(San Francisco County Super. Ct. No. CGC 05-447976). Trial judge: Hon. Robert L. Dondero.
The opinion of the court was delivered by: Needham, J.
CERTIFIED FOR PUBLICATION
Revenue and Taxation Code section 5097*fn1 provides that a taxpayer seeking a refund of property taxes must file a verified claim within four years after making the payment of the disputed tax unless an alternative period triggered by circumstances not relevant here applies. Appellant JPMorgan Chase Bank, N.A., as Trustee for the IBM Personal Pension Plan (Chase), filed a civil suit seeking a refund of fraud penalties imposed pursuant to earlier versions of sections 503 and 504 without filing a timely claim under section 5097. We conclude the failure to file a timely claim bars this action. We affirm the superior court judgment entered against Chase on its complaint.
I. FACTS AND PROCEDURAL HISTORY
A. One Market Plaza and the Separate Account Annuity Contracts
In 1973, the One Market Plaza Joint Venture (Joint Venture) was formed as a general partnership between The Equitable Life Assurance Society of the United States (Equitable), a New York corporation, and Southern Pacific Land Company (Southern Pacific), a California corporation. Equitable had a 90 percent interest in the Joint Venture and Southern Pacific had a 10 percent interest. Subsequently, the Joint Venture built One Market Plaza in downtown San Francisco, consisting of two large office towers on one lot (Parcel No. 3713-007) and a parking garage on a second lot (Parcel No. 3741-031).
The IBM Personal Pension Plan (the Plan) is an employee benefit plan established by International Business Machines Corporation (IBM) for the benefit of IBM's former employees.*fn2 Chase Manhattan Bank, N.A., the predecessor in interest to appellant JPMorgan Chase Bank, N.A. (collectively, "Chase") was the Plan's trustee. Equitable acted as the Plan's investment advisor. The Plan approached Equitable about developing proposals for investments in office buildings.
In December 1986, Equitable and the Plan entered into an annuity contract under which the Plan acquired 90 percent of Equitable's 90 percent interest in the Joint Venture (81 percent of the whole), which was placed into Separate Account No. 143, established and maintained by Equitable on behalf of the Plan. In exchange, the Plan paid Equitable an amount representing 81 percent of the subject property's fair market value. Chase was a party to this transaction as trustee for the Plan.
The formation of such separate accounts are highly regulated transactions authorized by the insurance laws of California and New York, through which insurance companies sell annuities backed by assets placed into separate accounts, segregated from the insurance company's general assets and, therefore, beyond the reach of the company's general creditors. The insurance laws of California and New York treat assets placed in the separate account of an insurance company as legally remaining the property of the insurer (here, Equitable), not the beneficiary (here, the Plan). (See Ins. Code, § 10506, subd. (a); N.Y. Ins. Law, § 4240, subd. (a)(12).)
As a result of the 1986 separate account transaction, Equitable retained legal title to the property while the beneficial interest transferred to the Plan. The Plan bore the risks and benefits of ownership of its share of the property. Income from rents on the Plan's share of the property were paid to the Plan through the separate account. The Plan had the power to hire the day-to-day manager for the property and to demand that Equitable transfer its remaining interest in the property to the Plan.
As a result of subsequent transactions, Equitable continued to hold a nominal 99.5 percent interest in the Joint Venture, with a 90 percent interest allocated to Separate Account No. 143 on behalf of the Plan. In March 1990, Equitable and the Plan entered into a second annuity contract and created Separate Account No. 178, into which Equitable reallocated all of its interest in the Joint Venture from Separate Account No. 143. Chase was a party to this transaction as the trustee for the Plan. At this point, the property was still owned by the Joint Venture, which was itself owned 99.5 percent by Equitable on the Plan's behalf. In June 1990, the remaining 0.5 percent of the Joint Venture was sold by Equitable's wholly owned subsidiary to the Plan's wholly owned subsidiary, One Market Plaza.
Equitable notified its property insurer to terminate coverage of the subject property effective March 30, 1990, because as of that date Equitable would no longer have an ownership interest in the property. In November 1990, the Plan replaced Equitable's property manager with its own. Thereafter, Equitable had no management responsibility for the property.
In 1994, the subject property was sold to an unrelated third party. In November 1994, Equitable, IBM, and Chase, as trustee for the Plan, executed a release and indemnification agreement providing that upon completion of the sale of One Market Plaza, the separate account and the Joint Venture were dissolved. The Plan was given all rights and liabilities arising from any tax reassessments and all rights to recover any overpayment of taxes and penalties.
B. Property Tax Reassessment and Penalties
The transfer of ownership of California real estate triggers a reassessment of the property under article XIII A of the California Constitution (Proposition 13) and a recalculation of the property taxes due. Following an investigation of the ownership of the property, the Assessor for the City and County of San Francisco (Assessor) concluded that the 1986 separate account transaction constituted a change of ownership under the Revenue and Taxation Code.*fn3 The Assessor concluded that, as a result of the 1986 transaction, ...