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Holland v. Assessment Appeals Bd. No. 1

Supreme Court of California

January 23, 2014

Joseph E. HOLLAND, as Assessor, etc., Plaintiff and Appellant,
v.
ASSESSMENT APPEALS BOARD NO. 1, Defendant and Respondent; Rancho Goleta Lakeside Mobileers, Inc., et al., Real Parties in Interest.

[As Modified on April 16, 2014]

Page 483

[Copyrighted Material Omitted]

Page 484

[167 Cal.Rptr.3d 75] Kamala D. Harris, Attorney General, Kathleen Kenealy, Chief Assistant Attorney General, Susan Duncan Lee, Acting Solicitor General, Paul D. Gifford, Assistant Attorney General, W. Dean Freeman, Felix E. Leatherwood and Stephen Lew, Deputy Attorneys General, for State Board of Equalization as Amicus Curiae on behalf of Plaintiff and Appellant.

Dennis A. Marshall, County Counsel, and Jerry F. Czuleger, Deputy County Counsel, for Defendant and Respondent.

David C. Fainer, Jr., Santa Barbara, for Real Parties in Interest and Respondents.

The Gibbs Law Firm, San Clemente, Gerald R. Gibbs and David L. Gibbs for The Associates Group for Affordable Housing, Inc., Palm Beach Park Association, Inc., and Summerland by the Sea, Inc., as Amici Curiae on behalf of Real Parties in Interest and Respondents.

Dennis A Marshall, County Counsel, and Marie A. LaSala, Deputy County Counsel, for Plaintiff and Appellant.

Douglas W. Walker, Kevin L. Morris; Nicholas S. Chrisos, County Counsel [167 Cal.Rptr.3d 76] (Orange), James Clement Harman, Deputy County Counsel (Orange); Glenn Beloian; Sandeep Mitra; Walter Joseph DeLorrell III; James B. Rooney for California Assessors' Association, Dennis Draeger, San Bernardino County Assessor, Webster J. Guillory, Orange County Assessor, Larry Ward, Riverside County Assessor, Lawrence E. Stone, Santa Clara County Assessor, and Ernest J. Dronenburg, Jr., San Diego County Assessor, as Amici Curiae on behalf of Plaintiff and Appellant.

LIU, J.

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[316 P.3d 1189] In 1978, California voters adopted Proposition 13, which added article XIII A to our state Constitution. This amendment limited the rate at which real property in this state may be taxed and the extent to which the assessed value of real property may be increased. As relevant here, real property [316 P.3d 1190] may be taxed at no more than 1 percent of its " full cash value," with " full cash value" defined to mean either the assessed value of that property in the 1975-1976 tax year or the property's value at the time of a subsequent " change in ownership," subject to an adjustment for inflation. (Cal. Const., art. XIII A, §§ 1, subd. (a), 2, subds. (a) & (b).) Thus, real property generally is taxed based on its value at the time of acquisition, not its current value. The task of defining when there has been a change in ownership that triggers reassessment has been left largely to the Legislature. ( Pacific Southwest Realty Company v. County of Los Angeles (1991) 1 Cal.4th 155, 160-161, 2 Cal.Rptr.2d 536, 820 P.2d 1046.)

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This case concerns the assessment of certain types of mobilehome parks. Mobilehome parks in California may be organized in a number of ways. In 1985, the Legislature passed a statute intended to encourage one particular form of organization. Pursuant to what is now Revenue and Taxation Code section 62.1, subdivision (a)(1), a " transfer ... of a mobilehome park to a nonprofit corporation, stock cooperative corporation, limited equity stock cooperative, or other entity formed by the tenants of a mobilehome park, for the purpose of purchasing the mobilehome park" is deemed not to be a change in ownership of the park. (All undesignated statutory references are to the Revenue and Taxation Code.) Thus, section 62.1, subdivision (a)(1) allows the residents of a mobilehome park to form a nonprofit corporation or similar entity to take ownership of the park without triggering reassessment.

Subsequently, in 1988, the Legislature introduced Senate Bill No. 1885 (1987-1988 Reg. Sess.) in part to address a problem in the tax treatment of mobilehome parks that emerged under section 62.1. Transfers of interests in mobilehome parks held by a nonprofit corporation, unlike those held by a condominium or stock cooperative, did not constitute a change in ownership under the Revenue and Taxation Code. (See §§ 61, 65.1.) Therefore, once a mobilehome park was purchased by a nonprofit corporation or similar entity, subsequent transfers of membership shares were not subject to reassessment. As explained in an analysis of Senate Bill No. 1885 prepared by the State Board of Equalization (SBE), " [p]utting a park into a nonprofit mutual benefit corporation ownership could mean that no part of the park would ever be reappraised again, since transfers of individual interests in a nonprofit corporation do not trigger reappraisal. This would give mobilehome parks much more favorable treatment than the average homeowner." (SBE, analysis of Sen. Bill No. 1885 (1987-1988 Reg. Sess.) Mar. 24, 1988, p. 2.)

In amending section 62.1, the Legislature crafted a rule to facilitate what it viewed as equitable tax treatment of these [167 Cal.Rptr.3d 77] property interests: Where a mobilehome park has been purchased by a nonprofit corporation or similar entity, any subsequent transfers " of shares of the voting stock of, or other ownership or membership interests in, the entity that acquired the park ... shall be a change in ownership of a pro rata portion of the real property of the park...." (§ 62.1, subd. (b)(1).) The Legislature defined the term " ‘ pro rata portion of the real property’ " as " the total real property of the mobilehome park multiplied by a fraction consisting of the number of shares of voting stock, or other ownership or membership interests, transferred divided by the total number of outstanding issued or unissued shares of voting stock of, or other ownership or membership interests in, the entity that acquired the park...." (§ 62.1, subd. (b)(2).) Thus, no change of ownership occurs when the residents of a mobilehome park form a nonprofit corporation or similar entity that purchases the park. But if one of the residents subsequently

Page 487

transfers his or her interest in the entity that owns the park, that transfer will constitute a change in ownership of a " pro rata portion" of the park.

In this case, the Assessor for the County of Santa Barbara (Assessor) reassessed 26 subsequent transfers of individual interests in two mobile-home parks held by resident-controlled nonprofit corporations after certain residents sold both their mobilehomes and their interests in the corporation. The mobilehomes [316 P.3d 1191] themselves, which are classified as personal property, were assessed separately. (§§ 5801, 5810.) Following the guidance of the SBE, the Assessor appraised the real property interest subject to reassessment— i.e., a fraction of the mobilehome park itself— by subtracting the estimated market value of the mobilehome from the total price paid for both the mobilehome and the membership interest in the corporation owning the park. We are asked to determine whether section 62.1, subdivision (b) (hereafter section 62.1(b))— which states that a transfer of a membership in an entity that owns a mobilehome park is a " change of ownership of a pro rata portion of the real property of the park" — requires an assessor to instead appraise such an interest by first estimating the value of the entire park and then multiplying that value by the fractional interest in the park that was transferred. We conclude that it does not. Section 62.1(b) simply describes a unit of real property that is subject to reassessment; it does not mandate any particular formula for appraising this unit. Accordingly, we reverse the judgment of the Court of Appeal, which affirmed the denial of the Assessor's petition for a writ of mandate.

I.

Rancho Goleta Mobilehome Park (Rancho Goleta) was purchased in 1992 for $9.4 million by Rancho Goleta Lakeside Mobileers, Inc., a nonprofit corporation whose members are residents of the park. Silver Sands Village Mobilehome Park (Silver Sands) was similarly purchased by a nonprofit corporation formed by park residents, Silver Sands Inc., for $1.5 million in 1998. All of the residents in these parks— including both those residents who hold interests in the corporations that own the parks and the handful of residents who do not— entered into a lease with the corporation that entitles each resident to a specific mobilehome space. During the 2001 calendar year, a total of 26 members of these two corporations sold both their membership interests and their mobilehomes to incoming residents of the parks.

In 1999, the SBE issued an advisory letter to county assessors that described how mobilehome parks should be assessed following such transfers of individual interests in ...


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