California Court of Appeals, First District, First Division
RICHARD N. BENSON, as Assessor-Recorder, etc., Plaintiff and Appellant,
MARIN COUNTY ASSESSMENT APPEALS BOARD, Defendant JAMES D. MIKKELSEN, Real Party in Interest and Respondent.
Superior Court of Marin County, No. CV 1003775 Honorable Faye D’Opal Judge.
Jack F. Govi and Sheila Lichtblau for Plaintiff and Appellant.
Frank I. Mulberg and Brett D. Mulberg for Real Party in Interest.
Kamala D. Harris, Attorney General and Joyce E. Hee, Supervising Deputy Attorney General for the California State Board of Equalization as Amicus Curiae on behalf of Defendant.
Under article XIII A of the California Constitution (popularly known as Prop. 13), the most common trigger of the reassessment of real property is a “change in ownership.” The initiative measure, itself, did not define change in ownership, leaving that task to the Legislature, which promptly appointed a task force to make recommendations. At the time the initiative measure was approved by California voters, joint tenancies were commonly used as an estate planning tool—parents would deed property to themselves and their children so it would pass automatically to the latter upon the death of the last surviving parent. The task force therefore proposed treating “family” joint tenancies akin to the making of a will. Since there is no change in ownership on the mere making of a will, there similarly would be no change in ownership on the creation of a family joint tenancy. Rather, change in ownership would occur when the joint tenancy terminated, frequently on the death of the last surviving parent. The Legislature adopted the task force’s recommendations, and the Legislature and the State Board of Equalization have spent the ensuing decades refining the notion that there is no change in ownership when a family joint tenancy is created, but there is on termination.
In this case, after one of two brothers inherited a residential property from their mother, he created a joint tenancy with his brother. Nearly a decade later, the second brother deeded his own joint tenancy interest to himself as a tenant in common with his brother. Although he and his brother continued to own the property and retained the same percentage ownership as before, the Marin County Tax Assessor determined a change in ownership had occurred, reassessed the property and sent the second brother, real party in interest James Mikkelsen, a tax bill. Mikkelsen appealed to the Assessment Appeals Board, claiming a mere change in the way title was held was not a change in ownership. The Board agreed with Mikkelsen. The Assessor sought a writ of review from the trial court. The court also agreed with Mikkelsen. The Assessor now appeals to this court, supported by the State Board of Equalization as amicus curiae.
As Mikkelsen points out, the Legislature has, indeed, specified a mere change in the way title is held is not a change in ownership when it comes to most property, and there certainly is logic to that approach. However, as we will explain, from the time the Legislature enacted the change in ownership statutes implementing Proposition 13, it has treated family joint tenancies differently. While the wisdom of the policy reason for that differential treatment—to accommodate the use of joint tenancy as an estate planning tool—may be a matter of debate, it was within the Legislature’s prerogative to craft the change in ownership statutes accordingly. What Mikkelsen, the Board and the trial court overlooked was that Mikkelsen got the advantage of this policy when his brother created the joint tenancy and no change in ownership was deemed to have occurred. The price for that property tax break, so to speak, was a change in ownership when the family joint tenancy was terminated. We therefore reverse the judgment of the trial court.
II. Factual and Procedural Background
When Peter and James Mikkelsen’s father died in the mid 1950’s, he left a home in Mill Valley to their mother, Dagmar Mikkelsen. She subsequently created a joint tenancy in the property with Peter. When Dagmar died in July, 1997, Peter became the sole owner of the property by right of survivorship. In December, Peter created a joint tenancy in the property with James. As a result, each had a 50 percent undivided interest in the property and reciprocal rights of survivorship. The brothers owned the home as joint tenants for a decade. In November 2007, James “severed his interest as a joint tenant” by executing and recording a grant deed wherein he granted “to himself an interest as a tenant in common.”
The Marin County Assessor determined James’ transfer of his joint tenancy interest to himself as a tenant in common, was a change in ownership triggering reassessment under Proposition 13. The assessed value of the property was determined to be $525, 323, significantly higher than its previously assessed value of $100, 631 and resulting in a tax increase of $2, 682.84.
James challenged the reassessment and sought a tax refund, on the ground, interalia, the change in legal title from joint tenancy to tenancy in common did not constitute a change in ownership. The Assessor rejected his challenge. James appealed to the Assessment Appeals Board for Marin County. By a vote of two to one, the Board reversed the Assessor’s decision and returned the property’s assessed value to $100, 631. The Assessor petitioned the Marin County Superior Court for a writ of review of the Board’s decision, which the court denied. The Assessor timely appealed to this court.
Proposition 13 specifies: “The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property.” (Cal. Const. art. XIII A, § 1, subd. (a).) The measure defines “full cash value” to mean “the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” (Cal. Const. art. XIII A, § 2, subd. (a), italics added.) Of the three “value benchmarks under Proposition 13” (i.e., the 1975 base, change in ownership, and new construction), change in ownership is “by far the most important, as it is the primary reappraisal ‘trigger’ under Article XIII A.” (Assem. Revenue and Taxation Com., Rep. of the Task Force on Property Tax Administration (January 22, 1979) (Task Force Report), p. 37.) It thus is no surprise that “[t]he most complex area of law implementing Proposition 13 is the attempt to define ‘change in ownership.’ ” (Assem. Revenue and Taxation Com., Rep. of the Implementation of Proposition 13, Vol. 1, Property Tax Assessment (October 29, 1979) (Implementation Report), p. 18.)
Statutory Definition of “Change in Ownership”
“Proposition 13 did not explicate the meaning of ‘change in ownership.’ ” (Pacific Southwest Realty Co. v. County of Los Angeles (1991) 1 Cal.4th 155, 161 [2 Cal.Rptr.2d 536, 820 P.2d 1046] (Pacific Southwest).) That task was left to the Legislature which, “the year after article XIII A’s passage, ... adopted a statutory framework for implementing it.” (Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1321 [104 Cal.Rptr.3d 195, 223 P.3d 57]; see also Pacific Southwest, supra, 1 Cal.4th at pp. 160–161.) It was understood ...