LA Live Properties, LLC v. County of Los Angeles ( 2021 )

Filed 3/17/21 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
LA LIVE PROPERTIES, LLC, B298278
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC674513)
v.
ORDER MODIFYING OPINION AND
COUNTY OF LOS ANGELES, DENYING PETITION FOR
REHEARING [NO CHANGE IN
Defendant and Respondent.
JUDGMENT]
THE COURT:
It is ordered that the opinion in this matter, filed
February 26, 2021, is modified as follows:
The first full sentence on p. 20 (immediately following
heading II.) is modified to read as follows: “The parties agree
that LA Live did not administratively challenge the escape
assessments by filing an application for assessment reduction
with the county board pursuant to section 1603.”
The petition for rehearing is denied. There is no change in
the judgment.
____________________________________________________________
Edmon, P.J. Lavin, J. Dhanidina, J.
Filed 2/26/21 (unmodified opinion)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
LA LIVE PROPERTIES, LLC, B298278
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC674513)
v.
COUNTY OF LOS ANGELES,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Elizabeth White, Judge (Ret.). Affirmed.
Ajalat, Polley, Ayoob & Matarese, Richard J. Ayoob,
Christopher J. Matarese, Gregory R. Broege and Andrew W.
Bodeau for Plaintiff and Appellant.
Lamb and Kawakami LLP, Thomas G. Kelch and Michael
K. Slattery; Mary C. Wickham, County Counsel, Peter M.
Bollinger, Assistant County Counsel, Richard Girgado and Justin
Y. Kim, Deputy County Counsel for Defendant and Respondent.
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This is a tax refund action brought by appellant LA Live
Properties, LLC (LA Live) against respondent County of
Los Angeles (County). In 2012, the County levied “escape
assessments”—that is, “retroactive [tax] assessment[s] for years
in which property was either not assessed or underassessed”
(Williams & Fickett v. County of Fresno (2017) 2 Cal.5th 1258,
1265, fn. 2 (Williams))—on real property owned by LA Live.
After paying the taxes due under the escape assessments,
LA Live filed the present action, which seeks a refund of those
taxes. LA Live claimed that when the Los Angeles County
Assessor (Assessor) reassessed the real property in 2012, he
failed to comply with the procedural requirements of Revenue
and Taxation Code1 section 531.8, which required that “Notices of
Proposed Escape Assessment” be issued ten days before the
escape assessments were enrolled. Instead, the Assessor mailed
the notices just five days before enrolling the escape assessments.
LA Live contended that because too few days passed between the
mailing of the notices and the enrollment of the escape
assessments, the assessments were void and subject to refund.
The matter was tried in the superior court, which denied
LA Live’s claim for a refund. The court found, among other
things, that the Assessor’s failure to wait 10 days before enrolling
the escape assessments did not render them void, and LA Live
had failed to exhaust its administrative remedies before pursuing
the present action. The court therefore entered judgment for the
County.
1 All subsequent undesignated statutory references are to
the Revenue and Taxation Code.
2
As we discuss, the trial court correctly concluded that
LA Live’s claim is not reviewable on the merits because LA Live
did not exhaust its administrative remedies. By statute, a
taxpayer is required to file administrative requests for
reassessment and refund before filing a refund action in court.
The administrative exhaustion requirement is jurisdictional
unless the assessment is a “ ‘nullity as a matter of law.’ ”
(Williams, supra, 2 Cal.5th at p. 1264.) In the present case, the
assessment was not legally null: Even if the Assessor failed to
follow the statutory procedure set out in section 531.8, that
failure did not render the assessment a nullity because the real
property at issue was not tax exempt, nonexistent, or outside the
County’s jurisdiction. We therefore will affirm the judgment for
the County.
STATUTORY FRAMEWORK
A. Regular and Escape Assessments
“The assessors in each of California’s 58 counties have the
authority—and duty—to levy taxes on all of the property within
their boundaries. (Cal. Const., art. XIII A, § 1, subd. (a); § 401.)
The amount of the levy is the property’s assessed value (referred
to as its ‘full cash value’) multiplied by the applicable, one-
percent tax rate.” (Prang v. Los Angeles County Assessment
Appeals Board No. 2 (2020) 54 Cal.App.5th 1, 11–12 (Prang).)2
2 “When Proposition 13 became law in 1978, the assessed
value of real property was redefined as (1) either (a) the value of
the property reflected on its ‘1975–[19]76 tax bill’ or, if certain
events triggering reassessment occur, (b) the ‘appraised value of
[the] real property’ at the time of the triggering event, plus (2) an
‘inflationary rate not to exceed 2 percent for any given year’
keyed to the ‘consumer price index or comparable data.’
3
An assessor may reassess real property “only if one of three
triggering events has occurred—namely, (1) when the property
has been ‘purchased,’ (2) when the property is ‘newly
constructed,’ or (3) when ‘a change in ownership has occurred.’
(Cal. Const., art XIII A, § 2, subd. (a); § 110.1; 926 North Ardmore
Ave. LLC v. County of Los Angeles (2017) 3 Cal.5th 319, 326 . . . ;
Osco Drug, Inc. v. County of Orange (1990) 221 Cal.App.3d 189,
192 . . .).” (Prang, supra, 54 Cal.App.5th at pp. 12–13.)
Although county assessors in some cases reassess property
in the same assessment year that a triggering event occurred, in
other cases there is a delay between the triggering event and
reassessment. In that circumstance, “the county assessor has the
authority—and a constitutional duty—to levy retroactive
assessments to recapture any under-taxation in the prior years
that would otherwise escape taxation due to the delay between
the triggering event and the reassessment. (Rev. & Tax. Code,
§§ 51.5, subd. (d), 531, 531.2; Trailer Train Co. v. State Bd. of
Equalization (1986) 180 Cal.App.3d 565, 580.)” (Prang, supra,
54 Cal.App.5th at p. 8.)
“If . . . reassessment is appropriate, then the assessor has
‘a constitutional [and a statutory] duty to levy retroactive
assessments’ ‘if [he or she] discovers property has “escaped
assessment.” ’ [Citations.] The duty to levy escape assessments
springs from our Constitution’s mandate that ‘[a]ll property . . .
be taxed in proportion to its full value’ (Cal. Const., art. XIII, § 1,
subd. (b), italics added), and this mandate obligates assessors
‘(1) to assess all property in [their] jurisdiction and (2) to do so on
(Cal. Const., art. XIII A, § 2, subds. (a) & (b); see §§ 110.1, 110.)”
(Prang, supra, 54 Cal.App.5th at p. 12.)
4
a uniform basis.’ [Citation.] ‘If any property subject to taxation
should escape assessment in any year,’ . . . ‘the taxation for that
year would not be equal and uniform, nor would all property in
this State be taxed in proportion to its value, and the behest of
the Constitution would not be obeyed.’ [Citation.]” (Prang,
supra, 54 Cal.App.5th at p. 14, italics omitted.)
B. Statutory Scheme for Challenging Assessments
The Legislature has established a three-step process by
which a taxpayer may challenge a regular or escape assessment.
(Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1307–
1308 (Steinhart).) The first step is the filing of an application for
assessment reduction (also referred to as an assessment appeal)
under section 1603, subdivision (a), through a “verified, written
application showing the facts claimed to require the reduction
and the applicant’s opinion of the full value of the property.” (See
Steinhart, at p. 1307; Williams, supra, 2 Cal.5th at p. 1269.) An
application for assessment reduction is made to the “county
board” (§ 1603)—i.e., to “a county board of supervisors meeting as
a county board of equalization or an assessment appeals board.”
(§ 1601, subd. (a).) Applications for assessment reductions are
resolved through an administrative appeals process that can
involve a public hearing (§§ 1605.4, 1605.6), exchanges of
information (§ 1606), examinations under oath (§ 1607), and the
collection and introduction of additional evidence in support or
refutation of an application (§§ 1609, 1609.4, 1609.5, 1610.2).
(See generally Williams, supra, 2 Cal.5th at p. 1269.) The county
board “shall make a record of the hearing” and, if requested, shall
make “[w]ritten findings of fact,” which “shall fairly disclose the
board’s determination of all material points raised by the party in
his or her petition and at the hearing, including a statement of
5
the method or methods of valuation used in appraising the
property.” (§§ 1611, 1611.5.) Ultimately, “ ‘the county board
shall equalize the assessment of property on the local roll by
determining the full value of an individual property, by assessing
any taxable property that has escaped assessment, correcting the
amount, number, quantity, or description of property on the local
roll, canceling improper assessments, and by reducing or
increasing an individual assessment . . . .’ (§ 1610.8.)” (Williams,
supra, at p. 1269.)
The second step in the process is the filing of an
administrative refund claim under sections 5096 et seq. (See
Steinhart, supra, 47 Cal.4th at pp. 1307–1308.) This step may be
satisfied by application for assessment reduction under
section 1603 “if the applicant states in the application that the
application is intended to constitute a claim for refund.” (§ 5097,
subd. (b).) If the applicant does not so state, “he or she may
thereafter . . . file a separate claim for refund of taxes.” (Ibid.)
The third and final step for challenging a regular or escape
assessment is the filing of a refund action in a superior court
pursuant to sections 5140 et seq. (See Steinhart, supra,47 Cal.4th at pp. 1307–1308.) These sections provide that within
six months of the date the county board makes its final decision,
a taxpayer may bring an action in superior court “against a
county or a city to recover a tax which the board of supervisors of
the county or the city council of the city has refused to refund on
a claim filed pursuant to Article 1 (commencing with Section
5096) of this chapter.” (§ 5140; see also § 5141.)
6
FACTUAL AND PROCEDURAL BACKGROUND
A. The Property
LA Live owns and manages a sports and entertainment
development in downtown Los Angeles known as L.A. Live (the
development). The development, which surrounds the Staples
Center and Nokia Theatre, is made up of several distinct
buildings and structures that were completed in 2007 and 2008.
Three are relevant to the present appeal: the Regal Building
(Assessor’s Parcel Number (APN) 5138-007-094), Building A
(APN 5138-007-097), and Building B (APN 513-007-098).3
B. The “Escape Assessments”
On June 21, 2012, the Assessor mailed “Notices of Proposed
Escape Assessment” (notices) to LA Live. The notices stated that
the Assessor had reassessed the Regal Building, Building A, and
Building B for the years 2008–2011, and intended to “enroll[]” the
new assessments 10 days from the date of the notices.
On June 26, 2012, five days after the notices were mailed,
the Assessor transmitted the escape assessments to the
Los Angeles County Auditor (Auditor). The Auditor levied
property taxes on the Regal Building, Building A, and Building B
3 Building A has a total of 387,722 square feet of interior and
exterior office and restaurant space. Its key tenants include the
Grammy Museum, Conga Room, Club Nokia, Trader Vic’s,
Starbucks Coffee, Yard House, ABC Radio, Lucky Strikes Lanes
and Lounge, Rosa Mexicano, Herbalife, The Farm of Beverly
Hills, Rock’n Fish, and Wolfgang Puck Bar & Grill. Building B is
five stories and has a total of 119,862 square feet of interior and
exterior office, studio, and restaurant space. Its main tenant is
ESPN Broadcast; other tenants include Lawry’s Carvery
Restaurant and ESPN Zone.
7
on August 4, 2012, and mailed adjusted property tax bills to
LA Live on August 16, 2012.4 The tax bills were based on the
following assessments:
Building Tax Year Prior New Net Tax
Assessed Assessed Due
Value Value
Regal 2008 $1,167,788 $4,767,788 $42,830
2009 $1,191,143 $4,863,143 $44,814
2010 $1,188,319 $4,851,616 $46,519
2011 $1,197,267 $4,888,148 $45,983
Building A 2008 $2,000,628 $41,693,128 $472,237
2009 $2,040,640 $112,074,990 $1,342,904
2010 $2,035,803 $111,809,371 $1,393,969
2011 $2,051,132 $112,651,294 $1,377,911
Building B 2008 $722,772 $23,959,872 $276,461
2009 $737,227 $34,146,069 $407,735
2010 $735,479 $34,065,141 $423,240
2011 $741,017 $34,321,650 $418,364
Collectively, the principal amount of property taxes levied
as a result of the escape assessments was $6,292,967. On March
21, 2013, LA Live timely paid the property taxes due under the
tax bills.
C. LA Live’s Request for Refund
LA Live did not administratively appeal the escape
assessments pursuant to section 1603 on the grounds raised in
4 LA Live contends the escape assessments were “enrolled”
within the meaning of section 531.8 when they were transmitted
to the Auditor, and the trial court so found. The County
disagrees, asserting that enrollment occurred when the Auditor
processed the information provided by the Assessor—in this case,
on August 4, 2012. For purposes of this appeal, we will assume
without deciding that the escape assessments were enrolled when
they were transmitted to the Auditor on June 26, 2012.
8
the present appeal.5 Instead, on September 20, 2016, it
submitted a claim for refund pursuant to sections 5096 et seq.,
seeking reimbursement of the entirety of the taxes paid pursuant
to the escape assessments. LA Live claimed that in issuing the
escape assessments, the County failed to comply with section
531.8, which required the Assessor to mail notices of escape
assessment at least 10 days before enrolling the escape
assessments.6 LA Live contended that because the Assessor had
mailed the notices only five days before enrolling the escape
assessments, rather than 10 days as required by statute, the
assessments were void and subject to refund.
The County denied LA Live’s claim for refund on March 1,
2017.
D. The Present Action
On September 1, 2017, LA Live filed the present action for
refund of property taxes pursuant to section 5140. LA Live’s
5 In 2012 and 2013, LA Live filed administrative appeals
challenging the assessed values of Building A and Building B, as
well as of several other structures that comprise the
development. In those administrative appeals, LA Live asserted
that the County had over-valued the property at issue, but did
not claim the assessments were void. Although LA Live and the
County disagree about the proper characterization of these
administrative appeals, both parties agree that the
administrative appeals did not exhaust LA Live’s administrative
remedies for purposes of this action.
6 Section 531.8 provides, in relevant part: “No escape
assessment shall be enrolled under this article before 10 days
after the assessor has mailed or otherwise delivered to the
affected taxpayer a ‘Notice of Proposed Escape Assessment’ with
respect to one or more specified tax years.”
9
complaint alleged that section 531.8 required the Assessor to wait
10 days after issuing a notice of proposed escape assessment
before enrolling the escape assessment. Because the Assessor did
not wait the statutory 10-day period before enrolling the escape
assessments, the escape assessments were “void and thus subject
to refund.” LA Live sought judgment of $6,292,967, plus interest
and attorney fees.
The matter was tried to the court in November 2018. In
lieu of live testimony, the parties submitted stipulated facts and
exhibits. As relevant here, the parties stipulated that the
Assessor entered the escape assessment for tax years 2008
through 2011 into the Property Tax Database on June 17, 2012,
and mailed “Notices of Proposed Escape Assessment” to LA Live
on June 21, 2012. The Assessor transmitted the escape
assessment to the Auditor on June 26, 2012, and the escape
assessments were placed on the Auditor’s “Secure Tax Roll” the
same day. The Auditor levied property taxes on the Regal
Building, Building A, and Building B based on the escape
assessments on August 4, 2012, and mailed tax bills to LA Live
on August 16, 2012. LA Live submitted a claim for refund within
four years of paying those taxes.
The trial court filed a statement of decision on February 15,
2019. It concluded that (1) nothing in the plain language of the
Revenue and Taxation Code suggested that “ministerial
violations of the 10 day [notice] period [of section 531.8] result in
voiding an escape assessment,” (2) interpreting the statute as LA
Live suggested would create an absurd result, (3) the County
substantially complied with the notice requirement of section
531.8, and (4) LA Live failed to exhaust its administrative
remedies. Thus, the court found the assessments at issue were
10
“valid and should not be voided,” and it awarded judgment in
favor of the County.
LA Live timely appealed.
DISCUSSION
LA Live contends that compliance with the 10-day notice
provision of section 531.8 is essential to the County’s taxing
power, such that a failure to comply with section 531.8 renders
the resulting assessments “ultra vires [and] void.” LA Live thus
urges that because the County enrolled the escape assessments
fewer than 10 days after it mailed notices of such assessments,
LA Live is entitled to a full refund of the property taxes paid
pursuant to the assessments.
The County contends that as a predicate to bringing this
action, LA Live was required to exhaust its administrative
remedies by administratively challenging the escape assessments
before the county board. Because LA Live indisputably failed to
do so, the County urges LA Live’s claims are not reviewable on
the merits. In the alternative, the County urges that it fully or
substantially complied with section 531.8.
As we discuss, parties generally must exhaust available
administrative remedies as a prerequisite to seeking relief in the
courts. In the property tax context, the exhaustion requirement
means that a taxpayer ordinarily may not pursue a court action
for a tax refund without first filing claims for reassessment and
refund with the county board of equalization or assessment
appeals board. Although there is a limited exception to this rule
where a property tax assessment is a “ ‘nullity as a matter of
law’ ”—i.e., where “ ‘the property is tax exempt, nonexistent or
outside the jurisdiction [citations], and no factual questions exist
regarding the valuation of the property’ ” (Williams, supra,
11
2 Cal.5th at p. 1275)—that exception does not apply in the
present case. Accordingly, LA Live was required to exhaust
administrative remedies before initiating this action, and its
failure to do so rendered its claim nonreviewable.
I.
Necessity of Exhausting
Administrative Remedies
A. Exhaustion Requirement Generally
The rule requiring exhaustion of administrative remedies is
well settled. “ ‘In general, a party must exhaust administrative
remedies before resorting to the courts. [Citations.] Under this
rule, an administrative remedy is exhausted only upon
“termination of all available, nonduplicative administrative
review procedures.” [Citations.]’ (Coachella Valley Mosquito &
Vector Control Dist. v. California Public Employment Relations
Bd. (2005) 35 Cal.4th 1072, 1080 (Coachella Valley); see also
Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 292–
293.)” (Williams, supra, 2 Cal.5th at pp. 1267–1268.)
“[I]n California a requirement that administrative
remedies be exhausted is jurisdictional.” (California Correctional
Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th
1133, 1151.) Thus, “[t]he exhaustion rule ‘ “is not a matter of
judicial discretion, but is a fundamental rule of procedure . . .
binding upon all courts.” ’ (Campbell v. Regents of the University
of California (2005) 35 Cal.4th 311, 321 (Campbell).) . . . ‘[T]he
exhaustion doctrine is principally grounded on concerns favoring
administrative autonomy (i.e., courts should not interfere with an
agency determination until the agency has reached a final
decision) and judicial efficiency (i.e., overworked courts should
decline to intervene in an administrative dispute unless
12
absolutely necessary). [Citations].’ (Farmers Ins. Exchange v.
Superior Court (1992) 2 Cal.4th 377, 391; see also Rojo v. Kliger
(1990) 52 Cal.3d 65, 83 [explaining that the exhaustion doctrine
advances policy interests such as ‘easing the burden on the court
system, maximizing the use of administrative agency expertise
and capability to order and monitor corrective measures, and
providing a more economical and less formal means of resolving
[a] dispute’]; Yamaha Motor Corp. v. Superior Court (1986)
185 Cal.App.3d 1232, 1240 [observing that the exhaustion
doctrine ‘ “facilitates the development of a complete record that
draws on administrative expertise” ’ and affords ‘a preliminary
administrative sifting process [citation], unearthing the relevant
evidence and providing a record which the court may review’].)”
(Williams, supra, 2 Cal.5th at p. 1268.)
In the property tax context, the requirement to exhaust
administrative remedies is explicit in the governing statutes.
Section 1603, subdivision (a) provides: “A reduction in an
assessment on the local roll shall not be made unless the party
affected or his or her agent makes and files with the county board
a verified, written application showing the facts claimed to
require the reduction and the applicant’s opinion of the full value
of the property.” Section 5097, subdivision (a) provides in
relevant part that “[a]n order for a refund . . . shall not be made,
except on” the timely filing of a verified claim for refund. And,
section 5142, subdivision (a) provides that a court action may not
“be commenced or maintained . . . unless a claim for refund has
first been filed pursuant to Article 1 (commencing with Section
5096),” and “[n]o recovery shall be allowed in any refund action
upon any ground not specified in the refund claim.” (See
Steinhart, supra, 47 Cal.4th at p. 1307.)
13
In light of these statutes, our Supreme Court has explained
that in the property tax context, “application of the exhaustion
principle means that a taxpayer ordinarily may not file or pursue
a court action for a tax refund without first applying to the local
board of equalization for assessment reduction under section
1603 and filing an administrative tax refund claim under section
5097.” (Steinhart, supra, 47 Cal.4th 1298, 1308, citing Stenocord
Corp. v. City etc. of San Francisco (1970) 2 Cal.3d 984, 986–990
(Stenocord); see also Williams, supra, 2 Cal.5th at p. 1268.)
Whether the exhaustion requirement applies in a
particular case raises legal issues, which we review de novo.
(Ortega v. Contra Costa Community College Dist. (2007)
156 Cal.App.4th 1073, 1080; Evans v. City of San Jose (2005)
128 Cal.App.4th 1123, 1136.)
B. The “Nullity Exception” and the Supreme Court’s
Decision in Parr-Richmond
Our Supreme Court has recognized a limited exception to
the exhaustion rule in the property tax context where a tax
assessment “is ‘a nullity as a matter of law.’ ” (Williams, supra,
2 Cal.5th at p. 1264.) The court discussed this exception most
recently in Williams, in the context of escape assessments
imposed by the County of Fresno. In that case, the taxpayer took
no action on the escape assessments for several years, but
eventually paid the additional taxes and filed a refund action in
superior court, asserting it had not owned most of the property at
issue during the relevant years. The superior court sustained the
county’s demurrer on the ground that the taxpayer had failed to
exhaust its administrative remedies; the appellate court
reversed, concluding that because the taxpayer claimed it did not
own the taxed property, it was not required to exhaust
14
administrative remedies. (Id. at pp. 1265–1267.) The county
sought review.
The Supreme Court explained that as a general rule, a
party must exhaust administrative remedies as a prerequisite for
seeking relief in the courts. Prior cases had recognized
exceptions to this general rule, however, “ ‘when the
administrative agency cannot provide an adequate remedy’ and
‘when the subject of [a] controversy lies outside the agency’s
jurisdiction.’ ” (Williams, supra, 2 Cal.5th at p. 1274.) In the
property tax context, cases had recognized an additional
exception “ ‘when the assessment “ ‘is a nullity as a matter of law
because, for example, the property is tax exempt, nonexistent, or
outside the jurisdiction [citations], and no factual questions exist
regarding the valuation of the property which, upon review by
the board of equalization, might be resolved in the taxpayer’s
favor, thereby making further litigation unnecessary [citations].’
(Stenocord, supra, 2 Cal.3d at p. 987.)” (Williams, supra,
2 Cal.5th at p. 1275, italics added.)
In an earlier decision, Parr-Richmond Industrial Corp. v.
Boyd (1954) 43 Cal.2d 157 (Parr-Richmond), the court had
applied the nullity doctrine where, as in Williams, a taxpayer
“ ‘attack[ed] the assessment as void because he [did] not own the
property on which the tax demand was made.’ ” (Williams,
supra, 2 Cal.5th at p. 1275.) Under those circumstances, the
Parr-Richmond court had held that exhaustion of administrative
remedies was unnecessary because the tax had been “levied
against a greater property interest than [the taxpayer] allegedly
owned,” and hence was “illegal.” (Parr-Richmond, supra,
43 Cal.2d at p. 165.) The Parr-Richmond court had explained:
“ ‘While in one sense it is true that almost any mistake which
15
results in an excessive assessment amounts to an overvaluation
of the property of a taxpayer, we think there is a real and distinct
difference between those cases in which it may properly be said
that the error is one of overvaluation and those cases in which
the overvaluation is a mere incidental result of an erroneous
assessment of property which should not have been assessed.’ ”
(Parr-Richmond, at p. 165.) Accordingly, “plaintiff’s theory of
relief—from an illegal tax because it was levied against a greater
property interest than it allegedly owned . . . did not require its
prior application to the board of equalization before recourse to
the court.” (Ibid.)
The Williams court overruled Parr-Richmond, holding that
a taxpayer is required to exhaust administrative remedies even if
it claims it does not own the assessed property. (Williams, supra,
2 Cal.5th at p. 1265.) The court noted that current law had
expanded the role of county boards, expressly giving them
jurisdiction over valuation and nonvaluation issues, and also had
provided a procedure by which a taxpayer could avoid the
assessment appeals process if the taxpayer and the assessor
stipulated that an assessment challenge involved only
nonvaluation issues, and the board accepted the stipulation.7
7 Section 5142, subdivision (b) provides, in relevant part:
“When the person affected or his or her agent and the assessor
stipulate that an application involves only nonvaluation issues,
they may file a stipulation with the county board of equalization
stating that issues in dispute do not involve valuation
questions. . . . The board shall accept or reject the stipulation,
with or without conducting a hearing on the stipulation. The
filing of, and the acceptance by the board of, a stipulation shall be
deemed compliance with the requirement that the person affected
file and prosecute an application for reduction under Chapter 1
16
(Id. at pp. 1270–1271.) These statutes, the court said, evidenced
the Legislature’s intent that claims as to which no stipulation
had been entered should be submitted to a county board as a
prerequisite to maintaining a refund action under section 5140.
The court explained: “[T]he stipulation procedure bespeaks a
legislative determination that the county board should, in the
first instance, pass on this question, or decide that it need not do
so. Indeed, the whole stipulation process—part of a ‘carefully
crafted statutory scheme the Legislature has, within its
constitutional authority, put in place’ [citation]—would be
meaningless, and section 5142, subdivision (b) would be
surplusage, if an exhaustion requirement did not apply to
nonvaluation issues. If that were true, there would be no need
for a taxpayer to seek a stipulation in order to obtain judicial
review of a challenge to an assessment when the dispute did not
involve a valuation issue.” (Williams, supra, 2 Cal.5th at
pp. 1271–1272, fn. omitted.)
The court noted, moreover, that requiring exhaustion of
administrative remedies in the case before it advanced “the
purposes served by the exhaustion of administrative remedies in
general.” (Williams, supra, 2 Cal.5th at p. 1272.) It explained
that nonvaluation challenges typically involve questions of fact,
and thus the assessment appeal process “would facilitate the
development of a record conducive to judicial review. The parties
also might resolve their disagreement over ownership through
the administrative process. Such an outcome could eliminate the
need to pay the tax under dispute and bring a refund action, and
(commencing with Section 1601) of Part 3 in order to exhaust
administrative remedies.”
17
thereby lessen the burden on the courts.” (Ibid.) Further, the
court said, recognizing an assessment appeal as subsumed within
the exhaustion requirement “also supplies a timeline for the
presentation and resolution of disputes such as this one. There is
a timeframe defined by statute for bringing and resolving an
assessment appeal through administrative channels. (§§ 1603,
subds. (b)–(d), 1604, 1605, subds. (b)–(e).) But no comparable
deadline exists when the nullity exception applies. Where
exhaustion is excused, therefore, the predictable result is stale
claims like the one before the court in this case. The passage of
time can make these claims difficult to adjudicate; it also hinders
counties’ ability to predict and budget for revenue.” (Id. at
pp. 1272–1273.)
Finally, the court noted that as a result of legislative
enactments, the modern assessment appeals process is
significantly more robust than it was when Parr-Richmond was
decided. (Williams, supra, 2 Cal.5th at p. 1280-1281.) The court
explained that in the 1950’s, the assessment appeals process “was
informal and incorporated few features conducive to the
development of a robust record.” (Id. at p. 1280.) In the 1960’s,
however, “the Legislature took substantial steps to make the
assessment appeal process a more effective mechanism for
challenging an assessment, and to improve the ability of a
taxpayer to develop an administrative record that could usefully
inform subsequent judicial proceedings.” (Id. at p. 1281.) Thus,
although the Parr-Richmond court in 1954 may have regarded
the assessment appeals process “as having little value in
advancing the purposes served by the exhaustion rule,” it was
apparent that such proceedings before a county board “can serve
useful purposes today.” (Id. at pp. 1281−1282.)
18
For all of these reasons, the court overruled Parr-Richmond
to the extent that it extended the nullity exception to cases where
the sole basis for invoking the exception was an assertion that a
taxpayer did not own taxable property. (Williams, supra,
2 Cal.5th at p. 1282.) Instead, the court said, “a claim of
nonownership of nonexempt assessed property, by itself, will not
provide a sufficient basis for invoking the nullity exception and
thereby avoiding the assessment appeal process when a taxpayer
seeks a reduction in an assessment on the local roll.” (Id. at
p. 1283.)8
In so holding, the court did not purport to overrule, and
therefore implicitly left intact, the much more limited version of
the nullity exception articulated in its earlier cases, which had
applied the exception where “it is readily ascertainable that the
property or interest lies beyond the county’s legal authority to
tax,” for example because “ ‘the property is tax exempt,
nonexistent, or outside the jurisdiction.’ ” (Williams, supra,
2 Cal.5th at pp. 1278, 1275.) In such cases, Williams said, the
nullity exception may appropriately be invoked because “a
dispute will not squarely implicate the county board’s valuation
expertise, and the other public interests advanced by
exhaustion—including the ability of the government to timely
anticipate and collect revenue—would not be unduly
compromised by allowing a refund action to proceed without prior
8 The court held, however, that because the taxpayer in the
case before it might reasonably have relied on Parr-Richmond to
conclude that it was unnecessary to exhaust administrative
remedies before filing a tax refund action, the court’s holding
would apply prospectively only. (Williams, supra, 2 Cal.5th at
p. 1282.)
19
exhaustion through an assessment appeal.” (Id. at pp. 1278–
1279.)
II.
LA Live’s Challenge to the Escape Assessments
Is Not Reviewable Because LA Live Failed to
Exhaust Its Administrative Remedies
The parties agree that LA Live did not its exhaust its
administrative remedies by filing an application for assessment
reduction with the county board pursuant to section 1603. The
question before us, therefore, is whether LA Live was required to
do so, as the County contends, or was excused from exhausting
administrative remedies because the escape assessments were
null as a matter of law, as LA Live contends.9 For the reasons
that follow, we conclude that LA Live was required to pursue its
administrative remedies before initiating this action, and that its
failure to do so bars consideration of this case on the merits.
As we have described, although Williams did not
completely eliminate the nullity exception in the property tax
context, it significantly limited its application to cases where “it
is readily ascertainable that the property or interest lies beyond
9 Throughout its briefs, LA Live refers to the escape
assessments as “void,” rather than as “null.” The two words are
synonymous (see, e.g., Merriam-Webster Dictionary
[defining
“void” as “of no legal force or effect: null”] [as of Feb. 26, 2021],
archived at https://perma.cc/UQ6C-QBGE); Black’s Law
Dictionary (5th ed. 1979) p. 1411, col. 2 [defining “void” as “[n]ull;
ineffectual; nugatory; having no legal force or binding effect”]);
thus, because California case law refers to assessments as to
which administrative remedies need not be exhausted as “null”
assessments, we will use that nomenclature in this opinion.
20
the county’s legal authority to tax,” for example because “the
property is tax exempt, nonexistent, or outside the jurisdiction.’ ”
(Williams, supra, 2 Cal.5th at pp. 1278, 1275.) Here, it is
undisputed that the parcels at issue are within the County’s
taxing authority: While LA Live challenges the timeliness of the
notices of proposed escape assessments, it does not contend that
the parcels are outside the County’s boundaries, are exempt from
taxation, or do not exist. As such, the present case does not fall
within the narrow nullity exception left intact by Williams.
Moreover, application of the exhaustion rule to the
circumstances present here advances the purposes served by the
exhaustion requirement. The present case turns, in part, on
questions of fact, including when the escape assessments were
enrolled, and whether LA Live’s 2012 and 2013 administrative
appeals addressed any aspect of the escape assessments.
Administrative exhaustion before the county board would have
resolved these issues, thus “facilitat[ing] the development of a
record conducive to judicial review. (See Williams, supra, 5
Cal.5th at p. 1272.) Administrative exhaustion also would have
ensured that LA Live’s claims were litigated within the statutory
timeframe, thus avoiding the present circumstance in which
challenges to a June 2012 assessment were not filed until
September 2016. As Williams noted, “[t]he passage of time can
make these claims difficult to adjudicate; it also hinders counties’
ability to predict and budget for revenue.” (Williams, supra, 5
Cal.5th at p. 1273.) The latter concern is particularly salient
here, where the challenged assessment exceeds six million
dollars.
Notwithstanding the foregoing, LA Live urges that the
escape assessments were legally null, and thus were not subject
21
to administrative exhaustion requirements, because the County
acted in excess of its statutory taxing power when it imposed the
escape assessments. In LA Live’s view, because the County “ ‘is a
creature of limited powers,’ ” its actions necessarily are “ultra
vires [and] void” whenever it fails to strictly comply with
statutory procedures. But in so urging, LA Live makes no
attempt to address the Supreme Court’s analysis in Williams,
where the taxpayer’s claim—that it had been assessed a tax on
property it did not own—plainly asserted a statutory violation.
(See § 405, subd. (a) [“the assessor shall assess all the taxable
property in his county, except state-assessed property, to the
persons owning, claiming, possessing, or controlling it on the lien
date,” italics added].) Because this statutory violation was the
express basis for the taxpayer’s refund claim in Williams, the
Supreme Court necessarily would have found the escape
assessment in Williams to have been null were the nullity
doctrine as broad as LA Live contends. The court’s rejection of
the nullity exception in Williams, therefore, fatally undermines
the extremely broad application of the doctrine LA Live espouses.
We note, moreover, that the legal violation urged in
Williams (assessing a property tax against a nonowner) is more
fundamentally inconsistent with the County’s taxing powers than
is the violation urged in this case—issuing an escape assessment
on five days, rather than on 10 days, notice. Because the
Supreme Court held in Williams that the alleged legal error did
not nullify the assessment, we have no difficulty reaching the
same conclusion here.
None of the cases cited by LA Live compels a different
result. Two of the cases, House v. Los Angeles County (1894)
104 Cal. 73 and Selby v. Oakdale Irr. Dist. (1934) 140 Cal.App.
22171 do not concern the validity of tax assessments: House
addressed an alleged breach of contract, and Selby concerned an
alleged failure to pay amounts due on irrigation bonds. Two
other cases, Ferguson v. Gardner (1927) 86 Cal.App. 421 and
Ryan v. Byram (1935) 4 Cal.2d 596 concluded, contrary to claims
made by the plaintiff taxpayers, that the defendant public
entities were empowered to collect the taxes at issue. (Ferguson,
at pp. 424, 429 [rejecting claim that special property tax was
“null, void, and of no effect”]; Ryan, at p. 610 [“the two levies of
August 31, 1935, . . . are valid”].) And another case, People v.
Coghill (1874) 47 Cal. 361, which was decided nearly 150 years
ago, considered a question entirely different than the one
presented in this case—namely, the legality of an assessment
levied on real property “viewed” by two commissioners, rather
than three.
Just three of the cases cited by LA Live are relevant to the
issues before us in this appeal, and none assists LA Live. In
Westinghouse Elec. Corp. v. County of Los Angeles (1974)
42 Cal.App.3d 32, the plaintiffs, like LA Live here, asserted that
they should be permitted to pursue a court action to recover
property taxes without first pursuing administrative remedies.
The plaintiffs “[did] not contend that the property upon which tax
was assessed [was] tax-exempt, outside the jurisdiction, or
nonexistent,” but instead urged that the assessments were void
because the County’s assessment practices violated the law in
various ways, including by applying a discriminatory assessment
ratio, failing to equalize assessments on business personal
property, and practicing “ ‘systemic fraud.’ ” (Id. at pp. 37, 39.)
The court rejected the plaintiffs’ contention, noting that the
Supreme Court had previously held that administrative
23
exhaustion was excused “ ‘only in those cases wherein the
assessment is totally void as an attempt to tax property not
subject to taxation, rather than merely an inaccurate assessment
of the value of taxable property.’ ” (Id. at p. 38, quoting
Stenocord, supra, 2 Cal.3d at p. 990.) In the case before the
court, the plaintiffs’ claims of illegality “[did] not excuse
appellants from the requirement that they have exhausted their
remedy before the county board of equalization before filing the
lawsuit at bench.” (Westinghouse, at pp. 38–39; see also id. at
pp. 39–43.)
Finally, in Gaumer v. County of Tehama (1967)
247 Cal.App.2d 548 (Gaumer) and Tamco Development Co. v.
County of Del Norte (1968) 260 Cal.App.2d 929 (Tamco), the
courts held taxpayers were excused from exhausting
administrative remedies because they received no notice of the
assessments prior to receiving their tax bills, failures that “made
it impossible for plaintiffs to apply for a hearing or appeal before
the board at the prescribed times.” (Gaumer, at p. 553.)10 In the
10 In Gaumer, taxpayers were given no notice of the increased
assessments before they received their tax bills, a failure that
“made it impossible for plaintiffs to apply for a hearing or appeal
before the board at the prescribed times.” (Gaumer, at p. 553.)
Nonetheless, the taxpayers “did go before the supervisors as soon
as they could and . . . were there denied relief.” (Ibid.) Under
those circumstances, the court said, the litigation was proper.
(Ibid.) Similarly, in Tamco, the county assessor failed to notify
taxpayers of an increased assessment, and thus the taxpayers did
not timely administratively challenge the assessment “because
[they] had no knowledge of the increase from any source.” (Id. at
p. 930.) They nonetheless applied to the board of supervisors for
relief “at their earliest opportunity.” (Id. at p. 935.) On this
24
present case, in contrast, LA Live admittedly received notices of
the proposed escape assessments—and, although the notices
were issued five days later than the statute required, LA Live
received them well within the statutory time to file an application
for assessment reduction. (See § 1603, subd. (a) [application for
reduction “shall be filed within the time period from July 2 to
September 15”].)
LA Live’s citations to various administrative materials
issued by the State Board of Equalization also fail to persuade us
that the County’s assertedly untimely notice of the proposed
escape assessments excused LA Live from exhausting
administrative remedies. At most, the administrative materials
LA Live cites suggest that compliance with section 531.8 is
“mandatory,” and thus that failure to give proper notice renders
an escape assessment “invalid.” But as the County notes, even if
an act required by a public entity is “mandatory” (i.e.,
nondiscretionary), the public entity’s failure to do the act does not
invariably invalidate the government action to which the act
relates. Indeed, our Supreme Court has explained in an
analogous context that there are many procedural rules “that are
not directory[,] but mandatory; these are binding, and parties
must comply with them to avoid a default or other penalty.”
(Kabran v. Sharp Memorial Hospital (2017) 2 Cal.5th 330, 341–
342.) Nonetheless, “ ‘failure to comply does not render the
proceeding void’ in a fundamental sense. . . .” (Ibid., italics
added.) Thus, for example, “a statute of limitations may be
‘mandatory in the sense that the court may not excuse a late
record, the taxpayers were entitled to pursue their action in
court. (Id. at p. 932.)
25
complaint on grounds of mistake, neglect, or the like,’ but ‘it is
not ‘jurisdictional.” ’ ” [Citation.] A properly raised objection to
an untimely complaint may require that the court dismiss it, and
the court’s failure to dismiss is reversible on appeal. But a party
cannot raise the untimeliness for the first time on appeal or in a
collateral attack. If an untimely complaint results in a judgment,
the judgment will not be disturbed on timeliness grounds if the
defendant did not properly preserve a statute of limitations
defense.” (Ibid.)
The principles articulated in Kabran and Williams suggest
that although assessments levied without proper notice may be
vulnerable to reversal through proper administrative channels,
they do not entitle a taxpayer to a reversal if it has not made use
of those channels. LA Live’s failure to exhaust administrative
remedies, therefore, is fatal to its claim.
CONCLUSION
For all of these reasons, the County’s apparent failure to
timely comply with the notice provision of section 531.8 did not
excuse LA Live from challenging the failure through prescribed
administrative channels. The trial court therefore properly
concluded that LA Live had failed to exhaust administrative
remedies and, therefore, declined to review its claims on the
merits.
26
DISPOSITION
The judgment is affirmed. The County is awarded its
appellate costs.
CERTIFIED FOR PUBLICATION
EDMON, P. J.
We concur:
LAVIN, J.
DHANIDINA, J.
27