Durante v. Co. of Santa Clara ( 2018 )


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  • Filed 11/30/18
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SIXTH APPELLATE DISTRICT
    MIMI K. KARAS DURANTE,                               H041620
    (Santa Clara County
    Plaintiff and Appellant,                     Super. Ct. No. 1-12-CV-217681)
    v.
    COUNTY OF SANTA CLARA,
    Defendant and Respondent.
    Plaintiff Mimi Karas Durante appeals from a defense judgment after trial in a tax
    refund action she brought against the County of Santa Clara. Plaintiff alleged an
    entitlement to a property tax refund because the County incorrectly determined there was
    a change in ownership of a house she co-owns with her sister, which triggered a
    reassessment of its value. The trial court concluded there was a change in ownership
    which allowed for reassessment. We find no error in that decision and will affirm the
    judgment.
    I.    BACKGROUND
    Plaintiff and her sister inherited a house in San Jose when their mother died in
    2003. They took title as tenants-in-common. A recorded deed reflected that each owned
    an undivided 50 percent interest in the property. Plaintiff lived in the home; her sister did
    not.
    In 2009, plaintiff’s sister granted her a life estate in the 50 percent interest that
    plaintiff did not already own. The deed reflecting that transfer was recorded. The 2009
    transfer resulted in plaintiff having sole ownership rights for the rest of her life, with her
    sister regaining a 50 percent interest in the property on plaintiff’s death.
    Based on the 2009 transfer, the County reassessed the property’s value under a
    statute allowing for recalculation of a property’s tax basis upon a change in ownership.
    The new valuation was significantly higher, resulting in a commensurately higher
    property tax bill. Plaintiff asked the County for a revised assessment on the ground that
    the creation of a life estate did not effect a change in ownership. After conducting an
    administrative hearing, the County denied the request.
    Plaintiff then sued the County seeking a property tax refund. The complaint
    alleged a refund was due based on no change in ownership. The case was tried to the
    court, with the parties submitting documentary evidence only.1 The trial court issued a
    statement of decision containing its findings and conclusions. The court found that the
    2009 deed granting plaintiff a life estate constituted a change in ownership and the
    reassessment was in conformity with the law. Judgment was entered for the County.
    II.   DISCUSSION
    Plaintiff’s lawsuit is authorized by Revenue and Taxation Code section 5140,
    which allows a person who overpaid property tax to bring a refund action in superior
    court, if the agency that collected the tax refused to refund the money after proper
    request. Plaintiff’s suit was resolved by trial and the judgment is based on a statement of
    decision. In reviewing a judgment based upon a statement of decision following a bench
    trial, we review questions of law de novo, and we review the trial court’s findings of fact
    for substantial evidence. “Under this deferential standard of review, findings of fact are
    liberally construed to support the judgment and we consider the evidence in the light
    most favorable to the prevailing party, drawing all reasonable inferences in support of the
    findings.” (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.)
    1
    One witness (a supervisor in the County Assessor’s office) testified at trial, but
    the parties later stipulated that her entire testimony would be stricken from the record.
    2
    This appeal presents two questions, one legal and one factual. The legal question
    we must resolve is whether granting a co-tenant a life estate in a tenancy-in-common
    interest is a “change in ownership” as that term is defined in the statutes governing
    property taxation. The trial court decided it is, but we review the issue using our
    independent judgment. The other question is whether plaintiff was in fact granted a life
    estate in her sister’s tenancy-in-common interest; in other words, whether the scenario
    described in the legal question is present here. The trial court found that it is, and on that
    factual question we must defer to the trial court’s finding so long as substantial evidence
    supports it.
    We turn to the legal question first. A California property’s value for property tax
    purposes is determined by its appraised value when it is purchased, newly constructed,
    or––as relevant here––a change in ownership has occurred. (Cal. Const. art. XIII A, § 2,
    subd. (a).) “Change in ownership” is defined by Revenue and Taxation Code section 60:
    “A ‘change in ownership’ means a transfer of a present interest in real property, including
    the beneficial use thereof, the value of which is substantially equal to the value of the fee
    interest.” The purported change in ownership here was the transfer of a life estate in one
    co-tenant’s interest in the property to the other co-tenant. “The creation, transfer, or
    termination of any tenancy-in-common interest” is expressly included within the statutory
    definition of a change in ownership. (Rev. & Tax. Code, § 61, subd. (f).) And the
    tenancy-in-common interest transferred to plaintiff––a life estate––is a present interest in
    real property, carrying with it all the beneficial use of the property. (Civ. Code, § 818
    [“The owner of a life estate may use the land in the same manner as the owner of a fee
    simple, except that he must do no act to the injury of the inheritance.”]; see also Faus v.
    City of Los Angeles (1967) 
    67 Cal. 2d 350
    , 362, fn. 9 [“[A] life tenant … enjoys a right to
    the use of the property which is restricted only by the rules against waste.”].) The
    remaining test under Revenue and Taxation Code section 60 is whether the interest
    transferred, here a life estate, is “substantially equal to the value of the fee interest” of the
    3
    property. Under Leckie v. County of Orange (1998) 
    65 Cal. App. 4th 334
    , 339, reasoning
    that a life tenant receives a “present interest in the property, the beneficial use of the
    property and the primary interest” in the property to meet the statute’s value equivalency
    test, we conclude that such a transfer qualifies as a change in ownership.
    Plaintiff argues that to the extent she received anything in 2009, it was personal
    property, not real property. She characterizes her life estate in her sister’s interest in the
    property as merely an assignment of the right to bring an action for monetary damages.
    But a life estate in real property is considered an interest in fee simple. (Civ. Code,
    § 765; Auerbach v. Assessment Appeals Board No. 1 (2006) 
    39 Cal. 4th 153
    , 162.) The
    transfer of a life estate as reflected by the 2009 deed is therefore an interest in real, not
    personal, property.
    Having decided that the transfer to plaintiff of a life estate in her co-tenant’s
    interest would qualify as a change in ownership for purposes of Revenue and Taxation
    Code section 60, we must determine whether that is what occurred here. More precisely,
    we must decide whether sufficient evidence supports the trial court’s affirmative finding
    on that point. Plaintiff argues that the 2009 deed indicating her sister granted her a life
    estate did nothing more than memorialize a situation already in existence: that her
    mother intended to allow plaintiff to occupy the property for life, as evidenced by the fact
    that plaintiff resided there (and her sister did not). According to plaintiff, at the time of
    the inheritance, she had the exclusive right to possess the property and her sister had no
    right to possession. (Plaintiff acknowledges the 2003 deed showing she and her sister
    received equal interests to the property, but suggests undue influence exerted by the sister
    caused their mother to revise her trust just before death.) All of this, plaintiff contends,
    leads to the conclusion that the true intent of the parties was for her to have an exclusive
    right to possess the property for life, and the 2009 deed simply perfected her existing title
    rather than transferring any property interest at all. The essence of plaintiff’s argument is
    that, as a factual matter, she received nothing in 2009 that she did not already have.
    4
    The trial court found otherwise. In its statement of decision, the court found that
    “until [the sister] transferred the life estate, she also had the right to beneficial use of the
    Subject Property even though plaintiff and her husband were living there. [The sister]
    legally relinquished her rights to use the property when she conve[y]ed the life estate[.]”
    (Bold italics in original.) That finding is supported by substantial evidence––most
    significantly, the recorded deeds in the property’s chain of title, which reflect exactly
    what the court found: beginning in 2003, plaintiff and her sister each had a 50 percent
    undivided interest in the property as tenants-in-common with equal rights of possession;
    then, in 2009, the sister transferred to plaintiff a life estate in the 50 percent interest
    plaintiff did not already own, giving plaintiff full ownership of the property and exclusive
    right to possession for life. Since sufficient evidence supports the trial court’s finding,
    we will not disturb it on appeal.
    Plaintiff advances emphatic arguments relating to the County’s administrative
    hearing process on her application for a changed assessment. She argues that the hearing
    was unfair and that she was denied due process. She characterizes certain aspects of the
    process as violating the California Constitution. And she asserts that the hearing officer’s
    factual findings and legal conclusions were erroneous. But none of her arguments
    regarding the administrative hearing process bears on our review of the decision after
    trial in superior court. The law allows a party aggrieved by a county’s erroneous
    imposition of property taxes to pursue an action for a refund under Revenue and Taxation
    Code section 5140. (Schoenberg v. County of Los Angeles Assessment Appeals Bd.
    (2009) 
    179 Cal. App. 4th 1347
    , 1355.) Plaintiff availed herself of that remedy when she
    filed her lawsuit. At that point––regardless of what the County had done in making its
    determination that plaintiff was not entitled to a refund––it was for the trial court to
    decide whether plaintiff owes the property tax. Plaintiff received a trial de novo on that
    issue. On appeal from the resulting judgment, our role is to determine only whether the
    trial court erred in its decision. We find it did not.
    5
    Plaintiff also asserts that the County’s method of valuing the property is
    inaccurate, and that the County improperly refused to disclose how it reached the
    valuation. Plaintiff argues that without knowing whether the County accurately appraised
    the property, it cannot be determined that the transferred interest (a life estate) is
    “substantially equal to the value of the fee interest” in the property, as required for a
    change of ownership under Revenue and Taxation Code section 60. That argument fails
    because no matter the monetary value of the property, the value of a life estate is
    substantially equal to the remainder interest for purposes of Revenue and Taxation Code
    section 60. We also note that whether the County correctly determined the value of the
    property is an issue outside the scope of this case. We must determine only whether the
    trial court correctly decided reassessment of the property was allowed by law; we express
    no opinion on whether the value produced in that reassessment is accurate.
    The constitutional and statutory framework governing property taxation in
    California allows for reassessment of property due to change of ownership only upon a
    true change of ownership of the fee interest or an interest substantially equivalent to the
    fee interest. It does not allow for reassessment when a transfer merely effectuates a
    change in the method of holding title to the property. Here, the record contains sufficient
    evidence that a life estate––which is an interest substantially equivalent to the fee
    interest––actually changed hands when it was transferred to plaintiff from her sister. The
    trial court therefore did not err when it determined the reassessment of plaintiff’s
    property was allowed by law.
    III.    DISPOSITION
    The judgment is affirmed. The parties shall bear their own costs on appeal.
    6
    ____________________________________
    Grover, J.
    WE CONCUR:
    ____________________________
    Greenwood, P. J.
    ____________________________
    Premo, J.
    H041620 - Durante v. County of Santa Clara
    Trial Court:                           Santa Clara County Superior Court
    Superior Court No. 1-12-CV-217681
    Trial Judge:                           Hon. Erica R. Yew
    Counsel for Plaintiff/Appellant Mimi   Joseph Durante
    K. Karas Durate                        Law Office of Joseph Durante
    Counsel for Defendant/Respondent       James R. Williams, County Counsel
    County of Santa Clara                  Danny Y. Chou, Assistant County
    Counsel
    Javier Serrano, Deputy Cunty Counsel
    Office of the County Counsel
    County of Santa Clara
    H041620 – Durante v County of Santa Clara
    

Document Info

Docket Number: H041620

Filed Date: 11/30/2018

Precedential Status: Precedential

Modified Date: 11/30/2018