trust posits several arguments to support its claim
that, as a matter of statutory interpretation, “stock” in section
62(a)(2) really means “voting stock.” We consider each. 4
1. “Voting Stock” in the Statutory Scheme and
Elsewhere in the Revenue & Taxation Code
Principal among the Trust’s various arguments is that
section 64 and related sections of the Revenue & Taxation Code
essentially use “stock” and “voting stock” interchangeably. So,
the argument continues, “stock” in section 62(a)(2) means “voting
stock.” A careful reading of the code sections on which the Trust
relies does not show the terms are interchangeable.
The Trust’s principal focus for this argument is on two
subdivisions of section 64. 5 Subdivision (b) of section 64 (section
4 The trial court concluded that “stock” in section 62(a)(2)
was not ambiguous but proceeded to consider the Trust’s other
proposed statutory interpretation, as do we.
5 Section 64, subdivisions (a) through (c) provide in part,
“(a) Except as provided in subdivision (i) of Section 61 and
subdivisions (c) and (d) of this section, the purchase or transfer of
ownership interests in legal entities, such as corporate stock or
partnership or limited liability company interests, shall not be
deemed to constitute a transfer of the real property of the legal
entity. This subdivision is applicable to the purchase or transfer
of ownership interests in a partnership without regard to
whether it is a continuing or a dissolved partnership.
“(b) Any corporate reorganization, where all of the corporations
involved are members of an affiliated group, and that qualifies as
a reorganization under section 368 of the United States Internal
Revenue Code and that is accepted as a nontaxable event by
similar California statutes, or any transfer of real property
among members of an affiliated group, or any reorganization of
8
64(b)) provides that “any transfer of real property among
members of an affiliated group . . . shall not be a change of
ownership.” The subdivision then defines “affiliated group” as
“one or more chains of corporation connected through stock
farm credit institutions pursuant to the federal Farm Credit Act
of 1971 (Public Law 92-181), as amended, shall not be a change of
ownership. The taxpayer shall furnish proof, under penalty of
perjury, to the assessor that the transfer meets the requirements
of this subdivision.
“For purposes of this subdivision, ‘affiliated group’ means
one or more chains of corporations connected through stock
ownership with a common parent corporation if both of the
following conditions are met:
“(1) One hundred percent of the voting stock, exclusive of
any share owned by directors, of each of the corporations, except
the parent corporation, is owned by one or more of the other
corporations.
“(2) The common parent corporation owns, directly, 100
percent of the voting stock, exclusive of any shares owned by
directors, of at least one of the other corporations.
“(c)(1) When a corporation, partnership, limited liability
company, other legal entity, or any other person obtains control
through direct or indirect ownership or control of more than 50
percent of the voting stock of any corporation, or obtains a
majority ownership interest in any partnership, limited liability
company, or other legal entity through the purchase or transfer of
corporate stock, partnership, or limited liability company
interest, or ownership interests in other legal entities, including
any purchase or transfer of 50 percent or less of the ownership
interest through which control or a majority ownership interest is
obtained, the purchase or transfer of that stock or other interest
shall be a change of ownership of the real property owned by the
corporation, partnership, limited liability company, or other legal
entity in which the controlling interest is obtained.”
9
ownership with a common parent corporation if . . . (1) One
hundred percent of the voting stock . . . is owned by one or more
of the other corporations [and] (2) The common parent
corporation owns, directly, 100 percent of the voting stock . . . .”
(§ 64(b) (emphasis added).) The Trust argues that the “term
‘stock’ in the first sentence here means voting stock, as the two
numbered sentences make clear.” 6 We do not read it that way.
Rather, giving these words their “usual and ordinary” meaning as
we must (see In re Alpine (1928) 203 Cal. 731, 736–737), this
sentence is explained as follows: The Legislature has used a
general term (stock) to explain the basic corporate relationship
with the parent (e.g. not a partnership), followed by a more
specific term (voting stock) to measure which type of stock
qualifies for the exclusion. (See Marshall v. Pasadena Unified
School Dist. (2004) 119 Cal.App.4th 1241, 1254.) In this context,
voting stock is one of many classes of stock and is the one class
that matters under section 64. It does not follow that “stock”
means “voting stock” in section 62(a)(2).
The Trust also cites to subdivision (c)(1) of section 64
(section 64(c)(1)), which provides that “When a corporation . . .
obtains control through direct or indirect ownership or control of
more than 50 percent of the voting stock of any corporation . . .
the purchase or transfer of that stock or other interest shall be a
change of ownership . . . .” (Emphasis added.) The Trust argues
that “voting stock” and “stock” are used interchangeably here.
We see it differently—the use of the word “that” shows that the
Legislature was referring to the prior use of “voting stock” in the
sentence, using “that” in a grammatically correct manner.
6 By “first sentence here,” we understand the Trust to mean
“one or more chains of corporation connected through stock
ownership with a common parent corporation.”
10
Nor do we find the different uses of “voting stock” in other
parts of the Revenue and Taxation Code to mean that “stock” in
section 62(a)(2) is “voting stock.” Each of the Code provisions
cited by the Trust uses the specific term “voting stock,” not the
more general term “stock.” This shows the Legislature knew how
to refer to “voting stock” when defining “ownership interests,”
and deliberately chose a different test for section 62(a)(2) than for
other types of transfers. (See § 64(c) [transfer of ownership
interest in a legal entity], § 64(b) [transfer of real property among
subsidiaries]; § 62.1 [transfer of mobile home park to nonprofit,
stock cooperative, limited equity stock cooperative or other entity
formed by tenants]; § 62.5 [transfer of floating home marina to
nonprofit, stock cooperative, limited equity stock cooperative or
other entity formed by tenants].
The Trust’s argument would carry more weight if the Code
used “stock” infrequently, but “stock” is used repeatedly in the
Code. 7 That the Legislature regularly uses both “stock” and
voting stock” in various parts of the Code undermines the Trust’s
argument that in section 62(a)(2), “stock” was only a stray
misnomer of “voting stock.” To adopt the Trust’s argument would
suggest that these terms are interchangeable throughout the
Code, and would make “stock” or “voting stock” at times
superfluous. (See Wells v. One2One Learning Foundation (2006)
7 Numerous provisions in the Code use the term “stock”
(§§ 23361, 23804, 250105) while others use the term “voting
stock” (§§ 62.1, 62.5, 2188.10). A search of the Code reveals that
“stock” is used much more frequently than “voting stock.”
11
39 Cal.4th 1164, 1207 [“interpretations which render any part of
a statute superfluous are to be avoided”].) 8
2. “Voting Stock” in Property Tax Rule 462.240
The Trust also cites Property Tax Rule 462.240, subdivision
(d) to support its “stock” means “voting stock” argument. 9 As it
did with section 64, the Trust again points out the regulation
uses “stock” and “voting stock” in the same sentence. (Cal. Code
Regs., tit. 18, § 462.240.) Under this regulation, an employee
benefit plan’s acquisition “of the stock of the employer
corporation pursuant to which the employee benefit plan obtains
. . . more than 50 percent of the voting stock” (emphasis added) of
the corporation is not a change in ownership. This use of the two
terms neither creates ambiguity nor proves that the words are
equivalents. As in section 64, subdivision (b), the regulation
employs a general term (stock) to describe a transaction that
involves stock acquisition, and then employs a different and more
8 Quite the contrary, section 23361 subdivision (a), for
example, expressly distinguishes “stock” and “voting stock” in the
statute’s last sentence: “Except in paragraph (c), ‘stock’ does not
include nonvoting stock which is limited and preferred as to
dividends.” (Emphasis added.) Stock has one meaning in
paragraphs (a) and (b) and a different one in paragraph (c).
9 The regulations set forth in California Code of Regulations,
title 18 are referred to as “property tax rules.” (Phillips
Petroleum Co. v. County of Lake (1993) 15 Cal.App.4th 180, 189,
fn. 7; CAT Partnership v. County of Santa Cruz (1998)
63 Cal.App.4th 1071, 1077, fn. 4.) The rules of this subchapter
“govern assessors when assessing, county boards of equalizations
and assessment appeals boards when equalizing, and the State
Board of Equalization, including all divisions of the property tax
department.” (Cal. Code Regs., tit. 18, § 1.)
12
specific term (voting stock) to measure what type of stock
transaction results in a change of ownership. We reject the
Trust’s argument by applying one of the common statutory
construction principles – the use of two different terms in a
statute indicates a legislative intent to distinguish between the
terms. (See Campbell v. Zolin (1995) 33 Cal.App.4th 489, 497
[“ordinarily, where the Legislature uses a different word or
phrase in one part of a statute than it does in other sections or in
a similar statute concerning a related subject, it must be
presumed that the Legislature intended a different meaning.”].) 10
c. The State Board of Equalization’s Ambiguity
Argument
Lastly, the Trust adopts the argument of amicus the State
Board of Equalization that the term “stock” is ambiguous because
there are many subcategories of stock. But the fact that there
are subcategories of a general term does not show ambiguity;
rather it confirms that the general term includes all the
subcategories. The Code expressly identifies numerous
subcategories of stock: voting stock (§ 64), non-voting stock
(§ 23361), capital stock (§ 212), treasury stock (§ 24942), common
stock (§ 23040.1), preferred stock (§ 23040.1), and qualified small
business stock (§ 18038.4). The statutory references to these
various classes of stock reaffirms our interpretation of “stock” in
10 The parties and amici have directed our attention to
several extrinsic sources such as the Assessor’s Handbook,
Letters to the Assessor, and legal opinions of the State Board of
Equalization. We agree with the trial court that these materials
are not particularly helpful. None of the examples cited in these
materials addresses the situation in which both voting and non-
voting stock are at play in determining ownership under section
62(a)(2).
13
section 62(a)(2) as meaning all classes of stock, not just voting
stock. 11
11 The dissent expresses concern that our holding will open
the “door to a patchwork, county-by-county system of differing
assessment practices that is the opposite of what the Legislature
intended.” (Dis. Opn., p. 3) To avoid that result, the dissent
suggests that this court should interpret Tax and Revenue Code,
section 62(a)(2) consistent with the construction given by State
Board of Equalization (“Board”). The Board is charged with
preparing and issuing “instructions to assessors designed to
promote uniformity throughout the state and its local taxing
jurisdictions in the assessment of property for the purposes of
taxation.” (Gov. Code, § 15606, subd. (e).) The Board filed an
amicus brief and stated that it interpreted “stock” in Tax and
Revenue Code section 62(a)(2) as meaning voting stock. The
California Assessors Association, a statewide association for
assessors representing each of California’s 58 counties, also filed
an amicus brief, taking the contrary position, namely that “stock”
means all stock. Ultimately, it is this court’s task to interpret the
statute. “Courts must, in short, independently judge the text of
the statute, taking into account and respecting the agency’s
interpretation of its meaning, of course, whether embodied in a
formal rule or less formal representation. Where the meaning
and legal effect of a statute is the issue, an agency’s
interpretation is one among several tools available to the court.
Depending on the context, it may be helpful, enlightening, even
convincing. It may sometimes be of little worth.” (Yamaha Corp.
of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7–8.)
It remains to be seen whether our holding prompts the
adoption of practices that avoid the dissent’s concern about
patchwork interpretation of section 62(a)(2). If not, or for other
reasons, the Legislature may step in.
14
4. The Trust’s Reliance on Section 64 Is Substantively
Misplaced
Implicit in many of the Trust’s arguments is that sections
62 and 64 must be read together because they cover the same
subject. That assumption does not hold up. The two statutes
address two different kinds of transactions: the former deals
with the actual transfer of real property from one entity to
another; the later deals with a change of ownership of the legal
entity (a corporation) that owns real property. Because the two
sections deal with different methods of changing property
ownership, section 64’s rules relating to control of a corporation
do not fit in the proportionality exclusion under section 62(a)(2).
This point is illustrated in section 64, subdivision (c)(1).
When an entity obtains control of a corporation through its
“ownership or control of more than 50 percent of the voting stock
of [the] corporation,” (section 64(c)(1)), the new configuration of
the corporation becomes a transferee owner of the corporate real
property for reassessment purposes. The 50 percent demarcation
apparently represents a legislative policy that, because shares of
corporations are regularly traded, sales of less than 50 percent of
the voting stock are legally not significant to justify
reassessment.
The Trust’s argument that the Legislature meant “voting
stock” when it used “stock” in section 62 similar to section 64
ignores that section 62 does not address sales of corporate stock
at all, but transfers of real property from one entity to another.
Nothing in the record suggests that intrinsic in the nature of
corporations is that voting stock must be the sole measure of
transfers from a corporation to another form of ownership.
Section 62(a)(2) looks at the proportional interests in real
property of owners of the transferor and transferee entities, not a
15
change in stock ownership. 12 The Legislature reasonably could
use stock or voting stock or other standards as its section 62(a)(2)
reassessment yardstick. It chose for corporations “stock,” even
though, as we have seen, voting stock is used in other situations
covered by the Revenue and Taxation Code.
In the present case, the proportional ownership interests
were not aligned before and after transfer. Before the transfer,
the corporation had at least five stockholders, namely several
individuals and the Trust, all five having economic interests in
the Property held by the corporation. After the transfer, the
Trust owned the Property, and the individuals no longer had any
ownership interest in the Property. The proportional ownership
interests of the transferor and transferee were different.
5. The “Primary Economic Value” test in Section 60 also
Supports that all Stock Is Considered in Applying
Section 62(a)(2)
Finally, the Assessor correctly observes that section
62(a)(2) must be read in light of section 60, which provides, “A
‘change in ownership’ means a transfer of a present interest in
real property, including the beneficial use thereof, the value of
which is substantially equal to the value of the fee interest.”
Under section 60, there is a change in ownership of real
property when there is “(1) a transfer of a present interest in real
property, (2) including the beneficial use thereof, (3) the value of
which is substantially equal to the value of the fee interest.”
(Pacific Southwest Realty, supra, 1 Cal.4th at p. 162.) As
explained by the Pacific Southwest Realty court, the “Legislature
intended to find a change in ownership when the primary
12 Section 64 does not use the “proportional ownership
interests” standard.
16
economic value of the land is transferred from one person or
entity to another.” (Id. at p. 167.)
The “beneficial use” inquiry in whether or not there has
been a change of ownership under section 60 asks who has an
economic interest in a parcel of real estate, not the nature of the
ownership interests in the entity that owns the real property.
Here, the Corporation’s Articles of Incorporation state, “[E]xcept
with respect to all voting rights being vested exclusively in the
holder of the Voting Common Shares, as herein provided, the
Voting Common Stock and the Nonvoting Common Stock shall be
equal in all other respects including but not limited to, dividend
and liquidation rights.” By express provision, at a minimum both
voting and non-voting stockholders had “dividend and
liquidation” rights, meaning both had economic interests in the
Corporation. 13 After the transfer, non-voting stockholders had no
interest in the Trust and had lost their previous economic
interest in the real property. The economic value of the
properties had been transferred from the non-voting stockholders
to the voting stockholders, resulting in a change in ownership
under section 60 and one not excluded under section 62(a)(2).
13 The trial court also found that non-voting stockholders had
economic interests in the Corporation. “The non-voting
shareholders own between .09% and 1.7% of the [Corporation’s]
stock. The Assessor appraised the Property at $10,280,000. It is
not inconceivable that, upon liquidation of the [Corporation], a
1/7% [sic] shareholder may receive a significant portion of this
amount.” Using the trial court’s findings, the non-voting
stockholders would be entitled to between $92,520 and $174,760
if the Corporation had sold the property.
17
DISPOSITION
The judgment is affirmed. Each party is to bear its own
costs on appeal.
RUBIN, P. J.
I CONCUR:
MOOR, J.
18
Jeffrey Prang, as County Assessor, etc. v. Luis Amen, as Trustee,
etc. et al.
B298794
BAKER, J., Dissenting
Resolving an issue of statewide importance, the majority
opinion authorizes the Assessor in Los Angeles County to
reassess real property in a manner inconsistent with the
considered legal view of the State Board of Equalization (the
Board)—the entity responsible for promulgating property tax
assessment regulations and for instructing county assessors on
correct property tax assessment methods. (Gov. Code, § 15606,
subd. (c); see also Gov. Code, § 15606, subd. (e) [directing the
Board to “[p]repare and issue instructions to assessors designed
to promote uniformity throughout the state and its local taxing
jurisdictions in the assessment of property for the purposes of
taxation”].) As a matter of statutory interpretation and of
implementing agency deference (Steinhart v. County of Los
Angeles (2010) 47 Cal.4th 1298, 1322; Hoechst Celanese Corp. v.
Franchise Tax Bd. (2001) 25 Cal.4th 508, 524-525; SHC Half
Moon Bay, LLC v. County of San Mateo (2014) 226 Cal.App.4th
471, 485), the majority opinion reaches the wrong result.
In regulations interpreting related statutes (see, e.g., Rev.
& Tax. Code, § 64, subd. (d); Cal. Code Regs., tit. 18, § 462.180)
and in guidance issued to county assessors that discusses
Revenue and Taxation Code section 62, subdivision (a)(2) (Section
62(a)(2)), the Board has interpreted the term “stock” to mean
voting stock. That interpretation should be given great weight,
and I see no good reason to deviate from it. As the Board
persuasively explains in the amicus briefing this court invited, its
interpretation of “stock” harmonizes Section 62(a)(2) with
pertinent portions of the statutory scheme implementing
Proposition 13. As the Board elaborates: “If Section 62(a)(2)
means ‘all stock,’ the exclusion under Section 62(a)(2) would be
measured under one standard—all stock—but under a different
standard—voting stock—to measure when the exclusion ends
under [Revenue and Taxation Code] Section 64(d).” Reading
“stock” in Section 62(a)(2) to mean voting stock also avoids
significant administrative difficulties because, as the Board again
explains, “evaluat[ing] the proportional ownership interests of
voting stock is relatively straightforward and readily
ascertainable” while “[a]ssessing whether or not the ‘proportional
ownership interests of the transferors and transferees’ remained
the same [for all stock shares] would necessitate an evaluation of
all the different classes and types of stock and their attendant
rights, having to assign what may amount to random percentages
of ownership to particular classes of stock since . . . owners of
corporations have no specific right to any corporate real
property.”
The majority’s oversimplified interpretive approach (the
statute just says “stock,” so that means any sort of stock) fails to
harmonize the statutory scheme, and that is an analytical flaw.
Analytical vulnerabilities, however, are the least of the opinion’s
problems; the deleterious practical consequences of today’s
holding are the real concern. The Legislature has stated a
preference for uniformity in the administration of property tax
assessment practices throughout the state—with the Board
specifically charged with achieving that end. (Gov. Code,
§ 15606, subd. (e).) The majority nonetheless permits the Los
2
Angeles County Assessor to disregard the Board’s instructions
and expertise, thereby opening the door to a patchwork, county-
by-county system of differing reassessment methods that is the
opposite of what the Legislature intended. Not only that,
decisions about how to structure an untold number of property
transactions and legal entity relationships in Los Angeles County
have almost certainly been informed by the Board’s longstanding
guidance regarding Section 62(a)(2) and related statutes. The
majority upends these reliance interests with unpredictable and,
at least in some cases, unfair consequences.
Let us therefore hope today’s decision is not the last word
on the meaning of Section 62(a)(2). For now, I respectfully
dissent.
BAKER, J.
3