Opinion
F076093
06-11-2020
DAIICHI GROVE SENIOR MOBILE HOME PARK LLC, Plaintiff and Appellant, v. ASSESSMENT APPEALS BOARD, COUNTY OF MADERA, Defendant and Respondent.
Costanzo & Associates and Neal E. Costanzo for Plaintiff and Appellant. Ericksen Arbuthnot and Michael D. Ott for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. MCV064695)
OPINION
APPEAL from a judgment of the Superior Court of Madera County. James E. Oakley, Judge. Costanzo & Associates and Neal E. Costanzo for Plaintiff and Appellant. Ericksen Arbuthnot and Michael D. Ott for Defendant and Respondent.
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Appellant, Daiichi Grove Senior Mobile Home Park LLC, appeals from the trial court's judgment upholding a property tax assessment decision made by respondent, the Assessment Appeals Board, County of Madera (the Board) regarding appellant's real property, a mobile home park in Madera County, California. The principal issue on appeal is whether the Board properly determined the base year value of the property following the completion of substantial new construction which more than doubled the number of mobile home spaces. In determining base year value, the Board applied a cost method of valuation by adding the cost of the new construction to the preexisting assessed value of the property, resulting in an increase in the assessed value of the property from approximately $2.7 million to just over $5 million. Because this constituted a valid method of valuation under the circumstances and was supported by the relevant facts at the time of the assessment, we conclude that the Board properly determined base year value. Since the trial court correctly upheld the Board's decision in this matter, and appellant has failed to affirmatively demonstrate error, the judgment of the trial court is affirmed.
FACTS AND PROCEDURAL HISTORY
Appellant is the owner of a mobile home park located in or near the community of Oakhurst, California, bearing the name Daiichi Grove Senior Mobile Home Park (the property). On January 2, 2010, appellant completed the construction of 55 new spaces or pads along with several other improvements to the property. Previously, there had only been 43 spaces or pads; after the improvements the number was more than doubled to 98 spaces or pads, plus related infrastructure.
These newly constructed improvements triggered the need for a reassessment of the value of the property by the Madera County Assessor (the assessor). On the effective date of valuation for purposes of the reassessment—i.e., January 2, 2010—the property consisted of approximately 37.18 acres, improved with a total of 98 pads or spaces for manufactured homes, paved interior roads, power, water and a private sewer system. At that time, 43 spaces were occupied, and the 55 new spaces were still vacant due to the recent construction. The reassessment by the assessor resulted in an increase in the assessed value of the property from approximately $2.7 million to $5,035,657. The $5,035,657 figure became the new "base year value" for the property. As will be seen, base year value has special significance and is distinguishable from the ordinary annual assessments of property values and taxes due for each tax year.
On June 15, 2011, the assessor issued a written Notice of Supplemental Assessment, noticing the reassessment of the value of the property for the tax roll year 2009-2010 from $2,759,140 to $5,035,657, and for the tax roll year 2010-2011 from $2,752,600 to $5,029,117. On the back side of the Notice of Supplemental Assessment, the following information was conspicuously provided to apprise the property owner (i.e., appellant) of its right to appeal the assessor's determination of value within 60 days: "YOUR RIGHT TO APPEAL. You have the right to a formal appeal of the assessment which involves (1) the filing of a valid application, (2) a hearing before an appeals board, and (3) a decision.... [¶] FILING DEADLINES. In general a formal appeal may be filed within 60 days of this notice (printed above) or the postmark date for the notice, whichever is later."
Appellant initiated the appeal process by filing two separate applications to the Board. On September 30, 2011, appellant filed his first application to the Board for a changed assessment, designated as application No. 11R035. This application was made on the ground that "the assessor's roll value exceeds the market value as of January 1 of the current year [i.e., 2011]."
On November 30, 2011, appellant filed a second application to the Board for a changed assessment, designated as application No. 11R175. This second application alleged that the base year value for the new construction completed on January 2, 2010, was incorrect. We note this second application, designated as application No. 11R175 and submitted by appellant to the Board on November 30, 2011, is the relevant application for purposes of the issues raised in the present appeal.
In March 2013, a stipulation was reached between appellant and the assessor regarding application No. 11R035 as to the value of the property for fiscal year 2011- 2012, fixing the value for that tax year at $2,309,790. The stipulation was based on facts and information unknown or unavailable to the assessor at the time the base year value had been determined. Apparently, in the ensuing months or years after the improvements were created, appellant had been unable to rent out the new spaces as it had expected.
As to the second application, application No. 11R175, the Board had initially concluded that it was untimely and denied it on that ground. Appellant made an inquiry to the State Board of Equalization, seeking to obtain an opinion with respect to the timeliness of application No. 11R175. By letter dated March 6, 2013, a response to appellant's inquiry was received from Dean R. Kinnee, Chief, County-Assessed Properties Division of the State Board of Equalization, which concluded that the application was timely to challenge the new 2010 base year value. The letter explained:
"From the information you provided ... it appears that the Application was timely filed. However, Madera County indicated that the Application was denied because it was filed more than 60 days after the date of the supplemental assessment notice. While your filing was not timely to challenge the supplemental assessment, it is timely to challenge the established base year value on the regular roll.... [¶] Since the Application indicates a 'Regular Assessment' filing in Box 5, and a challenge of 'Base year value for the new construction established on the date of 1/2/2010' in Box 6, the Application should have been accepted as timely when filed on November 30, 2011."
After receipt of the letter, the Board conducted a further hearing, at which time it rescinded its earlier denial of appellant's application No. 11R175 based on untimeliness. After a consideration of the merits of appellant's appeal of the base year value, the Board approved the amount of $5,035,657 as the 2010 base year value of the property. This action essentially affirmed the assessor's analysis of the property's base year value as of January 2, 2010.
On November 1, 2013, appellant filed a petition for writ of mandate and complaint for declaratory relief in the trial court challenging the Board's decision. A first amended petition for writ of mandate and complaint for declaratory relief was filed on April 24, 2014 (the amended petition). In the amended petition, appellant alleges among other things that the Board failed to properly determine the value of the property for tax year 2010-2011, especially when the value is considered in light of the assessor's subsequent stipulation to a considerably lower value of the property for the 2011-2012 tax year (i.e., $2,309,790). The purported error relating to the 2010-2011 assessment was allegedly due to the assessor's and the Board's reliance on an improper "cost" method of computing property value. According to the amended petition, the Board's determination of the assessed value for the base year 2010 constituted a failure to proceed in a manner required by law and an abuse of discretion. As a result, appellant claimed to be entitled to an order from the trial court directing the Board to require "that the base year assessment be reduced from $5,035,657 to $2,309,790." Similar relief was sought under each cause of action; one of which was for mandamus and the other for declaratory relief. The prayer requested the trial court to "rescind and reduce the amount of the 2010 base-year assessment to the amount of the [stipulated] assessment for 2011-2012," and further sought a declaration that the "assessed value for the 2010-11 supplemental tax year ... is illegal [and] incorrect, ... and ... that the assessed value for the 2010-11 supplemental tax year is $2,309,790."
After initial briefing, the trial court issued an order granting the petition on the procedural ground that the Board failed to provide any written findings to support its determination of base year value of $5,035,657. Afterward, the Board filed a motion to vacate that order or judgment and/or for a new trial. The motion argued that the record conclusively showed that appellant expressly waived written findings. The trial court found the Board's motion to be persuasive. Accordingly, the trial court vacated its prior order granting mandate and declaratory relief, and the trial court reopened the case as to the material issues. Thereafter, the parties filed supplemental briefing on the issues raised in the amended petition.
After further hearings were held, the trial court took the matter under submission and issued a tentative decision on March 14, 2017. Appellant requested a formal statement of decision. On May 22, 2017, the trial court issued its statement of decision in the case. In its statement of decision, the trial court's findings and conclusions included the following: (i) appellant's application was not timely to appeal the supplemental assessment issued on June 15, 2011; (ii) appellant's application to the Board was timely to appeal the base year value for new construction completed on January 2, 2010; (iii) the 2010 base year value was properly determined by the Board and supported by substantial evidence; and (iv) appellant expressly waived written findings by the Board.
Based on the statement of decision, judgment was entered on May 22, 2017. Appellant filed a timely notice of appeal from the judgment.
DISCUSSION
I. Standard of Review
Factual determinations of the Board are entitled on appeal to the same deference as would be due a judicial decision, i.e., review under the substantial evidence standard. (Shell Western E&P, Inc. v. County of Lake (1990) 224 Cal.App.3d 974, 979-980.) However, where the Board purports to decide a question of law, that decision is reviewed de novo. (Maples v. Kern County Assessment Appeals Bd. (2002) 96 Cal.App.4th 1007, 1013.) A Board's arbitrariness, abuse of discretion, or failure to follow the standards prescribed by the Legislature are legal matters subject to judicial correction. (Ibid.)
Where the taxpayer challenges the application of a valid valuation method, the court will review the record presented to the Board to determine whether the Board's findings were supported by substantial evidence, and the court may not independently reweigh the evidence. (Freeport-McMoran Resource Partners v. County of Lake (1993) 12 Cal.App.4th 634, 640.) On the other hand, where the taxpayer challenges the validity of the valuation method used by the assessor, the court must determine as a matter of law whether the challenged method of valuation was arbitrary, in excess of discretion, or in violation of the standards prescribed by law. (Ibid.; Bret Harte Inn, Inc. v. City and County of San Francisco (1976) 16 Cal.3d 14, 23.)
" 'In reviewing a property tax assessment, the court must presume the assessor properly performed his or her duty and that the assessment was both regularly and correctly made. [Citation.] The burden is on the taxpayer to prove the property was improperly assessed.' " (Chevron USA, Inc. v. County of Kern (2014) 230 Cal.App.4th 1315, 1331.)
II. The Record Supported the 2010 Base Year Value Using Cost Method
The trial court concluded that appellant failed to meet his burden of demonstrating prejudicial error in the Board's decision on the value of the property as of January 2, 2010, based on the cost method applied by the assessor. Further, it appeared to the trial court that the use of the cost method to arrive at base year value was not unreasonable under the circumstances, but was supported by the record. We agree with the trial court's conclusions.
Preliminarily, we shall briefly note the legal significance of a determination of base year value in distinction from an annual tax assessment or the amount of taxes due in a given tax year. A. Base Year Value Explained.
"Since the enactment of Proposition 13, the California Constitution limits property taxes to 1 percent of a property's base value compounded by an inflation factor. (Cal. Const., art. XIII, §§ 1, subd. (a), 2.)" (Harmony Gold U.S.A., Inc. v. County of Los Angeles (2019) 31 Cal.App.5th 820, 825.) Thus, the base year value operates as a controlling factor that limits annual assessments. (Osco Drug, Inc. v. County of Orange (1990) 221 Cal.App.3d 189, 193.) " 'Base-year values are reestablished only if property is purchased, is newly constructed, or if there is a change in ownership.' [Citation.]" (Harmony Gold U.S.A., Inc. v. County of Los Angeles, supra, 31 Cal.App.5th at p. 825.) Here, the event triggering a reassessment of the property's base year value was the new construction. B. Application Was Timely to Challenge Determination of Base Year Value
Property owners have four years within which to appeal new base year value determinations by filing an application for reduction with the county assessment appeals board. (Osco Drug, Inc. v. County of Orange, supra, 221 Cal.App.3d at p. 193; Rev. & Tax. Code, § 80, subd. (a)(3).) However, a distinction exists between a reduction in a base year value and a right to a refund of taxes. (Osco Drug, Inc. v. County of Orange, at p. 193.) Even if the base year value is reduced by the Board, any reduction in taxes would be limited to the assessment year in which the appeal was timely made, and prospectively thereafter. (Id. at pp. 194-195; § 80, subd. (a)(5); Ellis v. County of Calaveras (2016) 245 Cal.App.4th 64, 73; Metropolitan Culinary Services, Inc. v. County of Los Angeles (1998) 61 Cal.App.4th 935, 942 ["though a taxpayer has four years to challenge a base year value, the taxpayer can only receive a refund for the year in which the appeal is made, and thereafter"].) With respect to statutory time limits for relief, the code contains separate provisions relating to a taxpayer's challenge of an assessor's determination of (1) base year value, and (2) an assessment for any particular tax year. (Ellis v. County of Calaveras, supra, 245 Cal.App.4th at p. 70.) To challenge a supplemental assessment as to matters distinct from the base year value itself, such as an assessment for a particular tax year, the appeal to the Board must be filed within 60 days of the date of mailing printed on the notice of supplemental assessment. (§§ 75.31, subd. (c)(1), 1603, subd. (b)(2), 1605, subd. (c).)
Unless otherwise indicated, all further statutory references are to the Revenue and Taxation Code.
Here, it is undisputed that appellant's application filed with the Board on November 30, 2011, was timely to challenge the 2010 base year value established by the assessor as of January 2, 2010. (§ 80, subd. (a)(3) [base year value challenge is timely if filed during the regular assessment period for the year in which assessment is placed on the assessment roll or in any of the three succeeding years]; § 51.5, subd. (b) [error in assessor's judgment as to base year value correctible for four years after July 1 of the assessment year for which the base year value was first established].) C. The Board's Decision on Base Year Value Supported by the Record
In adopting the assessor's conclusion as to value, the Board relied on the cost method of valuing the new construction, essentially adding the cost of the incremental new construction or improvements to the prior assessed value of the property. Appellant claims the Board erred in using or applying the cost method here. As explained below, we discern no such error, and, in any event, appellant has failed to meet its burden of demonstrating that error occurred.
" 'There are three generally accepted methods of valuation for property tax purposes: the comparable sales method, the income capitalization method, and the cost method.' " (Chevron USA, Inc. v. County of Kern, supra, 230 Cal.App.4th at p. 1338.) At the hearing before the Board, representatives from the assessor's office described the application of the cost method to this context. The starting point was the preexisting assessed value of the property—that is, the assessed value prior to the additional improvements. The mobile home park property was purchased by appellant in 2005 for a purchase price of $2.6 million, which was accepted as the fair market value at that time. Before the new construction was completed, the property's last annual assessment had indicated a value of $2,759,140. The Notice of Supplemental Assessment in this case, which was based on the new construction completed on January 2, 2010, stated a reassessed value for the property of $5,035,657 for tax year 2009-2010, with the same reassessed value (or virtually the same) stated for tax year 2010-2011. The net increase in value reflected by the amount of the supplemental assessment was $2,276,517. The latter amount—i.e., the net increase in value—was arrived at based on the evidence of the cost of appellant's new construction, which amount was then added to the existing assessed value of the property prior to the completion of said improvements.
At the hearing before the Board, a representative from the assessor's office further explained the grounds and rationale for the use of the cost method under the circumstances of this case:
"This property was purchased by [appellant] in 2005. The purchase price was 2.6 million ... and we accepted the purchase price as—the market value.
"[On January 2] of 2010, [appellant] completed approximately 54 units of new mobile home spaces. At that time, we didn't have any income data. We didn't have any comparable sales in this county that were comparable to this mobile home park, so we went and used the cost approach. [¶] [T]here was $5610 in structural items reported for the 2010 year, and 1,935,907 for land improvements, and 335,000 for land and land development cost. A total added for those 54 spaces was $2,276,517.
"We typically do this when we don't have comparable sales, we don't have any income data. We're required to use that information that we have on the date of completion. There wasn't a whole lot of other things to go off of at that point. We felt that the best indication of value was the 2,276,000." (Italics added.)
In other words, since there was a preexisting assessed value of the property as a mobile home park, and only incremental new improvements were being added to it, it made sense to add the cost value of the new improvements to the preexisting assessed value—particularly where there was no income data on the new improvements and no comparable sales information. Consequently, as of January 2, 2010, it was "very difficult to use anything else but the cost approach." These would appear to be reasonable grounds for use of the cost method. Additionally, a senior appraiser from the assessor's office explained to the Board that the cost method was appropriate for the additional reason that, in order for the new improvements to have made sense financially from the standpoint of the mobile home park's owner, there would have been an expectation on the part of the owner to receive profit from the new improvements which were constructed over a period of time. That is, the cost involved would have reflected the value ascribed to the improvements by the owner himself.
An assessment is based on the facts known to the assessor at the time of valuation, not on post-assessment evidence. (See Glovis America, Inc. v. County of Ventura (2018) 28 Cal.App.5th 62, 70.)
During the hearing before the Board, the assessor's representative acknowledged that it was subsequently learned appellant had been unable to fill the new spaces which were added to the mobile home park, and therefore, contrary to appellant's expectations, no rent was being received for those new spaces. As a result, in 2013, the assessor entered a stipulation with appellant agreeing that the assessed value of the property for tax year 2011-2012 would be reduced to $2,309,790, based on an income approach and comparable sales available at that time. Nevertheless, in view of the information and data on hand at the time of the Notice of Supplemental Assessment, the assessor maintained that the base year value determination of $5,035,657 as of January 2, 2010 was correct.
As noted, the Board adopted the assessor's decision and approved the 2010 base year value of the property in the amount of $5,035,657. The trial court agreed, holding that said base year value arrived at under the cost method was not shown to be arbitrary or incorrect, but rather it appeared to be reasonable under the entire record. As explained below, the trial court correctly decided the issues before it.
" 'In reviewing a property tax assessment, the court must presume the assessor properly performed his or her duty and that the assessment was both regularly and correctly made. [Citation.] The burden is on the taxpayer to prove the property was improperly assessed.' " (Chevron USA, Inc. v. County of Kern, supra, 230 Cal.App.4th at p. 1331.) Where the taxpayer challenges the application of a valid valuation method, the court will review the record presented to the Board to determine whether the Board's findings were supported by substantial evidence and the court may not independently reweigh the evidence. (Freeport-McMoran Resource Partners v. County of Lake, supra, 12 Cal.App.4th 634, 640.) On the other hand, where the taxpayer challenges the validity of the valuation method used by the assessor, the court must determine as a matter of law whether the challenged method of valuation was arbitrary, in excess of discretion, or in violation of the standards prescribed by law. (Ibid.; Texaco Producing, Inc. v. County of Kern (1998) 66 Cal.App.4th 1029, 1047.)
As our discussion hereinabove reflects, the grounds offered by the assessor for utilizing the cost method, as presented at the hearing before the Board, were reasonable under the circumstances and based upon factual data. As the trial court observed, the evidence relied upon by the assessor and the Board came directly from appellant, who reported having originally purchased the property for $2.6 million and having spent "an additional approximately $2,500,000" in improvements for the additional 55 spaces. Since there was an assessed value in place for appellant's mobile home park property before the addition of the incremental new construction, it was reasonable to accept that figure as the starting point, with the cost value of the incremental improvements being added thereto. That was precisely what the assessor did in this case. According to the assessor's representatives, the cost method was also reasonable because of the lack of available income data or comparable sales at that time.
The trial court was, at this point in its discussion, obviously using a round number estimate for the construction costs.
Finally, as the Board correctly points out, the cost method used by the assessor was also reasonable because it was consistent with section 71 regarding how to determine base year value for new construction as more fully expounded by California Code of Regulations, title 18, section 463. California Code of Regulations, title 18, section 463, which implements section 71 (see, e.g., Ellis v. County of Calaveras, supra, 245 Cal.App.4th at p. 72; Pope v. State Bd. of Equalization (1983) 146 Cal.App.3d 1132), provides that the "taxable value on the total property shall be determined by adding the full value of new construction to the taxable value of preexisting property ...." (Cal. Code Regs., tit. 18, § 463, subd. (a).)
For all of these reasons, we conclude that the Board's application of the cost method was reasonable under the circumstances and was supported by the record. Furthermore, it does not appear that the Board's methodology or the conclusions it reached concerning value were arbitrary, in excess of discretion, or in violation of any standards prescribed by law. Accordingly, the decision on the 2010 base year value is affirmed.
III. Request for Reduction to Past Tax Assessment Years Untimely
The application at issue in this appeal, which is application No. 11R175 filed with the Board on November 30, 2011, was timely to challenge the base year value established by the Board as of January 2, 2010. As an adjunct to pursuing that relief, appellant apparently also sought a concomitant reduction of his obligation to pay taxes on the supplemental assessment for tax year 2010-2011. However, because appellant's challenge to the base year value determination has failed, any further relief sought that depended on the success of that challenge would logically fall with it and has become moot, including appellant's desired reduction in the 2010-2011 tax year assessment or a refund regarding the same. But even assuming for the sake of argument that such further relief was not rendered moot, we would conclude it was untimely asserted, as more fully explained below.
As provided in section 80, subdivision (a)(5), "[a]ny reduction in assessment made as the result of an appeal under this section [of the base year value] shall apply for the assessment year in which the appeal is taken and prospectively thereafter." (Italics added.) The Board has argued that, in light of section 80, subdivision (a)(5), any refund or reduction sought on the prior tax assessments was untimely. (See Metropolitan Culinary Services, Inc. v. County of Los Angeles, supra, 61 Cal.App.4th 935, 941-942.) Moreover, at least in the absence of a successful challenge of base year value, if a taxpayer seeks a reduction of a tax assessment for a given tax year, other timing requirements would apply. (Ellis v. County of Calaveras, supra, 245 Cal.App.4th at pp. 70-71.) To be specific, in order to appeal an assessment for a particular tax year stated in a supplemental assessment, the appeal to the Board must be filed within 60 days of the date of mailing printed on the notice of supplemental assessment. (§§ 75.31, subd. (c)(1), 1603, subd. (b)(2), 1605, subd. (c).) Here, appellant's application was not filed with the Board until November 30, 2011, which was long after the expiration of the 60-day deadline. We agree with the Board that the application for a reduction in the prior tax year assessment in question was not timely made to the Board by appellant.
IV. No Reversible Error Resulted From the Absence of Findings
Appellant argues the absence of written findings by the Board requires reversal. We disagree.
Section 1611.5 expresses the extent of the Board's duty to set forth written findings. That section states in relevant part: "Written findings of fact of the county board shall be made if requested in writing by a party up to or at the commencement of the hearing .... However, the party requesting findings may abandon the request and waive findings at the conclusion of the hearing." (§ 1611.5, italics added.) As the record in this case demonstrates, no such request for findings was made by appellant. In fact, appellant checked a box on his application to the Board stating that no findings were requested. As the statutory language clearly reflects, findings are not jurisdictional and can be waived. (See Westlake Farms, Inc. v. County of Kings (1974) 39 Cal.App.3d 179, 188.) Here, appellant clearly and expressly waived findings.
In arguing that findings were still required as a matter of law, appellant points to Topanga Assn. for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506, 514-515, which held that when review of a public agency's adjudicatory decision is governed by Code of Civil Procedure section 1094.5, there is an implied statutory requirement of written findings under that section. Appellant contends the holding in Topanga should trump the literal wording of section 1611.5.
We reject appellant's line of argument because the proceedings contemplated in assessment challenges do not ordinarily fall under the purview of Code of Civil Procedure section 1094.5. Thus, the Legislature would have reason to allow a different rule of practice with respect to findings. As one recent Court of Appeal opinion has explained: "Although a local assessment appeals board decision arises from an administrative hearing process, the mechanism for seeking judicial review of the decision ' "is significantly different from that of other administrative agency decisions. Ordinarily the aggrieved taxpayer's remedy is not to seek administrative mandate pursuant to Code of Civil Procedure section 1094.5, but to pay the tax and file suit in superior court for a refund. [Citations.]" [Citation.]' ... [¶] Because a tax refund action provides property owners with an adequate remedy at law, equitable actions for mandamus, injunctive, and declaratory relief generally are unavailable to obtain judicial review of a local assessment appeals board decision." (William Jefferson & Co., Inc. v. Orange County Assessment Appeals Bd. No. 2 (2014) 228 Cal.App.4th 1, 10-11.)
Based on this latter principle and the lack of evidence that appellant paid the taxes due before filing suit, the Board argues that appellant had no standing to file an action for writ of mandate and/or for declaratory relief in the trial court. Because we are unable to ascertain from the record whether this point was adequately raised and developed with legal argument in the trial court, we have not reached the lack of standing argument.
We accordingly reject appellant's argument regarding findings. Section 1611.5 controls, and under the clear terms of that statute, findings may be waived or abandoned. Here, not only did appellant fail to request written findings, but also affirmatively stated on its application that it was not requesting written findings. On this record, findings were not required, and in any event were clearly waived. No error is shown.
DISPOSITION
The judgment is affirmed. The Board shall recover its costs on appeal.
LEVY, Acting P.J. WE CONCUR: FRANSON, J. PEÑA, J.