Filed 1/10/18; Certified for Publication 1/22/18 (order attached)




              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   FOURTH APPELLATE DISTRICT

                                              DIVISION THREE


LAND PARTNERS, LLC et al.,

    Plaintiffs and Appellants,                                      G053664

         v.                                                         (Super. Ct. No. 30-2013-00680074)

COUNTY OF ORANGE,                                                   OPINION

    Defendant and Respondent.



                  Appeal from a postjudgment order of the Superior Court of Orange County,
Peter J. Wilson, Judge. Affirmed.
                  Enterprise Counsel Group, David A. Robinson, James S. Azadian and Cory
L. Webster for Plaintiffs and Appellants.
                  Leon J. Page, County Counsel and Laurie A. Shade, Deputy County
Counsel for Defendant and Respondent.
              In this taxpayer refund action, Land Partners, LLC, and Los Alisos Ranch
Company (collectively, Land Partners) appeal from a postjudgment order denying their
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motion for attorney fees brought pursuant to Revenue and Taxation Code section 5152.
Although the court had found the County of Orange Assessor (Assessor) used a
constitutionally invalid methodology in valuing Land Partners’ property for property tax
purposes, the court determined there was no evidence the Assessor’s actions were due to
his subjective belief that a certain constitutional provision, statute, rule or regulation was
invalid or unconstitutional. Because the court concluded proof of the latter was a
statutory prerequisite to recovery of fees under the statute, it held Land Partners was not
entitled to attorney fees.
              Land Partners contend the court erred in interpreting section 5152. It
asserts proof of the Assessor’s subjective mindset is not required. Instead, it claims
showing a violation of well-established and unambiguous law is sufficient for recovery of
attorney fees. We disagree and affirm the order.



FACTS


              Land Partners owns an approximately 68-acre parcel of land, improved
with a mobile home park, in the City of Westminster. Following a change in ownership
of the property, the Assessor reassessed it for property tax purposes. The Assessor’s
appraisal valued the property at $60,010,000, and Land Partners was sent a property tax
bill based on that valuation.
              Believing the Assessor erred in valuing the property, Land Partners
appealed to the County of Orange Assessment Appeals Board. Following the receipt of

1
             All further statutory references are to the Revenue and Taxation Code
unless otherwise stated.

                                               2
oral and documentary evidence, the appeals board sustained the Assessor’s valuation.
This lawsuit ensued.
              Land Partners’ complaint for a property tax refund alleged the Assessor had
overvalued the property by at least $22 million. It claimed the erroneous valuation was
caused by the Assessor’s incorrect application of the appropriate valuation method, the
income method, which is described in rule 8 of the State Board of Equalization Property
Tax Rules (Cal. Code Regs., tit. 18, § 8) (Rule 8). Among the relief sought was a refund
of excess taxes collected by the County of Orange based on the alleged erroneous
assessment and attorney fees.
              Based on pretrial filings, it became clear to the court the parties agreed the
income method was the proper appraisal method to use in valuing the property and the
fair market value was the proper value standard. They disagreed, however, about the
meaning of “fair market value” in the assessment context, including the types of data to
be used in calculating the value.
              Following a limited trial, during which the court received expert testimony
from both parties concerning the proper application of the income method, the court
concluded, “in material respects[,] the Assessor’s valuation of the properties in question
was arbitrary, in excess of discretion, and/or in violation of the standards prescribed by
law.” Specifically, it found the Assessor failed to recognize and apply directions from
Rule 8 and section 502 of the State Board of Equalization’s Assessors’ handbook,
meaning the “assessment was not in fact based on the economic reality of how the subject
property would be bought and sold.” The court explained this did not meet the
constitutional mandate of “‘achiev[ing] a reasonable estimate of the true value’ of the
property.”
              Among the particular errors the court identified were: (1) there was no
evidence demonstrating the Assessor had considered any market data in calculating
market rent for the mobile home spaces; (2) the Assessor did not use sufficient diligence

                                              3
to determine operating expenses based on market data; (3) there was a complete lack of
evidentiary support for the Assessor’s conclusion a 95 percent occupancy rate could be
achieved within two years; (4) the Assessor erroneously refused to factor all known and
reported damage at the property into his calculation of repair costs; and (5) the calculated
repair costs lacked evidentiary support. It entered judgment accordingly and remanded
the matter to the County of Orange Assessment Appeals Board so the board could hold
further proceedings and receive evidence concerning the identified deficiencies.
              No party appealed the court’s decision on the merits.
              Thereafter, Land Partners sought to recover attorney fees pursuant to
section 5152. The court denied the motion. In doing so, it interpreted the statute as
requiring a showing that the Assessor failed to apply a particular law, rule or regulation
because the Assessor subjectively believed it was unconstitutional or invalid. The court
declined to make such a finding. Land Partners timely appealed after entry of the order
denying its motion for attorney fees.



DISCUSSION


              “A request for an award of attorney fees is entrusted to the trial court’s
discretion and will not be overturned in the absence of a manifest abuse of discretion, a
prejudicial error of law, or necessary findings not supported by substantial evidence.”
(Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 577; see
Serrano v. Stefan Merli Plastering Co., Inc. (2011) 52 Cal.4th 1018, 1025–1026.)
Because the primary issue before us concerns legal entitlement to fees based upon
statutory interpretation, our review is de novo. (Goodman v. Lozano (2010) 47 Cal.4th
1327, 1332.) The court’s factual findings, however, are subject to the substantial



                                             4
evidence standard of review. (Pellegrino v. Robert Half Internat., Inc. (2010) 182
Cal.App.4th 278, 287-288.)
              Though articulated in various ways, Land Partners’ challenge concerns the
type of evidence needed to establish entitlement to attorney fees under section 5152. As
we explain, the interpretation of the statute urged by Land Partners is not supported by
the unambiguous language of the statute or case law. (Kirby v. Immoos Fire Protection,
Inc. (2012) 53 Cal.4th 1244, 1250 [in interpreting statute, “[i]f the statutory language is
clear and unambiguous our inquiry ends”].)
              Section 5152 provides, in relevant part: “In an action in which the recovery
of taxes is allowed by the court, if the court finds that the void assessment or void portion
of the assessment was made in violation of a specific provision of the Constitution of the
State of California, of this division, or of a rule or regulation of the [State Board of
Equalization], and the assessor should have followed the procedures set forth in Section
538 in lieu of making the assessment, the plaintiff shall be entitled to reasonable
attorney’s fees as costs in addition to the other allowable costs.”
              The section 538 procedures referenced in section 5152 concern the steps an
assessor must follow when (a) the assessor believes a property should be assessed in a
manner contrary to a specific state constitutional provision, statute, or rule or regulation,
because of the assessor’s belief the latter is unconstitutional or invalid; or (b) the assessor
“proposes to adopt a general interpretation” of a specific state constitutional provision,
statute, or rule or regulation, that would result in the denial of a property tax exemption to
five or more persons. (§ 538, subd. (a).) Under either of these circumstances, the
assessor may not make the assessment and must instead bring an action for declaratory
relief against the State Board of Equalization. (Ibid.) Following entry of judgment in
such an action, the assessor must levy assessments consistent therewith. (Id., subd. (b).)
              Based on the clear language of these statutes, there are three prerequisites to
obtaining attorney fees under section 5152 in a taxpayer refund action. First, the court

                                               5
must have allowed recovery of taxes. (§ 5152.) Second, the court must have found the
void assessment, or portion thereof, was made in violation of a specific provision of the
state constitution, the property tax statutes, or a State Board of Equalization rule or
regulation. (Ibid.) Third, the court must find the assessor subjectively believed a specific
provision of the state constitution, the property tax statutes, or a State Board of
Equalization rule or regulation was unconstitutional or invalid, and assessed property
contrary thereto, but the assessor failed to bring the requisite declaratory relief action.
(See Mission Housing Development Co. v. City and County of San Francisco (1997) 59
Cal.App.4th 55, 88 [“By its own terms, section 5152 only applies where the assessor
should have utilized the procedures set forth under section 538.”].)
              As for the last of these three elements, the subjective belief of the assessor
may be demonstrated through statements made by the assessor or objective facts which
evidence the assessor’s subjective state of mind. In addition, care must be taken to
distinguish between a situation in which an assessor believes a provision to be
unconstitutional or invalid, and a situation in which an assessor misinterprets or
misapplies a provision. The former would implicate section 5152, whereas the latter
would not.
              The decisions in Prudential Ins. Co. v. City and County of San Francisco
(1987) 191 Cal.App.3d 1142 (Prudential) and Phillips Petroleum Co. v. County of Lake
(1993) 15 Cal.App.4th 180 (Phillips Petroleum), are illustrative.
              In Prudential, the plaintiff purchased a hotel property and, as part of the
transaction, assumed a loan owed by the seller to Bank of America at a below market
rate. (Prudential, supra, 191 Cal.App.3d at p. 1146.) The assessor placed a value on the
hotel based on an inflated purchase price. (Ibid.) In doing so, it erroneously disregarded
a State Board of Equalization rule which required the loan to be discounted to its cash
equivalent. (Id. at pp. 1148-1149.) On appeal, the court upheld an award of attorney fees
under section 5251. (Prudential, at p. 1156.) In doing so, the court looked to the

                                               6
assessor’s testimony to determine his state of mind. (Id. at p. 1159.) Because the
assessor had testified he disagreed with the board’s rule (i.e., he believed it was invalid),
the court concluded section 538’s procedures should have been followed. (Prudential, at
pp. 1159-1160.) With the assessor having failed to follow those procedures, the court
found an attorney fee award under section 5152 was proper. (Prudential, at pp. 1160-
1161.)
              The same analysis was applied, but a different conclusion reached, in
Phillips Petroleum. There, the court upheld the denial of attorney fees under section
5152 because “[t]here [was] no indication in the record that the assessor believed [the
rule at issue] was unconstitutional or invalid.” (Phillips Petroleum, supra, 15
Cal.App.4th at p. 198.) It rejected the notion that section 5152 attorney fees are
implicated any time an assessor fails to apply a statue or regulation because he or she
believes it inapplicable when it is, in fact, applicable. (Phillips Petroleum, at p. 198.) In
addition, it emphasized the importance of a “factual finding by the court, as a prerequisite
to an attorney fee award” (id. at p. 197), that the assessor made a “cognitive decision . . .
a particular provision, rule or regulation [was] unconstitutional or invalid[,] either on its
face or as applied to the circumstances in the case.” (Id. at pp. 197-198.) Because the
record showed the assessor had failed to apply a required rule due to “a misunderstanding
of the law,” and not due to a belief in its invalidity, the court concluded fees were not
available under section 5152. (Phillips Petroleum, at p. 198.)
              Here, the court expressly declined to find the Assessor’s failure to follow
the law was the result of his belief it was invalid or unconstitutional. Instead, it
concluded the Assessor “just applied [the law] wrongly.” As in Phillips Petroleum, this
is not enough to trigger an award of attorney fees under section 5152.
              Land Partners claims the Assessor testified he believed it was improper to
apply a certain rule to the valuation of the property at issue. But the “rule” asserted by
Land Partners is not the specific type of rule contemplated by section 538, subdivision

                                              7
(a). Here is the cited testimony from the pretrial deposition of George Singletary, the
supervisor of the individual who prepared the appraisal for the County of Orange.
               “Question: Is it your understanding that the result in applying the income
method must always reflect the economic reality of how a particular type of property is
actually bought and sold?
               “Answer: No.
               “Question: You do not agree that the result must reflect that economic
reality; is that correct?
               “Answer: No, I don’t agree with that.”
               This deposition testimony was read after Mr. Singletary testified “I don’t
understand your term ‘economic reality.’”
               The testimony cited by Land Partners has little or nothing to do with a
cognitive decision that a specific state constitutional provision, statute, or rule or
regulation was unconstitutional or invalid. (§ 538, subd. (a).) Instead, the testimony was
given in answer to a question which contained a snippet of a quotation from a California
Supreme Court opinion, taken out of context, dealing with the issue whether a rule
adopted by the Board of Equalization for the valuation of petroleum refinery property
was constitutional. (Western States Petroleum Assn. v. Board of Equalization (2013) 57
Cal.4th 401, 408. At issue in the Western States Petroleum case, inter alia, was a
determination of the proper “appraisal unit” for petroleum refinery property under section
51, subdivision (d), which provides: “For purposes of this section, ‘real property’ means
that appraisal unit that persons in the marketplace commonly buy and sell as a unit, or
that is normally valued separately.” In deciding that the Board of Equalization’s new rule
appropriately required the “appraisal unit” for petroleum refinery properties to be the
aggregate value of the land, improvements and fixtures together, not requiring separate
valuations of the land and fixtures, the court noted the definition of “full cash value” for
property tax purposes “contemplates that appraisal of real property will reflect the

                                               8
economic reality of how a particular type of property is actually bought and sold.”
(Western States Petroleum Assn., at pp. 422-423.) Here, the appropriate “appraisal unit”
for Land Partners property was never an issue. Nor was there any controversy over how
mobile home parks are bought and sold. The Supreme Court’s choice of words in
analyzing the issue before it in the Western States Petroleum case is simply not a specific
state constitutional provision, statute, or rule or regulation within the meaning of section
538, subdivision (a). It was merely a recognition by the court that the purchase and sale
of petroleum refinery properties normally include both the fixtures and the land, and the
fact that such sales normally included both fixtures and land was an “economic reality” to
be recognized in conducting an appraisal. Further, Singletary’s testimony cannot
reasonably be read as stating his cognitive decision that a specific state constitutional
provision, statute, or rule or regulation is unconstitutional or invalid. And as the court
noted, this testimony was not that of the appraiser who prepared the disputed appraisal.
Rather, it was testimony of a County of Orange employee who supervised the person who
prepared the appraisal.
              Moving away from the Assessor’s subjective belief, Land Partners urges us
to adopt a rule that would allow recovery of fees under section 5152 anytime an assessor
violates a “well-settled and unambiguous” appraisal rule. Alternatively, it proffers a
“rebuttable presumption” test, under which it would be presumed an assessor’s violation
of a law or rule was due to a belief in its invalidity unless otherwise rebutted. Such
interpretations find no support in the statute’s unambiguous language, or the case law
interpreting it. (Kirby v. Immoos Fire Protection, Inc., supra, 53 Cal.4th at p. 1250
[unambiguous statutory language governs].) Our role is not to rewrite the laws adopted
by the Legislature; we interpret and apply them. (Berry v. American Express Publishing,
Inc. (2007) 147 Cal.App.4th 224, 232.)
              In sum, section 5152 does not apply whenever an assessor merely fails to
apply a statute or regulation. “Sections 5152 and 538 require a cognitive decision on the

                                              9
part of the assessor that a particular provision, rule or regulation is unconstitutional or
invalid either on its face or as applied to the circumstances in the case.” (Phillips
Petroleum, supra, 15 Cal.App.4th at pp. 197-198.) Accordingly, a factual finding by the
court “that the reason the assessor did not apply a particular provision was that he or she
believed it to be unconstitutional or invalid” is a prerequisite to an attorney fee award
under this section. (Id. at p. 197; see Prudential, supra, 191 Cal.App.3d 1159-1160.)
There was no such finding here, making the denial of Land Partners’ request for attorney
fees proper.



DISPOSITION
                                                     2
               The postjudgment order is affirmed. Respondent is entitled to its costs on
appeal.




                                                   IKOLA, J.

WE CONCUR:



O’LEARY, P. J.



ARONSON, J.




2
              The April 3, 2017 request for judicial notice is denied because it presents
information not before the trial court at the time of its decision and thus not relevant to
our review of the trial court’s decision.

                                              10
Filed 1/22/18

                              CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                              FOURTH APPELLATE DISTRICT

                                       DIVISION THREE

LAND PARTNERS, LLC et al.,

    Plaintiffs and Appellants,                        G053664

        v.                                            (Super. Ct. No. 30-2013-00680074)

COUNTY OF ORANGE,                                     ORDER

    Defendant and Respondent.


                  Defendant and respondent and the Los Angeles County Office of the
Assessor have requested that our opinion filed on January 10, 2018, be certified for
publication. It appears that our opinion meets the standards set forth in California Rules
of Court, rule 8.1105(c). The requests are GRANTED.
                  The opinion is ordered published in the Official Reports.



                                                    IKOLA, J.

WE CONCUR:



O’LEARY, P. J.



ARONSON, J.
