Filed 6/18/20
                     CERTIFIED FOR PUBLICATION

       IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                       FIRST APPELLATE DISTRICT

                              DIVISION THREE


731 MARKET STREET
OWNER, LLC,
       Plaintiff and Respondent,             A154369
v.
CITY AND COUNTY OF SAN                       (City & County of San Francisco
FRANCISCO,                                   Super. Ct. No. CGC-16-553010)
       Defendant and Appellant.


       In 2009, 731 Market Street Owner, LLC (731 Market) leased the
ground floor of its commercial building to Garfield Beach CVS, L.L.C. (CVS)
for a term of 45 years. Once the lease was recorded with the City and County
of San Francisco (San Francisco), a “Real Property Transfer Tax” was paid
pursuant to section 1101 et seq. of the San Francisco Business and Tax
Regulations Code (ordinance), based on the value of the stream of rental
payments due over the lease’s life.
       In 2015, 731 Market sold the building, which included the lease with
CVS. All terms of the original lease remained unchanged; CVS remained the
lessee, continued to possess the ground floor unit of the building, and still
had a remaining term of more than 35 years. 731 Market paid a
documentary transfer tax, then unsuccessfully sought a refund of the amount
of tax it paid based on the value of the remaining stream of payments due
over CVS’s lease.


                                        1
      The issue presented in this appeal is whether, as a matter of law, San
Francisco can impose a transfer tax on an existing leasehold interest with a
remaining term of over 35 years following the sale and transfer of the overall
property. This question turns on whether such a transaction constitutes
“realty sold” within the meaning of the ordinance. (S.F. Bus. & Tax Regs.
Code, § 1102.)
      Following a bench trial on 731 Market’s action for a partial refund of
the transfer tax amount it paid to San Francisco and for declaratory relief,
the trial court concluded that the 2015 transaction did not trigger the tax as
to the leasehold interest because the transaction did not result in any “realty
sold” under the ordinance, and, therefore, San Francisco impermissibly
collected a “double tax” on the property. San Francisco challenges that ruling
on appeal. Having independently construed the ordinance, we agree with the
trial court’s interpretation and affirm.
                               BACKGROUND
      We take our factual summary from the stipulated facts at trial. In
2009, 731 Market, the owner of a commercial building, leased part of the
building to CVS for 20 years, plus five successive options to extend the lease
for additional five-year periods, for a total term of 45 years. When a
memorandum of the lease was recorded in 2011, a transfer tax was paid
under the ordinance.
      In 2015, 731 Market sold and transferred the property to Jamestown
Premier 731 Market, L.P. However, CVS maintained the existing lease with
a remaining term of over 35 years and continued to possess the ground floor
unit of the building. Thus, other than substituting the new building owner as
lessor, there was no transfer of CVS’s interests under the original lease. In
connection with the sale, 731 Market paid San Francisco a transfer tax (S.F.



                                           2
Bus. & Tax Regs. Code, § 1101 et seq.) in the amount of over $1.6 million.
Part of that amount included the then-present value of 731 Market’s
anticipated 41-year stream of rent payments due over the lease’s life.1
731 Market submitted a claim to San Francisco for a refund of the amount
attributable to the leasehold interest. San Francisco denied the claim.
      731 Market filed a complaint against San Francisco for declaratory
relief and for a partial refund of the transfer tax it paid. The trial court held
a bench trial based on the parties’ trial briefs and stipulated statement of
facts and admission of trial exhibits.
      In its trial brief, 731 Market argued the transfer tax it paid in 2015
should not have included an amount attributable to the lease payments.
731 Market noted the ordinance contains language substantially identical to
that in California’s documentary transfer tax statute (Rev. & Tax. Code,
§ 11911, subd. (a)).2 731 Market also explained that, under the ordinance,
“ ‘the determination of what constitutes “realty” shall be determined by the
definition or scope of that term under state law.’ ” (S.F. Bus. & Tax Regs.
Code, § 1114.) Thus, 731 Market relied on section 11911 and cases
interpreting it to construe the phrase “realty sold” in the ordinance.
731 Market asserted that under those authorities, the 2015 transaction did
not result in a transfer of the lease in question, which had a remaining term
of over 35 years. 731 Market further explained that CVS, not the new
landlord, should be treated as the primary “ ‘owner’ ” of the leasehold interest

      1 Section 1115.2 of the San Francisco Business and Tax Regulations
Code provides that if a tax becomes delinquent, the taxpayer must pay a
penalty of 25 percent of the amount of tax due. Thus, taxpayers typically pay
the full tax amount and seek a refund afterward.
      2All further statutory references are to the Revenue and Taxation Code
unless otherwise specified. We refer to California’s documentary transfer tax
statute as “section 11911.”


                                         3
for taxation purposes because CVS’s interest was “substantially equivalent
to” holding an estate in fee simple. 731 Market argued there was no “ ‘realty
sold’ ” as to CVS’s lease and therefore no taxable event.
      San Francisco disagreed with 731 Market’s interpretation. It argued it
could tax both the 2015 sale of 731 Market’s ownership of the underlying
property and the transfer of 731 Market’s interests in CVS’s lease to a new
landlord. According to San Francisco, both of those property interests
constituted “ ‘realty sold’ ” and were separately taxable under the ordinance.
San Francisco also argued section 11911 and the cases interpreting it were
inapplicable.
      The trial court issued a statement of decision. It agreed with
731 Market’s interpretation of the ordinance and concluded that because
“nothing was ‘sold’ ” as to the existing lease, “no taxable event occurred in
2015 . . . .” The court therefore declared “San Francisco is not and was not
entitled to impose a documentary transfer tax on the then-current value of
the anticipated income stream from the long-term CVS lease” as of the 2015
sale and “that a refund is thus due . . . for the transfer tax paid on that
value . . . .” It awarded 731 Market a refund for $286,922. The court entered
judgment in favor of 731 Market.
                                 DISCUSSION
I.    Relevant Statutes and Standard of Review
      The ordinance authorizes San Francisco to impose a documentary
transfer tax, which is “ ‘the fee paid in connection with the recordation of
deeds or other documents evidencing transfers of ownership of real
property.’ ” (Brown v. County of Los Angeles (1999) 72 Cal.App.4th 665, 668.)
The ordinance states: “There is hereby imposed on each deed, instrument or
writing by which any lands, tenements, or other realty sold within the City



                                        4
and County of San Francisco shall be granted, assigned, transferred or
otherwise conveyed to, or vested in, the purchaser or purchasers, or any other
person or persons, by his or her or their direction, when the consideration or
value of the interest or property conveyed (not excluding the value of any lien
or encumbrances remaining thereon at the time of sale) (a) exceeds $100 but
is less than or equal to $250,000, a tax at [specified rates].” (S.F. Bus. & Tax
Regs. Code, § 1102.)
      This ordinance, known as the Real Property Transfer Tax Ordinance,
“is adopted pursuant to the authority contained in Part 6.7 (commencing with
Section 11901) of Division 2 of the Revenue and Taxation Code of the State of
California” (Documentary Transfer Tax Act). (S.F. Bus. & Tax Regs. Code,
§ 1101.)
      Section 11911 also authorizes a county the right to impose a
documentary transfer tax. (§ 11911, subd. (a).) Section 11911 contains
language substantially identical to that in the ordinance: “The board of
supervisors of any county or city and county, by an ordinance adopted
pursuant to this part, may impose, on each deed, instrument, or writing by
which any lands, tenements, or other realty sold within the county shall be
granted, assigned, transferred, or otherwise conveyed to, or vested in, the
purchaser or purchasers, or any other person or persons, by his or their
direction, when the consideration or value of the interest or property
conveyed (exclusive of the value of any lien or encumbrance remaining
thereon at the time of sale) exceeds one hundred dollars ($100) a tax at [a
specified rate].” (§ 11911, subd. (a).)
      The parties do not dispute any material facts but disagree on whether
the phrase “realty sold” in the ordinance includes the existing leasehold
interest of CVS at the time of the 2015 sale. This is a matter of statutory



                                          5
interpretation, which we review de novo. (McMillin-BCED/Miramar Ranch
North v. County of San Diego (1995) 31 Cal.App.4th 545, 553.)
      As with any statute, “our primary task is to ‘ascertain the intent of the
Legislature so as to effectuate the purpose of the law.’ [Citation.] The
Legislature’s language is the best indicator of its intent. [Citation.] The
words of the statute ‘must be construed in context, keeping in mind the
statutory purpose, and statutes or statutory sections relating to the same
subject must, to the extent possible, be harmonized.’ [Citation.] As to tax
statutes, courts ‘may not extend their provisions, by implication, beyond the
clear import of the language used,’ and a statute whose language is unclear
should be construed to favor the taxpayer. [Citation.]” (926 North Ardmore
Ave., LLC v. County of Los Angeles (2017) 3 Cal.5th 319, 328 (926 North
Ardmore).)
II.   The Trial Court Correctly Concluded 731 Market Was Entitled
      to a Partial Refund of the Documentary Transfer Tax It Paid
      San Francisco contends the trial court misinterpreted the term “realty
sold” in the ordinance as excluding the 2015 transfer of 731 Market’s
leasehold interest. We disagree.
      A. Applicable Law
      The ordinance does not define “realty sold” but states that “for the
purposes of this ordinance, the determination of what constitutes ‘realty’
shall be determined by the definition or scope of that term under state law.”
(S.F. Bus. & Tax Regs. Code, § 1114, subd. (a).) Because the ordinance was
adopted pursuant to authority in Revenue and Taxation Code section 11911
(S.F. Bus. & Tax Regs. Code, § 1101) and employs provisions nearly identical
to Revenue and Taxation Code section 11911 (S.F. Bus. & Tax Regs. Code,
§ 1101), we conclude the “state law” that guides our construction of the
ordinance is Revenue and Taxation Code section 11911 and cases


                                       6
interpreting it. (See Dieckmann v. Superior Court (1985) 175 Cal.App.3d 345,
356 [“Where the same term or phrase is used in a similar manner in two
related statutes concerning the same subject, the same meaning should be
attributed to the term in both statutes unless countervailing indications
require otherwise”].) Thus, we can attribute the same meaning of “realty
sold” under Revenue and Taxation Code section 11911 to that same phrase in
the ordinance.
      We turn to several instructive decisions that have interpreted the term
“realty sold” in section 11911. In particular, both Thrifty Corp. v. County of
Los Angeles (1989) 210 Cal.App.3d 881 (Thrifty) and McDonald’s Corp. v.
Board of Supervisors (1998) 63 Cal.App.4th 612 (McDonald’s) stand for the
proposition that because “realty sold” is sufficiently similar to the phrase
“change in ownership” contained in the same code and governing the
analogous subject of reassessing property for property tax purposes (see
§§ 60, 61 & 62), courts can look to the definitions of “change in ownership” set
forth in the property tax provisions to determine whether a particular type of
transaction qualifies as “realty sold.”
      Specifically, in Thrifty, supra, 210 Cal.App.3d 881, Thrifty Corporation
(Thrifty) filed an action for refund of a documentary transfer tax and for
declaratory relief due to a county’s and city’s insistence that it pay a
documentary transfer tax growing out of Thrifty’s having leased a parcel of
property for 20 years with an option to renew for an additional 10 years. (Id.
at p. 883.) The trial court concluded the tax did not apply to the lease. (Ibid.)
The court of appeal affirmed. (Id. at pp. 883–884, 886.)
      The court first looked to Revenue and Taxation Code section 11911’s
legislative history and explained that “[b]ecause section 11911 was patterned
after the [Federal Stamp Act, former 26 U.S.C. §§ 4361, 4363] and employs



                                          7
virtually identical language as that act, we must infer that the Legislature
intended to perpetuate the federal administrative interpretations of that
federal act.” (Thrifty, supra, 210 Cal.App.3d at p. 884.) The regulations
interpreting the former federal act provided that “ ‘[o]rdinary leases of real
property for a definite term of years’ ” were generally not subject to a transfer
tax. (Id. at pp. 884–885.) However, the regulations explained that leases
“ ‘enduring for a fixed period of years but which, either by reason of the
length of the term or the grant of a right to extend the term by renewal or
otherwise, consist of a bundle of rights approximating’ . . . an interest such as
an estate in fee simple” were subject to the tax. (Ibid.) The court therefore
held that leases “of sufficient longevity . . . to approximate an ‘ “ownership”
right rather than a mere “temporary right of possession” ’ ” were taxable. (Id.
at pp. 883–884, 885.)
      To determine whether the lease in Thrifty was “of sufficient longevity,”
the court turned to section 61, which defines a “ ‘change in ownership’ ” for
property tax purposes to include “ ‘[t]he creation of a leasehold interest in
taxable real property for a term of 35 years or more (including renewal
options), . . .’ ” (Thrifty, supra, 210 Cal.App.3d at p. 885.)3 The court held,
“While the Document[ary] Transfer Tax Act does not define ‘realty sold’ that
phrase is sufficiently similar to the phrase ‘change in ownership’ contained in
the same code and governing an analogous subject, to warrant that each
phrase be defined to have the same meaning.” (Id. at p. 886.) Based on that
construction, the court concluded the lease “was not of sufficient longevity to
constitute ‘realty sold’ under section 11911.” (Ibid.)

      3“ ‘ “Thirty-five years was felt to be the length of term generally
required for lease financing by institutional lenders and, therefore,
approximately equivalent to the fee . . . .” [Citation.]’ ” (Thrifty, supra, 210
Cal.App.3d at pp. 885–886.)


                                        8
      Later, in McDonald’s, supra, 63 Cal.App.4th 612, this court addressed
the question of how the 35-year period should be calculated for purposes of
the documentary transfer tax when an existing lease was extended. (Id. at p.
616.) McDonald’s Corporation (McDonald’s) had a lease with an original
term of 36 years. (Ibid.) It extended its lease, and the remaining term of the
lease was 28 years (13 under the original lease and 15 under the
amendment). (Ibid.) “If only the prospectively available term of the lease is
included, as the trial court found, McDonald’s lease would not be subject to
the tax; if the entire length of the lease, past and present, is included, as the
County contends, the tax would apply.” (Ibid.) This court upheld the trial
court’s decision to calculate only the prospectively available term of the lease,
not the entire length of the lease. (Id. at p. 617.) Accordingly, since the
remaining lease term was less than 35 years, McDonald’s was not considered
the “ ‘owner’ ” of the property for tax purposes, and the property therefore
was not subject to the tax. (Ibid.)
      B. Analysis
      We agree with the reasoning employed by Thrifty and McDonald’s that
because section 11911 (and the ordinance, which, as noted above, is adopted
from section 11911) does not directly address whether a particular type of
transaction qualifies as “realty sold,” we may look to the definitions of
“change in ownership” set forth in the property tax provisions. (Accord 926
North Ardmore, supra, 3 Cal.5th at pp. 335, 337 [adopting the approach in
Thrifty, the Supreme Court held that a transfer tax may be imposed
whenever a transfer of an interest in a corporation, partnership or LLC
results in a “change in ownership” of the underlying property within the
meaning of § 64, subds. (c) & (d)]; see ibid. [“[W]e conclude that the critical
factor in determining whether the documentary transfer tax may be imposed



                                        9
is whether there was a sale that resulted in a transfer of beneficial ownership
of real property. The change in ownership rules, though enacted after the
[Documentary] Transfer Tax Act, fit squarely into this framework”]; 11
Witkin, Summary of Cal. Law (11th ed. 2019) § 330(4) [“Although [section]
11911 does not define ‘realty sold,’ that phrase is sufficiently similar to the
phrase ‘change in ownership,’ used in the Revenue [and Taxation] Code and
governing the analogous subject of property taxation, to warrant that each
phrase be defined to have the same meaning”].)
      We apply these principles to the two relevant transactions in this case.
In the first transaction, in 2011, 731 Market created a lease for a parcel of
the property to CVS for a total of 45 years. Applying the reasoning in Thrifty
and its progeny, we find that the 2011 creation of the lease of more than 35
years was a “change in ownership” under section 61, subdivision (c) and
therefore constituted “realty sold” to trigger taxation under section 11911.
The parties do not dispute the validity of the transfer tax imposed on the first
transaction or that the tax was paid.
      In the second transaction, in 2015, 731 Market sold and transferred the
property subject to the lease, which had a remaining term of more than 35
years. The property law statute provides that, unlike the creation of a lease
of more than 35 years, a transfer of property subject to a lease with a
remaining term of more than 35 years is not a “change in ownership.” (See
§ 61, subd. (c)(1)(D) [change of ownership includes “[a]ny transfer of a lessor’s
interest in taxable real property subject to a lease with a remaining term . . .
of less than 35 years]; § 62, subd. (g) [listing as exclusion to change of
ownership “[a]ny transfer of a lessor’s interest in taxable real property
subject to a lease with a remaining term . . . of 35 years or more”].) The
rationale behind this statutory exclusion is that “[b]ecause the tenant with a



                                        10
remaining term of 35 years or more (including options) is deemed to hold the
equivalent of the fee interest, a transfer by the landlord of its reversionary
interest in property does not constitute a reassessable change in ownership
because the landlord’s reversionary interest is not considered equivalent to a
fee interest.” (Ground Lease Practice (Cont.Ed.Bar 2d ed. 2018) § 2.30.)
      Consistent with this reasoning, the Supreme Court in Pacific
Southwest Realty Co. v. County of Los Angeles (1991) 1 Cal.4th 155 explained:
“The Legislature’s determination that a change in the lessor under these
circumstances will not work a change in ownership is consonant with the
concern of the task force report drafters that a transaction should not trigger
reassessment unless it transfers the interest of the party carrying the
primary economic weight of the property.” (Id. at p. 168.) The court further
noted that “[t]he mischief a contrary rule could create is evident: for
example, a rule permitting reassessment whenever the fee changed hands in
land subject to a lease with a remaining term of 35 years could result in an
enormous tax increase for a lessee that has erected major capital
improvements on the land and whose lease requires the lessee to pay
property taxes. The increase could occur merely because the lessor has sold
that interest to a third party—a transfer over which the lessee has no
control.” (Ibid.)
      In applying these principles, we conclude that the 2015 sale of the
underlying property subject to CVS’s lease did not result in a change in
ownership and therefore did not constitute “realty sold” to trigger the
transfer tax. At the time of the 2015 transaction, CVS maintained all the
same rights under the original lease, which had a remaining term of more
than 35 years. Thus, the “primary economic value of land encumbered by a
lease” (Pacific Southwest Realty Co. v. County of Los Angeles, supra, 1 Cal.4th



                                       11
at p. 168) and “beneficial ownership” (926 North Ardmore, supra, 3 Cal.5th at
p. 337) stayed with CVS. Because CVS’s primary ownership interest in the
leasehold never changed hands up to and including the time of the 2015
transaction, there was no “realty sold” under the ordinance and as
interpreted under section 11911 and case law. (See Thrifty, supra, 210
Cal.App.3d at p. 886; McDonald’s, supra, 63 Cal.App.4th at pp. 615–617.) It
follows that the existing leasehold interest of the 2015 transaction was not
subject to the transfer tax under the ordinance in question. (See Thrifty, at p.
886.)
        Accordingly, the trial court correctly determined that 731 Market was
entitled to a refund of the amount paid attributable to the value of the
leasehold. Further, we find that the court’s interpretation of the ordinance
comports with the well-settled principle of statutory construction that “to the
extent there is any doubt whether the [transfer of the property subject to
CVS’s lease] is subject to a documentary transfer tax,” we “ ‘ “construe[] [the
ordinance] most strongly against the government and in favor of the
taxpayer.” ’ [Citations.]” (McDonald’s, supra, 63 Cal.App.4th at p. 617.)
        San Francisco launches several counterarguments, none of which we
find persuasive.
        First, San Francisco argues the trial court’s reliance on Thrifty and
McDonald’s is misplaced because they apply property tax law, which serves
different purposes than the transfer tax law. According to San Francisco, the
Legislature developed the change in ownership provisions for property tax
purposes “ ‘to avoid such unwarranted complexity by identifying the primary
owner, so that only a transfer by him will be a change in ownership.’
(Dyanlyn Two v. County of Orange (2015) 234 Cal.App.4th 800, 810
[citation].)” San Francisco claims transfer tax law, by contrast, is concerned



                                        12
only with transfers of “ ‘realty’ [citation] such that it is neither necessary nor
consistent with the purposes of the tax to determine the primary ‘owner,’ or
to limit the tax to a single type of interest in the realty.” This contention is
unavailing.
      San Francisco does not identify, nor do we perceive, any conflicting
intent from the plain language of the “change in ownership” provisions under
property tax law (Rev. & Tax. Code, § 60 et seq.) and the transfer tax
ordinance (S.F. Bus. & Tax Regs. Code, § 1101 et seq.) (or Revenue and
Taxation Code section 11911’s documentary transfer tax). In fact, the
ordinance provides that the change in ownership provisions should be applied
when determining if transfers of ownership interests in legal entities are
subject to the transfer tax. (See S.F. Bus. & Tax Regs. Code, § 1114, subd. (b)
[“ ‘[R]ealty sold’ includes any acquisition or transfer of ownership interests in
a legal entity that would be a change of ownership of real property under
California Revenue and Taxation Code Section 64”].) Therefore, the
ordinance’s incorporation of the change of ownership provisions undermines
San Francisco’s arguments against the application of Thrifty and
McDonald’s.
      We also reject San Francisco’s contention that Thrifty and McDonald’s
are distinguishable because they addressed the transfer of a lessee’s interest,
not a lessor’s interest, the relevant focus of analysis here. According to San
Francisco, 731 Market, as lessor, retained a right to receive rent and a future
reversionary interest under the lease. Those rights, San Francisco contends,
are distinguishable from a lessee’s interest; separately constitute “ ‘realty’ ”
under Civil Code sections 761, 762, 821, 1044, and 1046; and were thus
taxable under the ordinance. These contentions are unavailing.




                                        13
      The Civil Code sections cited by San Francisco are inapposite because
they refer to general property concepts and do not address the documentary
transfer tax or even mention the phrase “realty.” (See Civ. Code, §§ 761 [lists
various estates in real property], 762 [defines an estate in fee simple], 821
[provides that a grantee of rent or a reversion interest is entitled to the same
remedies as the grantor might have had], 1044 [specifies the type of property
which may be transferred], 1046 [provides that a right of reentry may be
transferred].)
      Blackledge v. McIntosh (1927) 85 Cal.App. 475 and Callahan v. Martin
(1935) 3 Cal.2d 110 also do not assist San Francisco’s position. San Francisco
relies on Callahan for the proposition “[t]hat the right to receive future rents
. . . is . . . an interest in land” to argue that 731 Market’s right to receive
rental payments under the lease was “ ‘realty’ ” and thus taxable under the
ordinance. (Callahan, at p. 124.) Such reliance is misplaced. Callahan did
not mention taxation much less analyze the term “realty” as it relates to
taxation. Blackledge is also unilluminating as it discussed the validity of the
delivery of a deed, a question that does not remotely apply here.
      San Francisco also relies on section 1108.3 of the San Francisco
Business and Tax Regulations Code to argue that a lessor’s leasehold interest
for a term of over 35 years is a conveyance of “ ‘realty’ ” subject to the transfer
tax. We disagree. Section 1108.3 provides: “Any tax imposed pursuant to
this ordinance shall not apply with respect to any deed, instrument or writing
which creates, terminates, or transfers a leasehold interest having a
remaining term (including renewal options) of less than 35 years.” (Italics
added.) This exception does not apply because it does not address the
situation presented here: the transfer of property subject to an existing lease
with a remaining term of more than 35 years. (See Bullis v. Security Pacific



                                         14
Nat. Bank (1978) 21 Cal.3d 801, 813, fn. 13 [It is a “ ‘rule of statutory
construction that an express exception is not to be extended beyond the fair
import of its terms’ ”].) Thus, the authorities San Francisco cites do not
establish that the transfer of a lessor’s interest encumbered by a 35-plus-year
lease is subject to the transfer tax.
      In any event, we find that San Francisco’s proposed interpretation of
the ordinance is unreasonable and would produce absurd results. (See
E. Gottschalk & Co. v. County of Merced (1987) 196 Cal.App.3d 1378, 1382–
1383 [“ ‘[S]tatutes must receive practical, common sense construction . . . and
. . . an interpretation which would lead to an unreasonable result or
absurdity must be avoided”].) San Francisco makes an artificial distinction
between a lessor’s interest and a lessee’s interest in a lease, without
analyzing the substance of each of those parties’ rights under the lease for
taxation purposes. (See Shuwa Investment Corp. v. County of Los Angeles
(1991) 1 Cal.App.4th 1635, 1648 [it is a “general tax principle” that “the
incidence of taxation depends upon the substance of a transaction rather
than its form”].) The mischief that San Francisco’s interpretation would
create was illustrated by the trial court using the following hypothetical: “By
the City’s logic, a building sale could be taxed on one day based on a
valuation that included the present value of a leaseable space—say
$286,922—and then taxed another $268,922 [sic] the next day when the
building owner actually leased out that space. The City would thus tax the
same income stream twice in two days. [Fn. omitted.]” San Francisco
conceded that the court’s “hypothetical is correct . . . .” We agree that such an
approach would indeed elevate form over substance and produce an absurd
result.




                                        15
      Finally, San Francisco contends the trial court erred in failing to
recognize that San Francisco, as a charter city, is permitted to enact and
administer a local transfer tax that differs from or conflicts with Revenue and
Taxation Code section 11911. (See Cal. Const., art. XI, §§ 3–4 [defining city
and county charters] & 5, subd. (a) [sets out general principles of self-
governance and provides, “It shall be competent in any city charter to provide
that the city governed thereunder may make and enforce all ordinances and
regulations in respect to municipal affairs, subject only to restrictions and
limitations provided in several charters and in respect to other matters they
shall be subject to general laws. City charters adopted pursuant to this
Constitution shall supersede any existing charter, and with respect to
municipal affairs shall supersede all laws inconsistent therewith”].) This so-
called “home rule” provision under the California Constitution establishes
that “ ‘so far as “municipal affairs” are concerned,’ charter cities are ‘supreme
and beyond the reach of legislative enactment.’ [Citation.]” (California Fed.
Savings & Loan Assn. v. City of Los Angeles (1991) 54 Cal.3d 1, 12; accord,
Johnson v. Bradley (1992) 4 Cal.4th 389, 397.) San Francisco, however,
mistakenly assumes that the ordinance and state law conflict. Specifically, it
notes that the ordinance imposes a tax “when the consideration or value of
the interest or property conveyed (not excluding the value of any lien or
encumbrances remaining thereon at the time of sale) . . . exceeds $100 . . . .”
(S.F. Bus. & Tax Regs. Code, § 1102, italics added.) Revenue and Taxation
Code section 11911 imposes the tax “exclusive of the value of any lien or
encumbrance . . . .” (Rev. & Tax. Code, § 11911, subd. (a), italics added.) San
Francisco, however, does not establish that these differences in calculating
consideration before taxation is triggered present a “ ‘genuine conflict’ ”
between the local ordinance and state law to invoke the municipal home rule.



                                       16
(Johnson, at p. 399.) By its own terms, the ordinance was adopted from the
Documentary Transfer Tax Act (S.F. Bus. & Tax Regs. Code, § 1101), employs
nearly identical language (id., § 1102), and defers to state law’s definition of
“realty” (id., § 1114). Thus, San Francisco’s reliance on the home rule to
impose the ordinance’s transfer tax is misplaced.
      In sum, we conclude that the trial court correctly determined that the
ordinance excludes the 2015 transfer of the underlying property subject to
CVS’s long-term lease.
                                DISPOSITION
      The judgment is affirmed. 731 Market is entitled to its costs on appeal.




                                       17
                                                    _________________________
                                                    Jackson, J.


WE CONCUR:


_________________________
Siggins, P. J.


_________________________
Fujisaki, J.




A154369/731 Market Street Owner, LLC v. S.F.




                                               18
A154369/731 Market Street Owner, LLC v. S.F.

Trial Court:     Superior Court of the City and County of San Francisco

Trial Judge:     Richard B. Ulmer, Jr., J.

Counsel:         Dennis J. Herrera, City Attorney, Scott M. Reiber, Chief
                      Tax Attorney, Thomas S. Lakritz and Moe Jamil,
                      Deputy City Attorneys, for Defendant and Appellant.

                 Farella Braun + Martel and James W. Morando for Plaintiff
                       and Respondent.




                                    19
