APPEAL from a judgment of the Superior Court of San Diego County, Yuri Hoffman, Judge. Affirmed. (Super. Ct. No. 37-2007-00072513- CU-MC-CTL).
The opinion of the court was delivered by: Irion, J.
CERTIFIED FOR PUBLICATION
Fashion Valley Mall, LLC (Mallco) appeals from the trial court's summary judgment ruling in favor of the County of San Diego (the County) on Mallco's complaint for a refund of property taxes. At issue is the trial court's ruling that a 100 percent change in ownership occurred when record title in the Fashion Valley Shopping Mall in San Diego (the Mall) was transferred by Equitable Life Assurance Company of the United States (Equitable) to Mallco as Equitable's initial capital contribution to Mallco's parent company, Fashion Valley MM, LLC (FVM), which gave Equitable a 50 percent membership interest in FVM. Mallco contends that due to its membership interest in FVM, it retained 50 percent of the beneficial use of the Mall, and thus only a 50 percent change in ownership of the Mall occurred for purposes of property tax reassessment, rather than a 100 percent change in ownership as found by the trial court. As we will explain, we conclude that a 100 percent change in ownership of the Mall occurred, and accordingly we affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2001, Equitable was the fee owner of 100 percent of the Mall when it entered into a transaction involving the transfer of its ownership of the real property (the Transaction). The issue in this appeal is whether, for property tax reassessment purposes, Equitable transferred all or only 50 percent of its ownership interest in the Mall.
The structure of the Transaction was as follows. Equitable and Simon Property Group, L.P. (Simon), created a Delaware limited liability company, FVM, to function as a holding company.*fn1 Simon and Equitable became equal members in FVM, with each of them holding a 50 percent interest.*fn2 Simultaneously, a wholly owned subsidiary of FVM was formed - Mallco - as the operating company for FVM, with the role of holding title to the Mall and acting as the management, leasing and development agent for it. As each of their initial capital contributions to FVM, Equitable contributed the Mall, and Simon contributed $165 million.
As part of the Transaction, the parties used a grant deed recorded in the San Diego County Recorder's office to transfer record title in the Mall directly from Equitable to Mallco. A "Contribution Agreement" entered into by Equitable, Simon, FVM and Mallco detailed an off-record chain of title in which the grant deed transferring the Mall directly to Mallco from Equitable would "be deemed to be a contribution by Equitable of the Mall to [FVM], and the contribution of the Mall by [FVM] to Mallco," resulting in FVM "hold[ing] title to the Mall in Mallco." At closing, FVM was to make a special, one-time distribution to Equitable, equivalent to Simon's initial $165 million capital contribution to FVM, and Simon was designated as the managing member of FVM.
B. Reassessment of the Mall
In August 2002 the San Diego County Assessor determined that the Transaction resulted in a 100 percent change in ownership of the Mall. It therefore reassessed the Mall pursuant to Revenue and Taxation Code section 75.10,*fn3 increasing the assessed value of the Mall for property tax purposes from approximately $247 million to $360 million. Mallco filed an appeal of the assessor's decision with the San Diego County Assessment Appeals Board (the AAB).
C. The Reformation Agreement
While Mallco's appeal of the assessor's decision was pending before the AAB, Equitable, Simon, FVM and Mallco entered into a June 2004 agreement entitled "Agreement to Rescind, Restructure and Reform the Contribution Agreement Dated September 28, 2001" (the Reformation Agreement).*fn4 The Reformation Agreement provided that it was intended to "expressly document a change in ownership of only fifty percent (50%) of the Mall, by providing that Equitable transfer one-half of its ownership interest in the Mall to [Simon] in exchange for [Simon's] [i]nitial [c]apital [c]ontribution and thereafter requiring both Equitable and [Simon] to transfer their respective one-half ownership interests in the Mall to [FVM]." (Italics added.)
The Reformation Agreement sought to effectuate a transfer of only 50 percent ownership of the Mall by providing that "[f]or property tax purposes only" certain provisions in the Contribution Agreement describing the Transaction were "rescinded, reformed, restructured, superseded and replaced" in favor of provisions stating that upon closing of the deal described in the Contribution Agreement the following shall occur:
(1) Equitable shall transfer an undivided 50 percent interest in the Mall to Simon; (2) as consideration, Simon shall transfer its initial contribution in FVM to Equitable; (3) Equitable shall transfer to FVM "as a capital contribution" its remaining undivided 50 percent interest in the Mall; (4) Simon shall transfer to FVM "as a capital contribution" the 50 percent interest in the Mall that it received from Equitable; and (5) Equitable shall deed the Mall to Mallco. The Reformation Agreement further provided that the grant deed transferring the Mall directly from Equitable to Mallco "shall be deemed to be a contribution by Equitable and Simon of their respective interests in the Mall to [FVM], and the [c]ontribution of the Mall by [FVM] to Mallco."
Emphasizing that the parties intended the prior version of the Contribution Agreement to remain in effect for all purposes except for the assessment of property taxes, the Reformation Agreement provided that it "shall be operative, and is to be given effect, . . . solely for property tax purposes. In all other respects, the Contribution Agreement, and the structure of the transaction described in the Contribution Agreement, shall remain in full force and effect for all other purposes, including without limitation income tax and securities purposes and commercial and real estate activities." (Italics added.)
D. The Ruling of the Assessment Appeals Board
In its appeal to the AAB, Mallco relied on the Reformation Agreement to argue that only a 50 percent change in ownership in the Mall had occurred.*fn5 The AAB ruled against Mallco, concluding that a 100 percent ownership change occurred, and that the Reformation Agreement was not effective to change the property tax effects of the Transaction in that it did not actually rescind the Transaction but ...