Beck v. County of Riverside

Filed 5/7/07 Beck v. County of Riverside CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of Riverside County. Lawrence W. Fry, Judge. Affirmed.

Donald R. Beck, Jr., and Dorothy M. Beck, in pro. per., for Plaintiffs and Appellants.

Joe S. Rank, County Counsel, Pamela J. Walls, Assistant County Counsel, and Glenn Beloian, Deputy County Counsel, for Defendants and Respondents.

Plaintiffs and appellants Donald R. Beck, Jr., and Dorothy M. Beck (hereafter the Becks) appeal an adverse ruling on a claim for refund of allegedly excessive property taxes. We affirm the judgment.

BACKGROUND

During the tax years 1997, 1998 and 1999, Desert Empire Food Corporation (hereafter sometimes referred to as Desert Empire or the corporation) was the lessee of real property located at 67555 Highway 111 in Cathedral City. The property was improved with a free-standing Wendys drive-through restaurant operated by Desert Empire. Under the terms of its lease, Desert Empire was required to pay the property taxes on the leased property. Donald R. Beck, Jr., was the president of Desert Empire.

Desert Empire filed applications for changed property tax assessments in 1997, 1998 and 1999, arguing that the actual value of the property was less than the assessed value. The applications pertaining to the 1998 and 1999 tax years also challenged the base year valuation of the property. (The property had been sold in a foreclosure sale in 1994, triggering a new base year valuation.) (Rev. & Tax. Code, 110.1.)

The applications were jointly heard by the Riverside County Assessment Appeals Board (hereafter the Board) on July 27, 2000. After a hearing, the Board took the matter under submission and later issued a written ruling of no change on each application. The Becks did not request written findings of fact.

The Becks filed a complaint, and then a first amended complaint, against the County of Riverside (hereafter the County) and the Riverside County Assessor (hereafter the Assessor) (collectively defendants), alleging discrimination in assessment of property values in determining property taxes and refund of property taxes.

In a court trial, the Becks asserted that the Board had applied a legally incorrect method of valuation of the property. They informed the trial court that none of the five valuation methods they had argued for before the Board was the correct method. Rather, relying on Revenue and Taxation Code section 110, they contended that because their restaurant was part of a shopping center in which most or all of the individual parcels had been sold in a foreclosure sale, the Assessor was required to assess the value of their parcel based on its fair market value relative to all of the other parcels which had been sold during the same foreclosure sale.^[1] They contended that because the correct valuation method was not presented to the Board, and because the results demonstrated that the Board could not possibly have applied the correct standard, the issue was purely one of law, entitling them to a trial de novo.

County counsel argued that because the Becks did not request written findings of fact at the conclusion of the Board hearing, it was impossible to know what method of valuation the Board employed. He contended that the trial court was therefore limited to reviewing the transcript of the Board hearing to determine whether there was substantial evidence which supported the Boards conclusions.

The trial court limited the trial to a substantial evidence review of the Board proceeding. However, the court allowed the Becks to argue their theory that the Assessor was required to adopt the valuation method set forth in section 110 or to assess their parcel as part of a shopping center. It also admitted photographs which the parties relied upon to argue their positions that the Becks restaurant was part of the shopping center or was separate from it. The court found, inter alia, that the Assessor utilized a correct method of appraisal and that the Becks had failed to establish a prima facie case that the Board adopted an incorrect method of appraisal. The court also found that the Board was not obliged as a matter of law to apply either the Becks theory that their property must be assessed as a part of a shopping center or as part of a multi-parcel foreclosure sale. It also found that the property was not part of the shopping center. The court entered judgment for defendants, and the Becks filed a timely notice of appeal.^[2]

LEGAL ANALYSIS

STANDARDS OF REVIEW

The Becks assert both that the Board applied incorrect methods of valuation and that the trial court made a number of errors in reviewing the Boards actions. We do not review the trial courts ruling, however. Rather, both the trial court and the appellate court review the Boards decision to determine whether, as a matter of law, the method of valuation was arbitrary, in excess of discretion, or in violation of the standards prescribed by law. (Bret Harte Inn, Inc. v. City and County of San Francisco (1976) 16 Cal.3d 14, 23; County of Orange v. Orange County Assessment Appeals Bd. (1993) 13 Cal.App.4th 524, 529-530.) If the Assessor used an approved valuation method, the factual findings and determination of value based upon the approved valuation method are presumed to be correct and will be sustained if supported by substantial evidence. If, on the other hand, the underlying valuation methodology is challenged, the issue is a question of law subject to de novo review both by the superior court and on appeal. (Service America Corp. v. County of San Diego (1993) 15 Cal.App.4th 1232, 1235.)

THE REBUTTABLE PRESUMPTION AS TO VALUATION CONTAINED IN SECTION 110 DOES NOT APPLY TO A FORECLOSURE SALE

The Becks primary assertion on appeal is as follows: When a single transaction involving multiple parcels takes place[,] the assessor is required to take the purchase price (or if they [sic] rebut the purchase price to obtain an alternate value for the transaction) and allocate that amount between the parcels based on the relative value of each. They contend that this valuation method is mandated by section 110, and that the Assessor was therefore required to base the assessed value of their parcel on its fair market value relative to the value of the other parcels within the shopping center.^[3]

As pertinent, section 110 provides:

(a) Except as is otherwise provided in Section 110.1, full cash value or fair market value means the amount of cash or its equivalent that property would bring if exposed for sale in the open market under conditions in which neither buyer nor seller could take advantage of the exigencies of the other, and both the buyer and the seller have knowledge of all of the uses and purposes to which the property is adapted and for which it is capable of being used, and of the enforceable restrictions upon those uses and purposes.
(b) For purposes of determining the full cash value or fair market value of real property, other than possessory interests, being appraised upon a purchase, full cash value or fair market value is the purchase price paid in the transaction unless it is established by a preponderance of the evidence that the real property would not have transferred for that purchase price in an open market transaction. The purchase price shall, however, be rebuttably presumed to be the full cash value or fair market value if the terms of the transaction were negotiated at arms length between a knowledgeable transferor and transferee neither of which could take advantage of the exigencies of the other. . . . If a single transaction results in a change in ownership of more than one parcel of real property, the purchase price shall be allocated among those parcels and other assets, if any, transferred based on the relative fair market value of each.^[4] (Italics added.)

Based upon the last sentence quoted above, the Becks contend that because some 11 parcels within the shopping center, including their leased parcel, were sold in a foreclosure sale in 1994, the Assessor was required to base the valuation of their property not on comparable fast-food businesses but on their propertys fair market value relative to the value of the other parcels within the shopping center. County counsel contends that section 110 does not apply to a foreclosure sale.

The application of a tax statute to undisputed facts is a question of law, which we review independently. (Neecke v. City of Mill Valley (1995) 39 Cal.App.4th 946, 953.)

The cardinal rule of statutory construction is to ascertain the intent of the Legislature in order to effectuate the purpose of the law. (Palmer v. GTE California, Inc. (2003) 30 Cal.4th 1265, 1271.) We look first to the words of the statute because they are the best indicators of the Legislatures intent. (Ibid.) When the language is clear and unambiguous, we look no further. Additionally, however, we must consider the statutory language in context, considering the nature and purpose of the statutory scheme. (Phelps v. Stostad (1997) 16 Cal.4th 23, 32.)

Section 110 pertains to base year valuations of property, i.e., the assessment which is performed when a property is purchased or a change in ownership occurs, or when other triggering events not pertinent here occur.^[5] ( 110.1, subd. (a).) The purpose of sections 110 and 110.1 is to implement section 401, which provides that all taxable property shall be assessed at its full cash value. (De Luz Homes, Inc. v. County of San Diego (1955) 45 Cal.2d 546, 561-562; Mola Development Corp. v. Orange County Assessment Appeals Bd. (2000) 80 Cal.App.4th 309, 311-312.)^[6] In furtherance of that purpose, section 110 creates a rebuttable presumption that the sale price of a property represents its full cash value or fair market value. This presumption applies, however, only if the sale occurs on the open market in an arms-length transaction between a willing and knowledgeable buyer and seller, neither of whom is in a position to take advantage of the exigencies of the other. ( 110, subd. (a).) A foreclosure sale is not such a transaction: [I]t is common knowledge that at forced sales such as a trustees sale the full potential value of the property being sold is rarely realized. [Citations.] (Melendrezv.D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1254.) Therefore, [t]he price at a foreclosure sale is not deemed the equivalent of the propertys fair market value . . . . An appraisers reconstruction of fair market value could show what similar property would be worth if it did not have to be sold within the time and manner strictures of state-prescribed foreclosure. But property that must be sold within those strictures is simply worth less. No one would pay as much to own such property as he would pay to own real estate that could be sold at leisure and pursuant to normal marketing techniques. [Citation.] (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1236-1237.) Thus, because a foreclosure sale is by definition not a reflection of the fair market value of a property, it would be inconsistent with the purpose underlying section 110 to apply the presumption embodied in subdivision (b) of that section to properties sold in foreclosure sales.

The Becks contend that by using the word exigencies, the Legislature indicated its intention to limit the presumption only if the sale involved a situation requiring immediate action. They contend that no such exigencies existed with respect to the foreclosure sale affecting their parcel because it was a voluntary foreclosure. They do not, however, cite to any evidence in the record concerning the reasons for the foreclosure. In any event, for the reasons stated above, we are not persuaded that the presumption applies to foreclosure sales.

The final sentence of section 110, subdivision (b) If a single transaction results in a change in ownership of more than one parcel of real property, the purchase price shall be allocated among those parcels and other assets, if any, transferred based on the relative fair market value of each also does not apply to the valuation of the Becks property. The meaning of that sentence is not fully clear. However, because the sentence refers to the purchase price (emphasis added) for multiple parcels, it appears to mean that if multiple parcels are sold in a single transaction for a single, undifferentiated price, the total purchase price is presumed to be the aggregate fair market value, and the purchase price is to be allocated pro rata among the parcels for the purpose of establishing the presumptive fair market value of each parcel. This interpretation is consistent with the purpose of section 110, which, as we have discussed, is to provide for assessment of properties at their full cash value.

The Becks have not cited any evidence in the record that their parcel was purchased in a single transaction with one or more other parcels. An appellant bears the burden of providing a record which affirmatively demonstrates both error and prejudice. (Aguilar v. Avis Rent A Car System, Inc. (1999) 21 Cal.4th 121, 132; In re Marriage of McLaughlin (2000) 82 Cal.App.4th 327, 337.) The mere fact that the property was sold in a foreclosure sale which involved multiple parcels is not sufficient to establish that it was sold in a single transaction, within the meaning of section 110, subdivision (b), and the Becks have therefore not met their burden.

Furthermore, as discussed above, the presumption that the purchase price equals the fair market value applies only to sales of property on the open market under conditions in which neither buyer nor seller could take advantage of the exigencies of the other because only those transactions are likely to reflect the fair market value of the property. There is no indication, in either the statutory language or in the legislative history, that the Legislature intended the term transaction to be used in any different sense in the final sentence of subdivision (b) than elsewhere in section 110, and it would be inconsistent with the legislative purpose of the statute to interpret it to include a multi-parcel foreclosure sale, as the Becks assert. Thus, even if there were evidence that the parcel was sold in a single transaction within the meaning of the final sentence of section 110, subdivision (b), that provision would not apply to the Becks property.

In a related argument, the Becks contend that even if the Board was not required to allocate the purchase price of multiple parcels pursuant to section 110, subdivision (b), it was nevertheless required assess the property in a manner which is fair in comparison with other properties similarly situated.^[7] Therefore, they contend, the Board was required to assess their property relative to or in proportion with the other properties within the shopping center. They cite no pertinent authority in support of this contention. Furthermore, they have not cited to any evidence that their parcel was taxed disproportionately to any similarly situated business property.^[8] An appellant has the burden to provide both pertinent authority and meaningful analysis of its application to the evidence in his or her case. The absence of either operates to waive appellate review. (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115; McComber v. Wells (1999) 72 Cal.App.4th 512, 522-523.) We therefore deem this issue waived.^[9]

THE ABSENCE OF WRITTEN FINDINGS OF FACT PRECLUDES ANY DETERMINATION AS TO THE CORRECTNESS OF THE VALUATION METHOD APPLIED BY THE BOARD

The Becks also contend that the Assessor applied an erroneous method of valuation and the trial court erred by finding a particular assessment method appropriate.

As we have previously discussed, we do not review the trial courts determination, but that of the Board. (Bret Harte Inn, Inc. v. City and County of San Francisco, supra, 16 Cal.3d at p. 23; County of Orange v. Orange County Assessment Appeals Bd., supra, 13 Cal.App.4th at pp. 529-530.)

We also do not review the Assessors method of valuation. Rather, we review the Boards independent assessment. When an assessment is appealed to the assessment appeals board, it is the boards function to determine the full value of the property based on the evidence presented to it. (Cal. Code Regs., tit. 18, 324.) The board is directed to consider evidence of value derived [by the assessor] by the use of any of the valuation methods described in [specified regulations] . . . [and] determine whether the method(s) used was (were) properly applied. (Id., subd. (a).) However, the board itself is directed to make its own determination of value based upon the evidence properly admitted at the hearing. In making that determination, the board is not required to choose between the opinions of value promoted by the parties to the appeal. (Id., subd. (b).) The board is bound by the same principles of valuation that are legally applicable to the assessor (id., subd. (c)), but exercises independent judgment as to the appropriate method. (Id., subds. (a), (b) & (c).)

When the taxpayers challenge is to the validity of the valuation method the board has applied, our function is to determine whether the method applied is arbitrary, in excess of discretion, or in violation of the standard prescribed by law. (Bret Harte Inn, Inc. v. City and County of San Francisco, supra, 16 Cal.3d at p. 23.) In order to do so, however, we must know what method the board applied. Here, the record does not contain that information. If either party had requested written findings of fact, the Board would have been required to disclose not only its factual findings on all material points raised in the application and at the hearing but also the method or methods of valuation it used in determining the full value of the property. (Cal. Code Regs., tit. 18, 324, subd. (e).) No such findings are included in the record. We therefore do not know what method the Board applied. An appellant has the burden of providing an adequate record demonstrating error. (Aguilar v. Avis Rent A Car System, Inc., supra, 21 Cal.4th at p. 132.) The Becks have not met this burden, and we therefore cannot grant relief.

The Becks appear to contend that we must assume that the Board applied the valuation method urged by the Assessor at the hearing. As discussed above, however, an assessment appeals board is not limited to the valuation methods urged by the parties, but must exercise its own judgment to determine the appropriate method. (Cal. Code Regs., tit. 18, 324, subds. (a) & (b).) We therefore cannot assume that the Board applied any method the Assessor asserted.

Although the argument is not developed in the opening brief, in their reply brief the Becks contend that the Board was required to assess their property as part of a shopping center. Had it done so, they contend, it would have assessed the value of their property not based on comparable fast-food restaurants but relative to the stores within the shopping center. They do not cite to any evidence in the record as to how this would have benefited them and thus how they were prejudiced by the Boards failure to do so, and we could deem the issue waived on that basis alone.^[10] (Paterno v. State of California (1999) 74 Cal.App.4th 68, 105.) We need not do so, however, because an assessor or appeals board is permitted to exercise judgment in determining whether multiple parcels constitute a single appraisal unit (Exxon Mobile Corp. v. County of Santa Barbara (2001) 92 Cal.App.4th 1347, 1353), and we cannot say as a matter of law that the Board was required to conclude that the shopping center was the appropriate appraisal unit for the Becks restaurant.

In determining whether a property is part of a larger appraisal unit, the assessor or board should consider, among other factors, which unit is most likely to be sold, if the property were exposed to the open market. (Exxon Mobile Corp. v. County of Santa Barbara, supra, 92 Cal.App.4th at p. 1353.) Here, the evidence at the Board hearing showed that the restaurant stood on the periphery of the shopping center parking lot. Based on this evidence, the Board could properly conclude that the restaurant would likely be sold separately either from individual units within the shopping center or from the shopping center itself, if it were offered on the open market. Thus, the Board was not required, as a matter of law, to assess the restaurant relative to the parcels within the shopping center.

In summary, the Becks have failed to show that the Board applied a method of valuation which was arbitrary, in excess of its discretion, or in violation of the standards prescribed by law. (Bret Harte Inn, Inc. v. City and County of San Francisco, supra, 16 Cal.3d at p. 23.) It is immaterial that another method might have yielded a more precise reflection of the propertys value, or one that was more beneficial to the Becks. The law requires only that an assessor adopt and use a reasonable method neither a trial court, nor this court, can reject a method found by the board to be reasonable merely because, in [its] nonexpert opinion, another method might have been better. [Citation.] (County of Orange v. Orange County Assessment Appeals Bd., supra, 13 Cal.App.4th at p. 530.)

PURPORTED ERRORS IN THE SUPERIOR COURTS STATEMENT OF DECISION ARE IRRELEVANT

Finally, the Becks contend that courts statement of decision is inconsistent with rulings it made at trial. We need not address this contention because, as we have discussed, we do not review the trial courts ruling; we independently review the ruling made by the Board. (See County of Orange v. Orange County Assessment Appeals Bd., supra, 13 Cal.App.4th at pp. 529-530.)

DISPOSITION

The judgment is affirmed. The parties are to bear their own costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

/s/ McKinster

J.

We concur:

/s/ Ramirez

P.J.

/s/ Richli

J.

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^[1]Revenue and Taxation Code section 110 is discussed below. All further statutory citations refer to the Revenue and Taxation Code.

^[2]The first amended complaint named only the Becks as plaintiffs; the corporation was not a party. During the trial, defendants moved for judgment on the pleadings or nonsuit, arguing that the Becks lacked standing to challenge the assessment because they did not pay the property taxes. It was undisputed that the taxes were paid by Desert Empire. Relying on section 5140, which provides that an action to recover a tax which a city or a county has refused to refund may be brought only by the person who paid the tax or by that persons guardian or conservator, or the executor of his or her will, or the administrator of his or her estate, the court ruled that the Becks did not have standing to challenge the assessment on behalf of the corporation. It granted their motion for leave to amend their complaint to add the corporation which had been renamed Chaos Solved, Inc. as a plaintiff. However, doing so required that the matter be continued to afford the corporation an opportunity to retain counsel. In order to avoid the delay, county counsel offered to waive, for purposes of trial and appeal, the defense of lack of standing. The Becks accepted the offer and the trial continued without interruption and without the participation of the corporation.

We requested supplemental briefing regarding the waiver of the standing requirement. We are not fully persuaded that the provisions of section 5140 can be waived by the parties. (See, e.g., IBM Personal Pension Plan v. City and County of San Francisco (2005) 131 Cal.App.4th 1291, 1301-1305, discussing the legislative purpose underlying 5140.) However, because we affirm the judgment, we will assume, without deciding, that the Becks have standing to bring this appeal.

^[3]At oral argument, the Becks contended that the central issue in the case is the failure of the Assessor to provide them with the factual data he relied on in assessing their property, and their consequent inability to address the valuation issue in a meaningful manner. However, although they alluded in their briefs to the Assessors failure to provide information they requested, they did not seek relief on that basis. Absent a showing of good cause and a timely request for supplemental briefing, we will not address an issue that was not raised in the opening brief. (REO Broadcasting Consultants v. Martin (1999) 69 Cal.App.4th 489, 500; Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 766.)

^[4]The italicized language in section 110, subdivision (b), quoted above, also appears in section 2, subdivision (d) of title 18 of the California Code of Regulations. The parties cite this provision as S.B.E. [State Board of Equalization] rule 2 or SBE rule 2.

^[5]The Becks point out that although they asserted an error in the base year valuation in their applications to the Board for relief, the trial court deemed the hearing to involve only their claim for adjustments for specified tax years.

They are correct that on their claims for 1998 and 1999, they did check the base year box. (The box is not checked on their 1997 claim.) However, at the Board hearing, the evidence and argument pertained solely to the Becks assertion that market conditions during 1997, 1998 and 1999 warranted a reduced assessment for those years. Thus, we question whether the Becks truly exhausted their administrative remedies with respect to any contention concerning the base year valuation. Further, as the Becks acknowledged, any such claim appears to be time-barred because it was first asserted more than four years after July 1, 1994, the tax year in which the property last changed ownership. (See 51.5.) Defendants have not asserted either failure to exhaust administrative remedies or the statute of limitations, however, and we will therefore address the issue the Becks raise. And, we would point out that, contrary to the Becks assertion on appeal, the trial court did address their contention that section 110 mandated a certain result in the base year valuation.

^[6]The Becks discuss at length the legislative history of section 110. Their request for judicial notice of the legislative history materials they provided is granted. However, we find nothing in those materials which directly answers the question whether section 110 applies to properties purchased in a foreclosure sale.

^[7]The Becks refer to the Assessors duty. However, as we discuss below, our function is not to review the Assessors valuation of the property, but to review the Boards independent valuation. Therefore, we will refer to the Board rather than to the Assessor.

^[8]The sole evidence the Becks cite is a chart they prepared as an exhibit in the trial court proceeding. This chart was not, as far as we are aware, presented to the Board. In any event, the chart is far from sufficient to explain how or to what extent application of the shopping center method of assessment would have resulted in a lower tax assessment for the Becks restaurant.

^[9]We discuss the Becks other contentions pertaining to the shopping center method of valuation below.

^[10]See footnote 8, ante.