Paramount Pictures Corp. v. County of Los Angeles CA2/4 ( 2023 )

Filed 8/30/23 Paramount Pictures Corp. v. County of Los Angeles CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
PARAMOUNT PICTURES B317513
CORPORATION,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No.BC721604)
v.
COUNTY OF LOS ANGELES,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Judge David J. Cowan. Reversed and
Remanded.
Renne Public Law Group, Michael K. Slattery, Thomas
G. Kelch, Ryan McGinley-Stempel; Dawyn R. Harrison,
County Counsel, Peter M. Bollinger, Assistant County
Counsel, and Drew M. Taylor, Deputy County Counsel;
Thomas M. Peterson, for Defendant and Appellant.
McDermott Will & Emery, Charles J. Moll III, Marcy
Jo Mandel, Jason D. Strabo, and Melvin B. Wu, for Plaintiff
and Respondent.
____________________________________________
Respondent Paramount Pictures Corporation
(Paramount) sought a refund of taxes paid on its personal
property for the 2011 tax year. The property was assessed a
final value of $137,397,278.
Paramount first appealed to the Los Angeles County
Assessment Appeals Board (the Board). When property is
assessed, a variety of methodological approaches can be
used. For personal property, the cost approach, which
generally looks at the cost paid for the equipment less
depreciation, is often used. During the appeal before the
Board, Paramount, like the County of Los Angeles Assessor
(the Assessor), used the cost approach to value its personal
property and agreed the Assessor used the correct tables for
calculating basic depreciation. Paramount’s only contention
was that it was entitled to further reduction for obsolescence
beyond that which is included in normal depreciation.
Paramount contended the value of its property under the
cost method was $71,700,000, estimating a total of 48%
obsolescence.
As an alternative method of valuation, Paramount
submitted a significantly lower appraisal using the income
approach, which values property based upon the income it
2
produces. However, Paramount gave this alternate income
approach valuation little weight in its final analysis,
combining it with its cost approach valuation through a
reconciliation process to reach a final value of $69,700,000
for its personal property.
Following a hearing, the Board issued a 19-page
written decision, agreeing with the valuation proposed by
the Assessor and finding Paramount failed to carry its
burden of demonstrating additional obsolescence. In those
findings, the Board also found Paramount’s income approach
valuation too unreliable to grant it any additional weight.
The Board noted the State Board of Equalization (SBE)
guidelines indicate the income approach is extremely
difficult for personal property valuation and found
Paramount failed to isolate the income it made on its
personal property from other components of its business
operations.
Paramount appealed the Board’s decision to the trial
court. Paramount alleged the Board’s decision was “contrary
to law and established appraisal methodologies” and
“unsupported by substantial evidence.” Paramount more
specifically alleged the Board: (1) failed to issue adequate
findings to explain how it arrived at its decision on various
material points; (2) erroneously refused to consider one
version of its income approach valuation; and (3) failed to
adequately make deductions for obsolescence in the
assessment. The trial court bifurcated the first two issues
from the third (deeming the third a factual question subject
3
to substantial evidence review) and proceeded to hold a
bench trial on the legal issues.
After allowing Paramount to present additional
evidence through a new expert witness, the trial court found:
(1) the Board committed a methodological error in excluding
Paramount’s initial income approach valuation and (2) the
Board issued inadequate findings regarding the significance
of Paramount’s pre-lien and post-lien sales of personal
property. The trial court remanded the matter to the Board
for further proceedings. In a separate ruling, the trial court
awarded Paramount attorney fees under Revenue and
Taxation Code1 § 1611.6, which allows a taxpayer to recover
fees for services necessary to obtain proper findings from a
county board. The County timely appealed both orders, and
we consolidated both cases for appeal.
In this appeal, we reverse the trial court’s decision,
concluding the Board committed neither methodological
error nor issued findings that were less than adequate
within the meaning of section 1611.5. First, Paramount did
not challenge the validity of the cost approach relied upon by
the Assessor and Board, and it did not otherwise identify
any legal error in the Board’s rejection of its income
approach valuation. Second, the hearing transcripts, in
conjunction with the Board’s written findings, adequately
disclose its rulings and findings on the pre-lien and post-
1 All further statutory references are to the Revenue and Taxation
Code unless otherwise noted.
4
sales data. In light of our disposition, we also vacate the
court’s attorney fees order. We remand the matter so the
trial court may consider the question of whether substantial
evidence supports the Board’s finding that Paramount failed
to establish additional obsolescence.
BACKGROUND
A. The Framework for Tax Refunds
When a taxpayer seeks to challenge the assessment of
its property, it may petition the Board for a reduction.
“‘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.’”’” (Fisher v. County of Orange (2022) 82
Cal.App.5th 39, 51; accord, William Jefferson & Co., Inc. v.
Orange County Assessment Appeals Bd. No. 2 (2014) 228
Cal.App.4th 1, 10-11.)
Property subject to taxation must be assessed at its full
value, which is defined as its full cash value or fair market
value. (Rev. & Tax. Code, §§ 110, 110.5, 401; Sky River LLC
v. County of Kern (2013) 214 Cal.App.4th 720, 726 (Sky
River).) The determination of fair market value is governed
and guided by two sources. (Torres v. San Francisco
Assessment Appeals Bd. No. 1 (2023) 89 Cal.App.5th 894,
5
899 (Torres).) The first consists of State Board regulations
referred to as the “Property Tax Rules,” which can be found
in the California Code of Regulations, title 18. These
regulations “have the force and effect of law.” (Prudential
Ins. Co. v. City and County of San Francisco (1987) 191
Cal.App.3d 1142, 1152.) The second consists of handbooks
issued by the State Board for use by assessors. (Torres,
supra, at pp. 899-900.) “‘“Although assessors’ handbooks are
not regulations and do not possess the force of law, they …
have been relied upon and accorded great weight in
interpreting valuation questions.”’” (Id. at p. 900; Sky River,
supra, at pp. 735-736.)2
Finally, there are three basic methods for calculating
fair market value: (1) the comparative sales or market data
approach; (2) the reproduction or replacement cost approach
(cost approach); and (3) the income approach. (Torres, supra,
89 Cal.App.5th at p. 900; Sky River, supra, 214 Cal.App.4th
at p. 726.)3 Rule 4 governs the comparative sales approach
2 We take judicial notice of the Assessor’s Handbook and the
SBE’s Guidelines for Substantiating Additional Obsolescence For
Personal Property and Fixtures. Portions of these materials were
submitted by the parties during the administrative and trial court
proceedings and were discussed by the parties and presiding officers.
(County of San Diego v. Assessment Appeals Bd. No 2 (1983) 140
Cal.App.3d 52, 59: Hunt-Wesson Foods, Inc. v. County of Alameda
(1974) 41 Cal.App.3d 163, 180).
3 Although Rule 3 “lists five permissible valuation approaches
(Cal. Code Regs., tit. 18, § 3), one is a variation of the comparative
sales approach and two variations of the cost approach are listed
(Fn. is continued on the next page.)
6
to value. Rule 6 governs the cost approach, and Rule 8
governs the income approach. (Cal. Code Regs., tit. 18, §§ 3,
4, 6, 8; Midstate Theatres, Inc. v. County of Stanislaus (1976)
55 Cal.App.3d 864, 879 (Midstate Theatres) [so noting].)
B. The Property Assessment
Paramount is the owner of personal property and
fixtures (the Property) situated at the Paramount Studios lot
on Marathon Street in the City of Los Angeles. On January
1, 2011, the Assessor valued the Property at $164,769,490
for tax purposes (the Assessment). Paramount then timely
filed an Application for Changed Assessment with the Board.
C. The Assessment Appeal Before the Board
On appeal, the parties agreed the Assessment
erroneously included a double assessment for construction in
progress costs (CIP), and the Assessor revised its valuation
to $137,397,278 after removing the CIP.4 To support the
final valuation, the Assessor utilized the cost approach,
which per property Tax Rule 6, consists of the acquisition
cost of the property, less depreciation according to tables
prepared by the State Board.
separately; therefore, the ‘five methods … in fact reduce themselves to
the same basic three.’” (Torres, supra, 89 Cal.App.5th at p. 900, fn.1.)
4 Paramount objected to the Assessor’s assertion that the double
assessment of CIP was due to Paramount’s misreporting of assets.
7
Paramount also presented a cost approach valuation
and did not dispute the Assessor’s base calculations under
the SBE tables, but argued additional5 reductions should be
made for various forms of “obsolescence.” To prove its case,
Paramount presented evidence in support of factors
identified or referenced in the SBE Handbook entitled,
“Guidelines for Substantiating Additional Obsolescence for
Personal Property and Fixtures.” Paramount estimated 48%
obsolescence, resulting in a fair market value indicator for
the cost approach of $71,700,000.
Paramount also presented a valuation of its property
using the income approach but ultimately gave it little
weight. That is, while Paramount’s income approach
resulted in a valuation that was significantly below its cost
approach ($51,400,000),6 Paramount sought to reconcile the
two approaches for a final combined valuation of
$69,700,000, which was only slightly below its cost approach.
On March 22, 2018, in a written 19-page decision, the
Board accepted the Assessor’s revised value of $137,397,278
and rejected Paramount’s various contentions seeking
further reductions. The Board concluded Paramount “did
5 The Board of Equalization Tables for basic depreciation factor in
a small amount of obsolescence that is included in the tables.
6 As indicated in the Board’s findings, and reflected by the
administrative record, the final income approach submitted by
Paramount reflects a typed total of $51,400,000 on its exhibits, and
Paramount testified to that total at the hearing, but one of the exhibits
in the record has a handwritten correction to a total of $54,000,000.
This difference has no impact on our decision.
8
not prove by a preponderance of the evidence that a
reduction for functional, economic or ‘additional’
obsolescence [was] warranted.”
The Board gave no weight to Paramount’s income
approach, finding this valuation too unreliable for several
reasons, including Paramount’s failure to isolate the income
for its personal property, as required under Rule 8. The
Board observed Paramount’s equipment is offered with
personnel to operate the equipment, but Paramount did not
separate the income streams from these components of its
operation. Paramount also failed to reliably separate its
personal property income from its real property income, and
its expenses were too generalized. The Board observed the
Assessor’s Handbook expressly cautions that the income
approach has limited application to personal property and
fixtures “because it is often extremely difficult to attribute
an income stream directly to individual items of Personal
Property and Fixtures.”
Accordingly, the Board found in favor of the value
recommended by the Assessor.
D. The Trial Court Refund Action
On September 13, 2018, Paramount filed a Verified
Complaint for Refund of Property Taxes against the County
of Los Angeles to obtain a refund of the property taxes it
paid. The Complaint alleged a single cause for refund of
property taxes with numerous supporting allegations.
9
Paramount alleged the Board’s decision was “contrary
to law and established appraisal methodologies” and
“unsupported by substantial evidence” because the Board,
among other things, (1) failed to issue adequate findings to
explain how it arrived at its decision on various material
points; (2) erroneously excluded certain evidence, including
an initial version of Paramount’s income approach valuation;
and (3) failed to account for all obsolescence in the
assessment.
The trial court bifurcated the first two issues from the
third (deeming the third a question of substantial evidence
review) and proceeded to hold a bench trial on the first
phase.
After allowing Paramount to present testimony from a
new expert witness, the trial court concluded: (1) the Board
committed a methodological error in excluding Paramount’s
initial income approach valuation and (2) the Board issued
inadequate findings on two material points: its reasons for
excluding evidence of pre-lien sales, and its reasons for
failing to accord any weight to admitted evidence of post-lien
sales. In light of its conclusions and decision, the court
found it unnecessary to reach the (previously bifurcated)
issue of whether substantial evidence supports the Board’s
determination, and instead remanded the matter to the
Board for further proceedings on the issues identified in its
decision.
In a separate hearing, the trial court considered and
granted Paramount’s motion for attorney fees under section
10
1611.6, in the amount of $233,120.00. The County timely
appealed from both orders, and we consolidated both cases
into the instant appeal.
DISCUSSION
A. Standards of Review and Relevant Legal
Principles
“In reviewing a property tax assessment, the court
must presume the assessor properly performed his or her
duty and that, [consequently], the assessment was both
regularly and correctly made.” (Bret Harte Inn, Inc. v. City
and County of San Francisco (1976) 16 Cal.3d 14, 21;
California Minerals, L.P. v. County of Kern (2007) 152
Cal.App.4th 1016, 1022 (California Minerals); Cal. Code
Regs., tit. 18, § 321.)
When a taxpayer claims a valid valuation method was
erroneously applied, “the court may overturn the assessment
appeals board’s decision only if there is no substantial
evidence in the administrative record to support it.”
(California Minerals, supra, 152 Cal.App.4th at p. 1022.)
However, if the taxpayer challenges the validity of the
valuation method itself, the court is faced with a question of
law subject to independent review. (Id. at p. 1022; Maples v.
Kern County Assessment Appeals Bd. (2002) 103 Cal.App.4th
172, 178 (Maples).) The court must determine “‘whether the
challenged method of valuation is arbitrary, in excess of
discretion, or in violation of the standards prescribed by
law.’” (Ibid.)
11
“In this regard we look not to whether another
approach might also have been valid or yielded a more
precise reflection of the property’s value, but whether the
method chosen was contrary to law. [citations.] ‘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.’” (County of Orange v. Orange County Assessment
Appeals Bd. (1993) 13 Cal.App.4th 524, 530; see also Elk
Hills Power, LLC v. Board of Equalization (2013) 57 Cal.4th
593, 605-606 [“‘When the assessor utilizes an approved
valuation method, his [or her] factual findings and
determinations of value based upon the appropriate
assessment method are presumed to be correct and will be
sustained if supported by substantial evidence’”].)
Finally, Section 1611.5 provides, in pertinent part, that
the Board’s “written findings of fact 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 the method or methods of valuation used in
appraising the property.” The Board’s findings need not
“cover every evidentiary matter,” nor be as thorough as
“formal findings of fact, such was would be prepared by a
court.” (Farr v. County of Nevada (2010) 187 Cal.App.4th
669, 686; McMillan v. American Gen. Fin. Corp. (1976) 60
Cal.App.3d 175, 184.)
12
This court reviews the trial court’s determination of
legal issues, de novo, and any factual findings it makes for
substantial evidence. (People ex rel. Lockyer v. Shamrock
Foods Co. (2000) 24 Cal.4th 415, 432; Benninghoff v.
Superior Court (2006) 136 Cal.App.4th 61, 66.) In light of
the issues on appeal, our review is de novo.
B. The Board Used a Reasonable Valuation Method
1. Paramount Does Not Challenge The Valuation
Method Used To Value Its Property
According to the Assessor’s Handbook, Section 504,
“The cost approach . . . . is the method of valuation used
most frequently to value personal property and business
fixtures for assessment purposes because it lends itself to
mass appraisal and is employed based on information
provided on yearly property statements.” (Assessor’s
Handbook, supra, Assessment of Personal Property &
Fixtures (Oct. 2002) p. 50, italics added.)7
Under Property Tax Rule 6(e): “Reproduction or
replacement cost shall be reduced by the amount that such
cost is estimated to exceed the current value of the
reproducible property by reason of physical deterioration,
misplacement, over or under improvement, and other forms
7 Mass appraisal is “‘the process of valuing a universe of
properties as of a given date utilizing standard methodology,
employing common data, and allowing for statistical testing.’”
(Assessor’s Handbook, supra, p. 50, fn. 110.)
13
of depreciation or obsolescence.” (Cal. Code Regs., tit. 18,
§ 6, subdivision (e).)
Section 504 identifies the various types of depreciation
as (1) physical depreciation (“wear and tear”); (2) functional
obsolescence (“the loss of value in a property caused by the
design of the property itself”); and (3) external or economic
obsolescence (“loss in value resulting from adverse factors
external to the property that decrease the desirability of the
property”). (Assessor’s Handbook, supra, at pp. 70-71.)
As previously indicated, Paramount agreed with the
Assessor’s base cost valuation of its personal property,
including the depreciation calculated under the SBE tables
but contended an additional reduction for obsolescence was
warranted and relied on various measures of obsolescence
identified under the cost approach method. (See Torres,
supra, 89 Cal.App.5th at pp. 901-902 [discussing functional
obsolescence as part of cost approach]; Dreyer’s Grand Ice
Cream, Inc. v. County of Kern (2013) 218 Cal.App.4th 828,
837-838 [discussing external or economic obsolescence as
part of cost approach].)
Although the parties agreed upon the use of the cost
approach, the trial court nevertheless found methodological
error, as a matter of law, based on the Board’s rejection of
Paramount’s income approach. This was incorrect for the
reasons we discuss below.
First, the cases cited by the trial court in support of its
decision all involve challenges to the methodology (or the
legality of its underlying assumptions) used by an appraiser
14
or appeals board to reach its final valuation. (See Bret Harte
Inn v. County of San Francisco, supra, at pp. 23-26
[methodology based solely upon the original acquisition cost
of personal property, with an “arbitrary,” across-the-board,
50% deduction for depreciation, was unreasonable]; GTE
Sprint Communications Corp. v. County of Alameda (1994)
26 Cal.App.4th 992, 999-1001, 1007 [methodology under
which the full value of non-taxable intangible assets was
subsumed, as a matter of law, in the value of tangible assets
was improper]; County of Stanislaus v. Assessment Appeals
Bd. (1989) 213 Cal.App.3d 1445, 1450 [County’s challenge to
Board’s assumption that franchise rights were non-taxable,
as underlying premise in its assessment of taxpayer’s real
and personal property, presented a question of law].)
Here, Paramount did not challenge the “chosen
method” of the Assessor or the Board, nor did it identify any
legal error underlying that approach. (See Hunt-Wesson
Foods, Inc. v. County of Alameda, supra, 41 Cal.App.3d at
p. 179 [observing taxpayer had not directed the court to “any
authority which indicates the particular method used by the
assessor in the case at bench was contrary to law or was at
variance with any standards prescribed by the Legislature”],
italics added.) Paramount’s position resembles that of the
plaintiff in Dreyer’s Grand Ice Cream, Inc. v. County of Kern,
supra, 218 Cal.App.4th 828. In that case, the parties agreed
that the cost approach was the appropriate method to value
plaintiff’s personal property and equipment, and plaintiff did
not dispute the assessor’s adjustment for ordinary
15
depreciation, but it sought an additional reduction for
obsolescence. (Id. at p. 837.) After the tax board decided
against it, plaintiff claimed the board used an incomplete
valuation method by omitting a reduction for
underutilization, a form of obsolescence, as required under
Property Tax rules. (Id. at p. 837.) The appellate court
(affirming the trial court) disagreed: “The board found that
the assessor carefully considered making the adjustment,
but determined it was not warranted. Thus, the issue before
the trial court was not one of law: Whether the cost method
of valuation mandated making an underutilization
adjustment in an appropriate case. Rather, the issue was
one of fact: Whether, on the evidence presented, the board
could conclude that plaintiff failed to satisfy its burden of
proving an underutilization adjustment was appropriate,”
and the issue of fact was subject to the substantial evidence
standard of review. (Id. at p. 838.)
Similarly here, the parties agreed that the cost
approach was the appropriate method to value Paramount’s
personal property and that the cost approach provided for
adjustments for obsolescence. Paramount made various
arguments as to why an obsolescence adjustment should be
made, but the Board found Paramount did not meet its
burden of proof. This is not an issue of law. Paramount
challenges the way in which the cost method was applied,
and the results reached, which is subject to the substantial
evidence standard of review.
16
2. The Failure to Adopt - or Include - An Alternate
Valuation Proffered by the Taxpayer, Is Not
Methodological Error
Second, and relatedly, Paramount not only presented
the income approach as an alternative valuation method, but
as a secondary valuation, giving it little weight in its final
mixed valuation. However, the failure to adopt a valuation
method preferred by a taxpayer, even if valid, is generally a
matter within the Board’s discretion. (Dressler v. County of
Alpine (1976) 64 Cal.App.3d 557, 571 [noting that of the
valuation approaches enumerated in the State Board rules,
“assessors have discretion to select the one or several
appropriate to the particular property”]; Chevron USA, Inc.
v. County of Kern (2014) 230 Cal.App.4th 1315, 1333
[method of valuation used is within sole discretion of Board,
and Board may even consider “practical reasons” in adopting
a particular valuation method]; Trailer Train Co. v. State
Bd. of Equalization (1986) 180 Cal.App.3d 565, 581-583
[Board’s selection of particular method of valuation,
including choice of combining methods, rests in Board’s
discretion]; County of Orange v Orange County Assessment
Appeals Bd., supra, 13 Cal.App.4th at p. 530 [noting on
review of tax board decision, courts “look not to whether
another approach might also have been valid or yielded a
more precise reflection of the property’s value, but whether
the method chosen was contrary to law”], italics added.)
Further, in its trial brief below, Paramount suggested
the income approach was an “approved valuation method”
17
for measuring obsolescence and cited to the SBE Guidelines
for Measuring Additional Obsolescence in support of this
suggestion. However, the SBE Obsolescence Guidelines
state clearly at the outset, “These Guidelines focus on
quantifying additional obsolescence of personal property and
fixtures when using the cost approach,” and then refer to the
Assessor’s Handbook Section 504 for any discussion of the
income, or comparable sales, approaches. (Guidelines,
supra, at p. 3, italics added.) This introductory statement in
the Guidelines also makes clear that the three major value
approaches (income, comparable sales, and cost) should
generally be “carried out independently” of one another and
“completed on the basis of market data supporting that
approach.” (Guidelines, at p. 3, italics added.) 8 Here,
Paramount disregarded this instruction, mixing and
matching approaches, using the income approach to justify
an obsolescence adjustment to an assessment done using the
cost approach. (See Section A, subsection 3, and Section C,
post.)9
8 In its responding brief, Paramount appears to recognize this
point, stating “if both an income approach and a cost approach are
used, they are still two different approaches even if they reach the
same value.”
9 Paramount’s Appraiser testified that because the income
approach valuation came out far lower than the cost approach
valuation, it indicates that there is substantial obsolescence “that
needs to be applied in the cost approach. There’s another check on it.”
18
3. The Board’s Reasons for Rejecting Paramount’s
Income Approach Valuation Were Consistent With
Applicable Rules and Regulations
Third, the Board’s reasons for rejecting Paramount’s
Income Approach valuation were consistent with the rules
and regulations on the issue. (Cf. Next Century Associates,
LLC v. County of Los Angeles (2018) 29 Cal.App.5th 713, 722
(Next Century) [whether Board followed applicable legal
standards is a matter of law subject to judicial correction].)
As noted in the Board’s written findings, the Assessor’s
Handbook recognizes that “the income approach has limited
application to personal property and fixtures because it is
often extremely difficult to attribute an income stream
directly to individual items of personal property and
fixtures.” The same page from the Assessor’s handbook
indicates that it nevertheless is sometimes possible to use
the income approach to “estimate personal property as a
residual amount. For example, the value of an entire
manufacturing plant can be estimated using the income
approach, with the value of the constituent personal
property then estimated as a residual by subtracting out the
(presumably) known values of any real property and other
assets. (Assessor’s Handbook, supra, at p. 85, italics added.)
In its initial presentation of the income approach,
Paramount submitted an income appraisal assigning a value
to its real property of approximately $90,400,000 and
$50,900,000 to personal property, and no value to intangible
property. The appraisal stated the conclusion was “based on
19
an analysis of the relative earning of the three asset
classes.”10
After Paramount’s appraiser testified to a real property
value of $90,400,000, the Assessor objected, noting
Paramount had, at the outset of the hearing, withdrawn its
appeal from the enrolled value of its real property, which
was about $271,000,000. In other words, Paramount was
neither appealing the assessment of its real property as
being worth $271,000,000 nor was it seeking a refund for
any taxes that it paid based on that assessment, yet it was
now claiming the real property was worth one-third that
amount. The Assessor noted there is a presumption the
enrolled value is correct and that Paramount’s assumed
valuation of its real property was “so way off” from that
enrolled value that it should not be permitted as a reference
point in its income analysis. Paramount responded it was
“not challenging the roll value of the real property” or asking
the Board “to make any determination on the real property”
and that it “did not want to get into real property issues at
10 The Board periodically closed the proceedings to accommodate
Paramount’s request to keep some of its financial information
confidential. In the trial court, the parties stipulated they would
discuss appraisal values, but not specific income or expense
information. The parties, however, also submitted exhibits containing
several portions of the confidential hearing transcripts as reflective of
the Board’s reasoning or the parties’ positions on certain points. To
the extent we reference any facts from confidential portions of the
Board hearing, we do so for similar reasons. (Sager v. County of Yuba
(2007) 156 Cal.App.4th 1049, 1051.)
20
all” but was simply using the real property number as part
of its allocation for the income approach.
The Board sustained the Assessor’s objection and told
Paramount it could either proceed with its cost approach or
present its income approach “without any reference to the
value of real property.” Paramount chose the latter option
and later in the proceedings resubmitted its income
approach. The revised income approach valued Paramount’s
personal property at approximately $51,400,000 (with a
subsequent handwritten notation to $54,000,000). When the
Assessor examined Paramount’s expert on how he extracted
the income for the personal property, he stated he allocated
revenue for a few categories to personal property, then as to
others, “[w]e sat down with Paramount, I think Paramount
had four or five different employees in the room, and we
went through line item by line item and discussed what it
was and how it should be apportioned.”11
In its written findings, the Board found Paramount
could not isolate the income attributable to its personal
property, as required by Rule 8, noting Paramount’s lot
“offers equipment and its personnel to operate the
equipment, and thus the income and expenses would need to
be segregated within the overall different components of the
11 In presenting the revised income approach, Paramount’s
appraiser testified his final valuation of personal property in both the
original and revised income approach were “very close” and “very
similar” and thus he made no change in his final reconciled/combined
total valuation of Paramount’s cost & income methods.
21
overall operation.” The Board further found that Paramount
had failed to “accurately segregate the income streams” for
its personal property from its real property assets. The
Board accordingly found Paramount’s income approach “was
not a credible method” to value its personal property.
The Board did not act contrary to the law in rejecting
Paramount’s income approach valuation using a property
value that was one-third the enrolled value. (Chevron USA,
Inc. v. County of Kern, supra, 230 Cal.App.4th at p. 1333
[failure to present independent evidence to Board
challenging value or correctness of assessment forfeits
subsequent challenge to that value in trial court]; see also
Mission Housing Development Co. v. City & County of San
Francisco (1997) 59 Cal.App.4th 55, 85-86 [assessor’s
selection of method not arbitrary where he had “significant
concerns” regarding reliability of taxpayer’s data].)
Moreover, Paramount’s revised income approach
valuation, like the first, was flawed in that it failed to
reliably isolate the income attributable to personal property.
The fact that Paramount itself gave very little weight to its
income approach in its final analysis (both before and after
revision) is indicative, if not corroborative, of the Board’s
decision. (See Assessor’s Handbook, supra, at p. 85 [noting
challenges in verifying income are attributable to personal
property because personal property “is significantly
influenced by business activity, personal services, sales or
services directly related to the rented property . . . or other
non-property factors”]; Georgia-Pacific Corp. v. County of
22
Butte (1974) 37 Cal.App.3d 461, 470 [discussing limitations
of income approach]; cf. Next Century, supra, 29 Cal.App.5th
at p. 723 [“the Board has the power to disregard a valuation
analysis it determines for good reason is unpersuasive, and
to reject expert testimony that is speculative, unsupported,
or otherwise unpersuasive”].)
In short, there was no showing that a provision of law
was violated by the Board’s rejection of Paramount’s income
approach valuation.
C. The Board’s Findings Were Adequate and
Complied with Section 1611.5
The trial court concluded the Board failed to issue
adequate findings on why it found Paramount’s “comparable
sales” data did not support a further reduction for
obsolescence. In so concluding, the trial court identified two
pieces of evidence: (1) Paramount’s pre-lien data, which the
court recognized was excluded by the Board; and (2)
Paramount’s post-lien data, which was admitted by the
Board but not expressly addressed in its written findings.
The trial court concluded the Board failed to explain why it
either excluded these items or found them unworthy of
weight.12 As explained below, the administrative record
discloses adequate findings on these issues.
12 Although the trial court’s order initially states the findings were
inadequate only as to post-lien sales (in light of the Board’s exclusion
of the pre-lien sales), the trial court’s order subsequently suggests the
Board’s failure to consider or discuss both types of sales in its written
(Fn. is continued on the next page.)
23
1. Board’s Rulings and Findings
We first note that in discussing the adequacy of the
Board’s findings on the two pieces of evidence at issue here,
the trial court characterized the evidence as data involving
“comparable sales,” and Paramount argued in briefing before
the trial court that “comparable sales” “are a strong
indicator of the fair value of property.”
As a preliminary matter, it is undisputed that
Paramount utilized the cost approach, relied minimally on
the income approach, but placed no reliance on the
comparable sales approach to conduct the assessment.
Indeed, in its final reconciliation page, Paramount expressly
stated the comparable sales approach was not used because
“it could not be fully developed.” In its case before the
Board, Paramount stated, “[t]here is an income approach
and there is a cost approach. The Assessor has done a cost
approach, solely a cost approach, but there is no comparable
sales.”
However, in its rebuttal case before the Board,
Paramount sought to present a chart listing several sales of
its equipment that took place prior to the January 1, 2011,
lien date at issue, i.e., before the date the assessor valued its
personal property on the lot, as evidence that property
suffered from obsolescence. The Assessor objected, noting
Paramount had not relied on this information in its case-in-
decision was prejudicial error. We set out the Board’s rulings on both
types of sales.
24
chief and the County had not discussed it in its rebuttal
case. After Paramount’s appraiser conceded he had neither
discussed it in his appraisal nor sought to provide this
information to the County in its exchange (discovery)
materials, the Board stated, “[W]e can’t accept it” and
sustained the objection.
The County also separately objected to evidence
(contained in Exhibit X) listing five sales of Paramount’s
equipment after the January 1, 2011, lien date. The County
pointed out these sales (from 2013 and 2014) were beyond
the 90-day rule,13 and there was no information regarding
the circumstances of the sales, including the condition of the
property.14
The Board noted because these sales were of items that
were actually on the tax roll at the time of the assessment in
this case, the “90 day rule doesn’t apply.” However, the
Board understood the Assessor’s objection as one of
“relevance” given the sales were two or three years after the
lien date in this case. The Board allowed evidence of the
sales but made clear it would be given only the weight it
deserved. Paramount’s appraiser subsequently testified he
13 Section 402.5 sets out various requirements for “valuing
property by comparison with sales of other properties” including that
any comparable sale is near in time and “[no] more than 90 days after
the lien date.” (§ 402.5; Mission Housing Development Co. v. City &
County of San Francisco, supra, 59 Cal.App.4th at pp. 84-85)
14 Paramount’s appraiser acknowledged he could not ascertain the
condition of the property at the time of sale.
25
did not use the post-lien sales to conclude “this is the value”
of the subject property, but rather as a way to “confirm” his
previous finding that there was obsolescence affecting the
property.
In its 19-page written findings, the Board noted
Paramount submitted evidence of its post-lien date sales of
its equipment in its procedural background, but it did not
separately discuss this evidence in its “findings and decision”
section. The Board, however, concluded Paramount “did not
prove by a preponderance of the evidence that a reduction
for functional, economic or ‘additional obsolescence’ is
warranted.”
2. Analysis
As previously indicated, Section 1611.5 provides, in
pertinent part, that the Board’s “written findings of fact
shall fairly disclose the board’s determination of all material
points raised by the party in his or her petition” but the
findings need not “cover every evidentiary matter.” (Farr v.
County of Nevada, supra, 187 Cal.App.4th at p. 685;
McMillan v. American Gen. Fin. Corp., supra, 60 Cal.App.3d
at p. 184.) Rather, the findings need only “‘enable the
reviewing court to trace and examine the agency’s mode of
analysis.’” (Midstate Theatres, supra, 55 Cal.App.3d 864,
888; see also Topanga Assn. for a Scenic Community v.
County of Los Angeles (1974) 11 Cal.3d 506, 515-516.)
California courts have consistently recognized that in
reviewing administrative findings, a court is not limited to
26
the four corners of the findings themselves and may
supplement these findings with relevant references or oral
statements on the record. (See County of Amador v. State
Bd. of Equalization (1966) 240 Cal.App.2d 205, 219; Harris
v. City of Costa Mesa (1994) 25 Cal.App.4th 963, 971.)
Here, the Board’s rulings and statements during the
hearing demonstrate why it excluded pre-lien sales evidence,
and that Paramount’s evidence of sales made years after the
lien date was, at best, deemed marginally relevant. Given
this, the Board’s failure to expressly analyze the post-lien
sales in its written findings is unremarkable, while its
ultimate conclusion that Paramount failed to establish its
case of “functional, economic, or ‘additional’ obsolescence” by
a preponderance of the evidence fairly subsumes the issue.
(Midstate Theatres, supra, 55 Cal.App.3d at p. 888.)
D. Attorney Fees Order
The trial court awarded Paramount all of its attorney
fees relating to its tax refund action pursuant to section
1611.6, which awards a taxpayer his or her attorney fees
where findings made by a tax board are so deficient “that a
remand to the county board is ordered to secure reasonable
compliance with the elements of findings required by Section
1611.5.” (§ 1611.6)
In light of our disposition, this order is vacated.
27
DISPOSITION
The judgment of the trial court is reversed, and the
matter is remanded for the court to reach the (previously
bifurcated) issue of whether substantial evidence supports
the Board’s finding that respondent failed to establish a
reduction for obsolescence was warranted. In light of our
disposition, the trial court’s award of attorney fees to
respondent is vacated.
The County is awarded its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
MORI, J.
We concur:
COLLINS, Acting P. J.
ZUKIN, J.
28