Filed 10/10/18
                   CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                   SECOND APPELLATE DISTRICT

                            DIVISION SIX


GLOVIS AMERICA, INC.,                   2d Civil No. B286538
                                      (Super. Ct. No. 56-2015-
     Plaintiff and Appellant,         00475755-CU-OR-VTA)
                                          (Ventura County)
v.

COUNTY OF VENTURA,

     Defendant and Respondent.


             When a lease of federal lands includes an option to
extend its term and the tax assessor reasonably concludes that
the option will likely be exercised, the value of the leasehold
interest is properly based on the extended term. In this case,
Glovis America, Inc.,1 appeals from the judgment of dismissal
entered after the trial court sustained without leave to amend the
County of Ventura’s (the County) demurrer to Glovis’s complaint
for refund of property taxes. Glovis contends the County’s
Assessment Appeals Board (the Board) erred when it determined

        1 Glovis
               is the successor in interest to Global Auto
Processing, Inc., which is the party named in the lease and many
of the proceedings discussed below. We refer to both companies
as Glovis throughout the opinion.
that: (1) Glovis’s lease with the U.S. Navy includes an option to
extend its term of possession of Navy lands, and (2) it was
reasonable to assume that the option would be exercised, thereby
justifying a higher tax valuation. We affirm.
            FACTUAL AND PROCEDURAL HISTORY
             In 2007, Glovis began to lease land from the Navy to
provide vehicle inspection and processing services at the Port of
Hueneme. In 2013, Glovis and the Navy signed a five-year lease
that is exempt from federal contract term limits. (See 10 U.S.C.
§ 2667.) Paragraph 2 of the lease states:

     TERM. The initial term of this Lease shall be for
     five-years [sic] commencing on September 16,
     2013[,] and end [sic] on September 15, 2018, with
     two five-year options at the request of the Lessee and
     approval of Government, unless sooner terminated
     under Paragraph [15].

     Release Rate. If the LESSEE requests an additional
     five-year term, LESSEE shall notify LESSOR at least
     180 days prior to the ending date noted above to
     provide sufficient time for completion of an updated
     Appraisal which is required to estimate the Market
     Rental Value of the leased lands. The appraisal cost
     shall be borne by the LESSEE. The appraisal will be
     ordered and managed by the NAVFAC Southwest
     Senior Appraiser to ensure that all Federal Appraisal
     Standards are met.




                                2
(Italics added.) Paragraph 3.2 specifies Glovis’s annual rent for
the initial lease term. Paragraph 3.1 permits Glovis to perform
long-term maintenance of the leased premises in lieu of paying
rent. Paragraph 3.3.4 allows for renegotiation of these terms
upon any extension of the lease.
              The Ventura County Assessor issued a tax bill for the
2014-2015 tax year, and a supplemental tax bill for 2013-2014.
The assessor determined that Glovis’s reasonably anticipated
term of possession is 15 years. He valued Glovis’s lease based on
the 15-year term.
              Glovis appealed the assessments to the Board in
October 2014. Glovis conceded it had the burden of showing the
assessments were incorrect. Citing the lease and a 2011
newspaper article, Glovis claimed Paragraph 2 did not include an
extension option because: (1) Glovis lacked the unilateral right to
extend the lease term, (2) the contract was subject to competitive
bidding every five years, and (3) previous leases did not include
options. Even if Paragraph 2 did include an option, it could not
be determined whether it would be exercised.
              The evidence showed that this was Glovis’s fifth lease
with the Navy. All of the prior leases were renewed. While prior
leases were subject to competitive bidding, this one was not. And
this was the first lease to include an option to extend the lease
term.
              Additionally, a newspaper article quoted a Glovis
representative as saying that the lease was “a critical part of [its]
plan to offer . . . customers long-term stability at a port
strategically located just north of the Los Angeles market.”
Relocating from Port Hueneme would be a challenge. Glovis
“look[ed] forward to a long business relationship” with the Navy.




                                 3
             The Board determined that Glovis did not meet its
burden of showing the assessments were incorrect. Glovis
presented no evidence of the parties’ intent when they included
the option language in Paragraph 2. It presented no evidence
that the Navy did not intend to approve any lease extension. To
the contrary, Glovis’s previous relationship with the Navy, the
parties’ desire for long-term stability, Paragraph 2’s rental
renegotiation term, and Paragraphs 2 and 3.3.4’s implied
exemption from federal competitive bidding requirements showed
that the parties contemplated a 15-year term of possession.
             Glovis challenged the Board’s determinations in the
trial court. After the court granted the County’s motion for
judgment on the pleadings with leave to amend, Glovis filed an
amended complaint, which included an amendment to the lease
executed 12 days after the court’s ruling on the County’s motion.
The amendment states that the parties intend that the lease: (1)
“provide for a stated term of five years,” (2) give Glovis a “right to
request” a term extension, and (3) permit the Navy to approve or
reject any extension request. It also states that the parties did
not intend to convey “any rights in law or in equity in the event a
request for extension is rejected by [the Navy].”
             The amendment also replaces Paragraph 2 of the
lease with the following language:

      TERM. The initial term of this Lease shall be for
      five-years [sic] commencing on September 16,
      2013[,] and ending on September 15, 2018, unless
      sooner terminated under Paragraph 15.




                                  4
     Extension Requests. LESSEE may request that
     GOVERNMENT extend the term of the lease for an
     additional five-year period (an “Extension Request”).
     Any Extension Request may be approved or rejected
     by GOVERNMENT in its sole discretion for any
     reason or no reason at all. LESSEE shall have no
     recourse in law or in equity in the event
     GOVERNMENT rejects an Extension Request, and
     no more than two Extension Requests shall be
     requested or approved.

     Release Rate. LESSEE must submit any Extension
     Request to LESSOR at least 180 days prior to the end
     of the current term in order to provide sufficient time
     for completion of an updated Appraisal which is
     required to estimate the Market Rental Value of the
     leased lands. The appraisal cost shall be borne by
     the LESSEE. The appraisal will be ordered and
     managed by the NAVFAC Southwest Senior
     Appraiser to ensure that all Federal Appraisal
     Standards are met.

            The trial court concluded it could not consider the
amendment. It sustained without leave to amend the County’s
demurrer to Glovis’s amended complaint.
                          DISCUSSION
                        Standard of review
            When the trial court sustains a demurrer, we
independently determine whether the complaint states a cause of
action. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) We deem




                               5
true “‘all material facts properly pleaded, but not contentions,
deductions, or conclusions of fact or law.’ [Citation.]” (Ibid.) We
reasonably interpret the complaint, “reading it as a whole and its
parts in their context.” (Ibid.) If the court did not grant leave to
amend, we decide whether the plaintiff has shown a “reasonable
possibility” that the defects in the complaint can be cured by
amendment. (Ibid.)
                            Legal framework
              “Privately held possessory interests in property
owned by the federal government . . . are subject to taxation.”
(Connolly v. County of Orange (1992) 1 Cal.4th 1105, 1118.) A
lease of federal property is a possessory interest. (Cal. Code
Regs., tit. 18, § 20, subd. (c)(3).) It may be taxed based on the
leaseholder’s “reasonably anticipated term of possession.” (Cal.
Code Regs., tit. 18, § 21, subd. (d)(1).) The reasonably anticipated
term of possession is the term of possession stated in the lease,
unless there is clear and convincing evidence that the lessor and
lessee have agreed otherwise. (Ibid.) The stated term of
possession as of a specific date is the remaining period of
possession specified in the lease, including any option to extend
the period of possession “if it is reasonable to assume that the
option . . . will be exercised.” (Id., subd. (a)(6).)
                               The option
              Glovis contends the assessor miscalculated the lease’s
stated term of possession because the lease does not include an
option to extend its term. We disagree.
              “[A]n option is a contract by which the owner of
property invests another with the exclusive right to [lease] said
property . . . in the future.” (Caras v. Parker (1957) 149
Cal.App.2d 621, 626.) It is obligatory on the optionor, and cannot




                                 6
be withdrawn or revoked. (Ibid.) An option has a “dual nature:
on the one hand it is an irrevocable offer, which upon acceptance
ripens into a bilateral contract, and on the other hand, it is a
unilateral contract [that] binds the optionor to perform an
underlying agreement upon the optionee’s performance of a
condition precedent.” (Palo Alto Town & Country Village, Inc. v.
BBTC Company (1974) 11 Cal.3d 494, 502 (Palo Alto Town &
Country Village).) It is a legal right that must rest on more than
a hypothetical probability of extension. (San Diego Metropolitan
Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73
Cal.App.4th 517, 531 (SDMTDB).)
             Whether Glovis’s lease with the Navy includes an
option is a question for our independent review. (Parsons v.
Bristol Development Co. (1965) 62 Cal.2d 861, 865.) We apply
familiar rules: We interpret the lease to give effect to the parties’
mutual intent at the time of contracting. (Civ. Code, § 1636.) We
ascertain that intent from the lease terms alone if they are clear
and explicit. (Civ. Code, §§ 1638, 1639.) We give the terms their
ordinary and popular meaning unless the parties clearly intended
to give them technical or special meanings. (Civ. Code, § 1644.)
And we construe the lease as a whole to give effect to every part.
(Civ. Code, § 1641.)
             Applying these rules here, we conclude that the
terms of the lease evidence the parties’ mutual intent to grant
Glovis the option to extend its possession of the Navy’s property
past the initial five-year term. Paragraph 2 of the lease clearly
and explicitly gives Glovis the exclusive right to lease the Navy’s
property until 2028. And it contains no language permitting the
Navy to withdraw or revoke its offer. That is the definition of an




                                 7
option. (Palo Alto Town & Country Village, supra, 11 Cal.3d at p.
502.)
             Other lease terms would be superfluous if Paragraph
2 did not include an option to extend the term of possession.
Paragraph 2 defines the initial lease term as running from 2013
to 2018, which suggests that other terms may follow. Similarly,
Paragraphs 3.1 and 3.2 specify Glovis’s annual rent for the initial
lease term, while Paragraph 3.3.4 includes a mechanism to
determine rent for a term of possession extending past five years.
The lease is exempt from the federal five-year contract term
limit. Giving these provisions effect by interpreting Paragraph 2
to include an option is more reasonable than leaving them devoid
of purpose. (Fred A. Chapin Lumber Co. v. Lumber Bargains,
Inc. (1961) 189 Cal.App.2d 613, 620.)
             That the Navy must approve the lease extension does
not change our conclusion. An option may include a term that
requires approval by the optionor. (Ontario Downs, Inc. v.
Lauppe (1961) 192 Cal.App.2d 697, 700-701, 703 (Ontario
Downs).) An option may also be conditioned on some future
event. (Wrather Port Properties, Ltd. v. County of Los Angeles
(1989) 209 Cal.App.3d 517, 522-523.)
             State Board of Equalization Property Tax Annotation
220.0350, on which Glovis relies, is inapplicable here. While that
annotation states that a conditional option may not be included
in computing a lease’s term, it applies only where there has been
a change in ownership of taxable real property. (Property Tax
Annotations, Annotation 220.0350, Change in Ownership (Feb.
18, 1999).) Federal property is exempt from state taxation.
(California Farm Bureau Federation v. State Water Resources
Control Bd. (2011) 51 Cal.4th 421, 443.) The exercise of an option




                                8
to extend the lease of tax-exempt real property does not qualify
as a change in ownership. (Rev. & Tax. Code, § 61, subd. (b)(1);
Cal. Code Regs., tit. 18, § 462.080, subd. (b)(2).)
             The Navy’s ability to terminate the lease at will also
does not change our conclusion that the lease includes an option.
(De Luz Homes, Inc. v. County of San Diego (1955) 45 Cal.2d 546,
554, 574 [upholding valuation based on 75-year term of
possession even though lease could be terminated after 50
years].) That provision is instead relevant to whether it is
reasonable to assume the option will be exercised. (Kaiser Co. v.
Reid (1947) 30 Cal.2d 610, 618-620.) We thus conclude that
Paragraph 2 gives Glovis a legal right that does not rest on
“‘mere expectation’” that the lease term will be extended in the
future. (SDMTDB, supra, 73 Cal.App.4th at pp. 531-532.)
                        The lease amendment
             Glovis argues we should consider the 2017 lease
amendment to determine whether Paragraph 2 includes an
option to extend the term of possession. We independently
review whether to use extrinsic evidence to interpret the lease
(Abers v. Rounsavell (2010) 189 Cal.App.4th 348, 357), and
conclude that there is no need to do so here because the lease is
not “reasonably susceptible” to Glovis’s proffered interpretation
(Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co. (1968) 69
Cal.2d 33, 37).
             Moreover, the amendment pertains to an issue of
fact: whether the parties intended Paragraph 2 to include an
option. (Benchley v. Durkee Famous Foods (1933) 128 Cal.App.
604, 610.) When a party challenges an issue of fact, this court’s
review is limited to the administrative record presented to the
Board. (Bret Harte Inn, Inc. v. City and County of San Francisco




                                 9
(1976) 16 Cal.3d 14, 23.) The amendment was not part of the
administrative record.
             Indeed, the amendment did not even exist when the
assessment was made or during the Board proceedings. An
assessment must be based on the facts known to the assessor at
the time of valuation. (Silveira v. County of Alameda (2006) 139
Cal.App.4th 989, 1003 (Silveira).) Evidence that only later comes
into existence does not render the assessment invalid. (Fujitsu
Microelectronics, Inc. v. Assessment Appeals Bd. (1997) 55
Cal.App.4th 1120, 1125; see also Firestone Tire & Rubber Co. v.
County of Monterey (1990) 223 Cal.App.3d 382, 395 [assessor
should not be “held to knowledge obtained after the fact”].) Here,
the assessor was allowed to rely on Paragraph 2 as written, and
was not required to “ferret[] out the . . . undisclosed and secret
intentions of [the Navy] and [Glovis] relative to the terms of [the]
lease.” (Trabue Pittman Corp. v. Los Angeles County (1946) 29
Cal.2d 385, 392.) It would be improper for this court to consider
the amendment to undermine the assessor’s valuation. (Fujitsu
Microelectronics, at pp. 1125-1126.)
             But even if we were to do so, we would still conclude
that the lease includes an option to extend the term of possession.
Though the amendment removes the word “option” from
Paragraph 2, the parties’ substantive rights remain the same:
2013 to 2018 remains the initial lease term. Glovis still has the
exclusive right to extend its lease to 2028. The Navy still cannot
revoke or withdraw its offer. The exemption from contract term
limits remains intact. And the mechanism to determine the
amount of Glovis’s future rent is substantively unchanged. That
the amendment reinforces the Navy’s ability to approve or reject
an extension request is irrelevant to whether the lease includes




                                10
an option. (Ontario Downs, supra, 192 Cal.App.2d at pp. 700-
701, 703.) Such a privately imposed restriction does not control
an assessor’s valuation. (Carlson v. Assessment Appeals Bd. I
(1985) 167 Cal.App.3d 1004, 1012-1013.)
                 Whether the option will be exercised
              Glovis next contends that, even if the lease includes
an option to extend the term of possession, the assessor erred
when he determined it is reasonable to assume the option will be
exercised. We again disagree.
              Leaseholders cannot be “taxed on something they do
not have, namely possessory interests extending beyond the
terms of their leases.” (American Airlines, Inc. v. County of Los
Angeles (1976) 65 Cal.App.3d 325, 331.) But if it is reasonable to
assume that a leaseholder’s term of possession will be extended,
“the assessor can valuate the possessory interest based on a term
[that] includes the period of the option.” (Id. at p. 329; see Cal.
Code Regs., tit. 18, § 21, subd. (a)(6).) The expectation of
extension can be “based on statute [citation] or contract or indeed
. . . any real substance at all.” (American Airlines, at p. 331.)
              Because the assessor enjoys the presumption that he
properly performed his duties, Glovis had the burden to show it
was not reasonable to assume the extension option would be
exercised. (Farr v. County of Nevada (2010) 187 Cal.App.4th 669,
682-683; see Cal. Code Regs., tit. 18, § 321, subd. (a).) The Board
explicitly determined that Glovis did not carry its burden. Our
review is accordingly limited to determining “‘whether the
evidence compels a finding in favor of [Glovis] as a matter of
law.’” (Dreyer’s Grand Ice Cream, Inc. v. County of Kern (2013)
218 Cal.App.4th 828, 838.) Specifically, we must determine
whether Glovis’s evidence was uncontradicted, unimpeached, and




                                11
of such weight that there is no possibility it was insufficient to
support the Board’s findings. (Ibid.)
             The evidence Glovis submitted to the Board does not
compel the conclusion it was unreasonable to assume the option
in Paragraph 2 would be exercised. Glovis first claimed it was
not reasonable to assume it would exercise the option because the
Navy could terminate the lease at any time. But “the possibility
of termination merely affects the value of the possessory interest,
not its taxability.” (Silveira, supra, 139 Cal.App.4th at p. 997.)
To claim that the right to lease government land is not properly
included in an assessor’s valuation, simply because “that right is
revocable at the government’s will[,] . . . is unbelievable.” (Board
of Supervisors v. Archer (1971) 18 Cal.App.3d 717, 724.)
             Glovis next claims it was not reasonable to assume
the option would be exercised because the Navy would have to
approve any extension. But the evidence established that the
Navy had renewed all of Glovis’s previous leases, the parties
anticipated a long-term business relationship, and the current
lease was not subject to the federal five-year contract term limit.
And there was no evidence that the Navy did not intend to
approve any lease extension.
             Finally, Glovis claims it was not reasonable to
assume the option would be exercised because any extension
would be subject to competitive bidding. But the renegotiation
terms in Paragraphs 2 and 3.3.4 imply an exemption from
competitive bidding requirements. And a Glovis representative
testified that the lease was exempt from such requirements.
             This case is like Silveira, supra, 139 Cal.App.4th 989,
991, in which the plaintiff claimed the assessor overvalued his
month-to-month lease by basing the valuation on a years-long




                                12
anticipated term of possession. He, like Glovis, asserted that
such a valuation conflicted with the decision in American
Airlines. (Ibid.) But in American Airlines, there were “‘no
understandings, agreements, negotiations, or discussions . . .
relating to extension of the leases.’” (Id. at p. 996.) In contrast,
the Silveira plaintiff’s lease stated it would continue on a month-
to-month basis after its initial expiration. (Id. at p. 992.) And
the plaintiff had continued possession on that basis for more than
a decade. (Ibid.) That “long history of possession” supported the
assessor’s years-long valuation. (Id. at p. 1000.)
             The same is true here. The trial court thus properly
sustained the County’s demurrer. And, in light of the above,
Glovis has failed to show a reasonable probability that the defects
in its complaint can be cured.
                            DISPOSITION
             The judgment is affirmed. The County shall recover
costs on appeal.
             CERTIFIED FOR PUBLICATION.




                                     TANGEMAN, J.
We concur:



             GILBERT, P. J.



             YEGAN, J.




                                13
                   Kevin G. DeNoce, Judge

              Superior Court County of Ventura

               ______________________________


           Croudace & Dietrich, Virginia P. Croudace and Mark
A. Nitikman, for Plaintiff and Appellant.

           Leroy Smith, County Counsel, Ronda J. McKaig and
Jaclyn Smith, Assistant County Counsel, for Defendant and
Respondent.
