REILLY v. COUNTY OF SAN FRANCISCO

Filed 8/29/06

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

DWIGHT PATRICK REILLY, as Trustee, etc.,

Plaintiff and Appellant,

CITY AND COUNTY OF SAN FRANCISCO,

Defendant and Respondent.

A109062

(San Francisco County Super. Ct.

No. CGC-03-427279)

Under Proposition 13, real property may be reassessed at its current market value when ownership of the property changes. (Pacific Southwest Realty Co. v. County of Los Angeles (1991) 1 Cal.4th 155 (Pacific Southwest).) In this appeal, we consider whether there is a change in ownership of real property held by a testamentary trust when an income beneficiary of the trust dies and is succeeded by another income beneficiary. The City and County of San Francisco (the City) reassessed real property held by a trust after a new income beneficiary succeeded a beneficiary who died. The trustee filed suit and sought a property tax refund, arguing there was no change in ownership under Revenue and Taxation Code section 60, which generally defines what constitutes a change in ownership for purposes of reassessing property.[1] The trial court granted summary judgment in favor of the City. We conclude there was a change in ownership under section 60 because the beneficiary's death caused a transfer of the property's primary economic value to the successor beneficiary, who acquired a present beneficial interest in the property. Accordingly, we affirm the judgment.

Factual and Procedural History

In 1965, Francis O'Reilly executed a will providing for the creation of a testamentary trust upon his death containing all of his personal and real property. O'Reilly died in 1966. Under the terms of the will, O'Reilly's grandniece, Geraldine McGovern, was entitled to receive all of the net income derived from the Francis O'Reilly Testamentary Trust (the trust) for the remainder of her life. The trust's assets included the real property at issue in the litigation, described as apartments located at 421-435 Buena Vista East Avenue in San Francisco (the property).

Beginning in March 1967, when the property was distributed to the trust, McGovern was the trust's sole present income beneficiary. The terms of O'Reilly's will provided that upon McGovern's death, the trust would terminate and the entire remaining corpus of the trust would be distributed to McGovern's â€

Description	Where an income beneficiary of real property held by a testamentary trust died and was succeeded by another income beneficiary, there was a change in ownership under Proposition 13--thereby allowing the property to be reassessed at its current market value for property tax purposes--because the beneficiary's death caused a transfer of the property's primary economic value to the successor beneficiary, who acquired a present beneficial interest in the property.
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