California Court of Appeals, Third District, Sacramento
APPEAL from a judgment of the Superior Court of Sacramento County, No. 34-2011-00116029-CU-MC-GDS David I. Brown, Judge.
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O’Melveny & Myers, Carla J. Christofferson, Dimitri D. Portnoi, Smita Reddy, Melanie P. Ochoa; Sutherland Asbill & Brennan, Carley A. Roberts and Douglas Mo for Plaintiff and Appellant.
Kamala D. Harris, Attorney General, Paul D. Gifford, Assistant Attorney General, Molly K. Mosley, Robert E. Asperger and Serajul F. Ali, Deputy Attorneys General, for Defendant and Respondent Board of Equalization.
Nicholas S. Chrisos, County Counsel, and Laurie A. Shade, Deputy County Counsel, for Defendant and Respondent County of Orange.
Theresa A. Goldner, County Counsel, and Jerri S. Bradley, Deputy County Counsel, for Defendant and Respondent County of Kern.
John F. Krattli, County Counsel, and Albert Ramseyer, Deputy County Counsel, for Defendant and Respondent County of Los Angeles.
Pamela J. Walls, County Counsel, and Leslie E. Murad II, Deputy County Counsel, for Defendant and Respondent County of Riverside.
John F. Whisenhunt, County Counsel, Scott Fera and Rick J. Heyer, Deputy County Counsel, for Defendant and Respondent County of Sacramento.
Jean-Rene C. Basle, County Counsel, and Kevin L. Norris, Deputy County Counsel, for Defendant and Respondent County of San Bernardino
Dennis A. Marshall and Michael C. Ghizzoni, County Counsel, and Marie A. LaSala, Deputy County Counsel, for Defendant and Respondent County of Santa Barbara.
Orry P. Korb, County Counsel, and Neysa A. Fligor, Deputy County Counsel, for Defendant and Respondent County of Santa Clara.
Leroy Smith, County Counsel, and Linda K. Ash, Deputy County Counsel, for Defendant and Respondent County of Ventura.
BLEASE, Acting P. J.
This is a property tax refund action for the 2007 tax year filed by plaintiff, Verizon California Inc. (Verizon). The trial court entered a judgment of dismissal after it sustained defendants’ demurrer
without leave to amend. Defendants are the Board of Equalization (Board) and nine individual counties. Verizon owns property in 38 counties, but it sought a refund for taxes paid for the 2007 tax year only from the nine named counties. The trial court sustained the demurrer on the ground Verizon failed to name indispensable parties, i.e., the 29 absent counties in which Verizon owns property, even though Verizon sought no refund from those counties.
The properties of telephone companies, of which Verizon is one, are assessed annually by the Board on a statewide basis, rather than by each individual county. (Cal. Const., art. XIII, § 19.) If a taxpayer disagrees with the assessed value determined by the Board and desires a refund, the taxpayer must first exhaust its administrative remedies by petitioning the Board for reassessment, paying the taxes at issue, and claiming a refund. (Rev. & Tax. Code, §§ 741, 5148, subds. (e)(g).) Only then may a taxpayer file a complaint, which must be “a single complaint with all parties joined therein with respect to disputes for any year.” (§ 5148, subd. (a).)
The trial court sustained defendants’ demurrer without leave to amend on the ground the absent counties were indispensable parties. The trial court reasoned that section 5148 required all counties in which Verizon owned property to be named as defendants in the action, and that even though Verizon sought no refund from the absent counties for 2007, a change in the assessment for 2007 would affect the absent counties in future tax years. The statute of limitations having run on filing a complaint against the absent parties, the case was dismissed.
We shall conclude that section 5148 does not require a plaintiff to name as a defendant every county in which it owns property, unless it is seeking a refund from the county. We shall further conclude that in this case the trial court abused its discretion in finding the absent counties were indispensable parties. There is no evidence in the record that the absent counties will necessarily be affected in the future by a change in the 2007 assessment, and the absent counties’ object in seeing that the Board appraise the property at its highest value in future tax years will be adequately litigated by the named defendants.
FACTUAL AND PROCEDURAL BACKGROUND
Verizon is a telephone company, and as such is taxed pursuant to article XIII, section 19 of the California Constitution. That section provides that the Board must annually assess property for the purpose of taxation. The
property is assessed at its fair market value or full value on the first day of January of each year. (§ 722.) “Full market value” or “full value” “mean the price at which a property, if exposed for sale in the open market with a reasonable time for the seller to find a purchaser, would transfer for cash or its equivalent under prevailing market conditions between parties who have knowledge of the uses to which the property may be put, both seeking to maximize their gains and neither being in a position to take advantage of the exigencies of the other.” (Cal. Code Regs., tit. 18, § 2, subd. (a).)
The property may be valued using one of four approaches: (1) the comparative sales approach, (2) the stock and debt approach, (3) the replacement or reproduction cost approach, or (4) the income approach. (Cal. Code Regs., tit. 18, § 3.) The Board assessed Verizon’s property pursuant to the third option, using a “Replacement Cost New Less Depreciation” model. Under this model, the replacement or reproduction cost is “reduced by the amount that such cost is estimated to exceed the current value of the reproducible property by reason of physical deterioration, misplacement, over- or underimprovement, and other forms of depreciation or obsolescence.” (Cal. Code Regs., tit. 18, § 6, subd. (e).)
The Legislature has determined that the value of the assets of a phone company or any public utility depends on the interrelation and operation of the entire property as a unit. (ITT World Communications, Inc. v. City and County of San Francisco (1985) 37 Cal.3d 859, 863 [210 Cal.Rptr. 226, 693 P.2d 811] (ITT World).) Thus, the value the Board assigns to Verizon’s property within the state is determined as a whole. (Id. at pp. 863-864.)
The complaint states, and we accept as true, that “[o]nce the Board has adopted a unitary value of the property, it transmits the value to each county through a ‘roll’ and each county taxes the telephone company according to the Board-adopted value of the property that is in that county.” The Board “makes a formulary allocation that has little or no relationship to the actual fair market value of the particular assets situated within the jurisdiction.” (ITT World, supra, 37 Cal.3d at p. 864.)
If an owner of property objects to the value of the assessment, it must first petition the Board for reassessment. (§§ 741-742.) The petition is filed with the Board, and sets forth the name of each county in which the petitioner owns property that has been assessed in the unitary assessment. The Board holds a hearing on the petition, and notifies the petitioner of its decision. (§§ 742-744.) A petition to the Board for ...