Filed 3/29/19
                             CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                               FIRST APPELLATE DISTRICT

                                       DIVISION FOUR

RICHARD S. WRIGHT et al.,
          Plaintiffs and Appellants,
                                                   A153687
v.
COUNTY OF SAN MATEO,                               (San Mateo County
                                                   Super. Ct. No. CIV531406)
          Defendant and Respondent.


          Revenue and Taxation Code1 section 69.5, which implements Proposition 60,
enacted by voters in 1986, allows qualified homeowners over 55 years of age to transfer
the property tax basis of their principal residence to a replacement dwelling of equal or
lesser value in the same county. (Stats. 1987, ch. 186, § 1; Cal. Const., art. XIII A, § 2,
subd. (a).) The purpose of the legislation is to provide tax relief to qualified homeowners.
(Ibid.)
          Here, the County of San Mateo (county) determined that plaintiffs Richard S.
Wright and Susan M. Hansch, who are otherwise qualified under the statute, are not
entitled to transfer the property tax basis from their original home to a newly constructed
replacement home because they formed a limited liability company (LLC) to purchase
the land on which they installed the manufactured replacement home that they purchased.
Plaintiffs brought this action challenging the county’s determination, and the trial court
granted the county’s motion for summary judgment. The court reasoned that the use of
the LLC to construct the replacement home precluded plaintiffs’ claim for tax relief as a
matter of law. On appeal, plaintiffs argue, among other things, that the court erred in


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


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granting the county’s motion because they, rather than the LLC, constructed the
replacement home. We agree and, accordingly, shall reverse the judgment.
                                         Background
Section 69.5
       Section 69.5 “has been aptly described as ‘extraordinarily complex’ with ‘pages of
dense, convoluted and interrelated provisions.’ ” (Wunderlich v. County of Santa Cruz
(2009) 178 Cal.App.4th 680, 695.) Under subdivision (a)(1), “any person over the age of
55 years . . . who resides in property that is eligible for the homeowners’ exemption
under subdivision (k) of Section 3 of Article XIII of the California Constitution and
Section 218 may transfer, subject to the conditions and limitations provided in this
section, the base year value of that property to any replacement dwelling of equal or
lesser value that is located within the same county and is purchased or newly constructed
by that person as his or her principal residence within two years of the sale by that
person of the original property . . . .” (Italics added.) A “person” eligible for transfer
under section 69.5 “means any individual, but does not include any firm, partnership,
association, corporation, company, or other legal entity or organization of any kind.”
(§ 69.5, subd. (g)(11).)2 The term “newly constructed” is defined in relevant part as “Any
alteration of land or of any improvement, including fixtures, since the last lien date that
constitutes a major rehabilitation thereof or that converts the property to a different use.”
(§ 70, subd. (a)(2).) A “replacement dwelling” is “a building, structure, or other shelter
constituting a place of abode, whether real property or personal property, that is owned
and occupied by a claimant as his or her principal place of residence, and any land owned


2
 The definition of “person” was added to section 69.5 in 1990 (Stats. 1990, ch. 1494,
§ 3.7) to address concerns that had arisen in the implementation of section 69.5 as a result
of the definition of a person in section 19, as including “any person, firm, partnership,
association, corporation, . . . or organization of any kind.” Because “a claimant is defined
as any ‘person,’ businesses have questioned whether or not they are eligible for these tax
benefits. This bill clarifies legislative intent that only individuals may transfer an original
base year value to a replacement residence.” (Assem. Bill No. 3723, 3d reading April 24,
1990 (1989-1990 Reg. Sess.) p. 3.)


                                               2
by the claimant on which the building, structure, or other shelter is situated.” (§ 69.5,
subd. (g)(3).) In addition to meeting the requirement of subdivision (a), “any person
claiming the property tax relief provided by this section” must also, among other things,
“[a]t the time of claiming the property tax relief . . . [be] an owner of a replacement
dwelling and occup[y] it as his or her principal place of residence.” (§ 69.5, subd. (b)(4).)

       Undisputed Facts

       On June 2010, plaintiffs arranged for the purchase of an unimproved lot in the
City of Half Moon Bay (the lot), within San Mateo County, which, after installation of a
manufactured home, they intended to be their primary residence. During escrow, the
lender informed plaintiffs that it would not issue a construction loan unless title to the lot
were held by a LLC. Accordingly, plaintiffs formed a LLC, and title to the lot was taken
in the name of the LLC. Thereafter, plaintiffs entered into a contract with a company in
Utah for the purchase of a manufactured home. The manufactured home was installed on
the lot in January 2012.
       In the meantime, in September 2011, plaintiffs sold their primary residence in the
City of Belmont, also in San Mateo County.
       In January, after installation of the new residence was completed, plaintiffs’
complaint alleges, “title to the lot with the new residence” was transferred from the LLC
to plaintiffs. Plaintiffs obtained an exemption from payment of the real property transfer
tax under section 62, subdivision (a)(2), for the transfer of title from the LLC to plaintiffs
because their proportional ownership interests in the lot were the same as their ownership
interests in the LLC (i.e., 50 percent for each spouse). Plaintiffs also filed a request to
transfer the base year value of the Belmont property to the Half Moon Bay property
pursuant to section 69.5. The request was denied and plaintiffs filed an appeal with the
county assessment appeals board (appeals board).
       Plaintiffs argued to the appeals board that at all relevant times they had equity in
the replacement dwelling as a result of the personal funds they advanced for the lot
purchase, the purchase of the manufactured home, and their payment for the installation


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of the home on the lot. They argued further that at the time they filed their claim under
section 69.5, subdivision (a), they were the owners of the replacement dwelling and were
occupying it as their principal place of residence. The appeals board noted that while it
was “not unsympathetic” to plaintiffs’ situation, under the unambiguous language of
section 69.5 and the undisputed facts, plaintiffs were not entitled to relief. The decision
by the appeals board states, “For purposes of this appeal, the parties have agreed that
applicants satisfy the age requirement and that (1) the replacement dwelling is of equal or
lesser value than the original property, and (2) the replacement dwelling is located within
the same county as the original property. Applicants would therefore be entitled to
transfer the base year value of the original property if they had performed all transactions
themselves instead of through the LLC. The only issue is whether, given the involvement
of the LLC in the acquisition and construction of the replacement dwelling, applicants
have satisfied the requirement that the replacement dwelling be ‘purchased or newly
constructed by that person.’ ” The appeals board explained that although plaintiffs
“advanced some amount of personal funds for construction” of the home, because the
lender “provided construction financing to the LLC” and the “LLC was issued a building
permit” for installation of the home on the lot, the LLC constructed the replacement
dwelling within the meaning of the statute.3 The board acknowledged that neither
plaintiffs nor the county “identified any authority that specifically addresses [this] unique
factual situation,” nor was it aware of any authority. Nonetheless, the board relied on
Grotenhuis v. County of Santa Barbara (2010) 182 Cal.App.4th 1158 for the proposition
that “for purposes of property tax relief, the legal distinctions between corporate entities
and their owners are to be respected and enforced.”



3
  The appeals board explained, “The fact that [plaintiffs’] personal assets were utilized for
construction does not compel the conclusion that [plaintiffs] as individuals had a formal
or legal role in construction. [Plaintiffs’] financial inputs, for example, might be best
understood as contributions to the LLC by its members. . . . Without more, [plaintiffs’]
financial contributions alone are insufficient to support disregarding the LLC’s formal
role in carrying out the new construction.”


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       Plaintiffs filed the present action seeking a refund of property taxes paid following
the denial of their appeal by the appeals board. The county moved for summary judgment
on the ground that plaintiffs had admitted that they purchased and newly constructed the
property by and through the LLC. The trial court agreed and granted the county’s motion.
Plaintiffs timely filed a notice of appeal.4

                                          Discussion

    1. Summary Judgment Law and Standard of Review

       Summary judgment is appropriate when all of the papers submitted show there is
no triable issue of material fact and the moving party is entitled to a judgment as a matter
of law. (Code Civ. Proc., § 437c, subd. (c).) A defendant moving for summary judgment
has the initial burden of showing that a cause of action is without merit. A defendant
bears that burden by showing that one or more elements of the cause of action cannot be
established, or that there is a complete defense thereto. (Code Civ. Proc., § 437c,
subd. (p)(2).) If the defendant makes such a showing, the burden shifts to the plaintiff to
produce evidence demonstrating the existence of a triable issue of material fact. (Ibid.)
“On appeal from a summary judgment, our task is to independently determine whether an
issue of material fact exists and whether the moving party is entitled to summary
judgment as a matter of law.” (Hutton v. Fidelity National Title Co. (2013) 213
Cal.App.4th 486, 493.)

    2. The court erred in granting summary judgment.

       The county moved for summary judgment on the ground that plaintiffs do not
qualify for relief under the statute because the replacement dwelling was “purchased and
newly constructed” by the LLC. As the appeals board recognized, the effect on plaintiffs’



4
  Plaintiffs purport to appeal from the court’s non-appealable order granting the county’s
motion for summary judgment. According to plaintiffs, no judgment has been entered. In
the interests of justice and to avoid delay, we construe the order as a judgment for the
county. (Avila v. Standard Oil Co. (1985) 167 Cal.App.3d 441, 445.)


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claim of the LLC’s role in constructing the replacement dwelling presents a question of
law.
       “The interpretation of constitutional or statutory provisions presents a legal
question, which we decide de novo. [Citation] Our task is to ascertain the intent of the
electorate or the Legislature, thereby giving effect to the law's purpose. [Citation.] [¶] We
begin by examining the language of the relevant provisions. [Citation.] Where ‘intent is
expressed in unambiguous terms, we must treat the statutory language as conclusive; “no
resort to extrinsic aids is necessary or proper.” ’ [Citations.] [¶] On the other hand, where
‘the provision’s words are ambiguous and open to more than one meaning, we consult the
legislative history, which in the case of article XIII A is the ballot pamphlet.’ [Citation.]
[¶] ‘In cases of ambiguity we also may consult any contemporaneous constructions of the
constitutional provision made by the Legislature or by administrative agencies.’
[Citation.] As to the latter, however, ‘the binding power of an agency’s interpretation of a
statute or regulation is contextual: Its power to persuade is both circumstantial and
dependent on the presence or absence of factors that support the merit of the
interpretation.’ [Citation.] [¶] ‘Finally, the court may consider the impact of an
interpretation on public policy . . .’ when construing an ambiguous provision. [Citation.]
Absurd results are to be avoided.” (Wunderlich v. County of Santa Cruz, supra, 178
Cal.App.4th at p. 694.)
       Here, plaintiffs contend that they purchased and constructed the replacement
dwelling, albeit in part with the temporary use of an LLC, and that when they submitted
their claim, they alone owned and occupied the home as their principal place of
residence. Plaintiffs explained that the LLC was formed to enable them to obtain the
construction loan and that they intended at all times to transfer ownership of the lot to
themselves once construction was complete. While the LLC obtained the construction
loan, plaintiffs also contributed personal funds to both the purchase of the lot and the
purchase and installation of the manufactured home. The evidence in the record shows
that the lot was purchased for $675,000 and the manufactured home was assessed by the
county at a value of $450,000. According to plaintiffs, “The LLC in the course of


                                              6
building the property incurred $380,000 in construction debt and $249,316 in land debt.
. . . [Plaintiffs] paid the balance of the land and construction costs personally.” In
opposition to the county’s motion for summary judgment, plaintiffs submitted copies of
cancelled personal checks signed by plaintiffs in the total amount of $18,712.85 for
excavation, grading and paving to prepare the lot and a copy of the signed contract under
which they personally purchased the manufactured home from the builder.5 Plaintiffs
made all arrangements for the delivery and installation of the home on the lot. On these
facts, the replacement dwelling was “newly constructed” by plaintiffs.
       The contrary conclusion reached by the appeals board is based on an unnecessarily
strained interpretation of the statute. The appeals board found that, despite plaintiffs’
financial contributions and personal effort, they did not have a “formal or legal role” in
the construction. Section 69.5, however, does not require that plaintiffs have any such
role. It requires that they “purchase or newly construct” the replacement home. Given the
considerable restrictions expressly provided in the statute, we discern no justification for
implying additional requirements. Nothing in section 69.5 requires that plaintiffs own the
lot during construction. The statute requires only that they own the replacement home “at
the time of claiming the property tax relief.” Plaintiffs would not be entitled to tax relief
if title to the property had still been held by the LLC when they submitted their claim for
relief—not because the LLC constructed the home but because plaintiffs would not have
been the owners of the replacement dwelling at the point required by section 69.5,
subdivision (b)(4).



5
  The county argues that we should disregard the signed contract with the manufacturer
because it was not presented to the appeals board. Due to the procedural posture of this
case, the record of the appeals board proceedings is not before this court, so that we
cannot determine what was or was not presented in those proceedings. Moreover, the
county failed to file a proper evidentiary objection to consideration of the contract. (Cal.
Rules of Court, rule 3.1354(b) [“All written objections to evidence [in support of or in
opposition to a motion for summary judgment] must be served and filed separately from
the other papers in support of or in opposition to the motion.”].) There was thus no basis
to exclude the contract from consideration in ruling on the summary judgment motion.


                                               7
       Grotenhuis v. County of Santa Barbara, supra, 182 Cal.App.4th 1158, relied on by
the county, is distinguishable. In that case, the plaintiff sought to transfer the base year
value of his former residence to a new residence, both of which were owned by a
corporation, of which he was the sole shareholder. (Id. at p. 1161.) Because Grotenhuis
had neither sold the original property nor purchased and owned the replacement property,
to obtain tax relief under the statute he argued that he was the alter ego of the corporation.
(Id. at p. 1163.) The court rejected this argument, explaining, “In tax matters, a
corporation and its stockholders are deemed separate entities. [Citation.] ‘It is well
established that corporate status will not be disregarded to facilitate a tax avoidance.’ ”
(Id. at p. 1165.) The court added, “Grotenhuis elected the corporate form for business
reasons unrelated to tax. . . . Grotenhuis should not be able to weave in and out of
corporate status when it suits the business objective of the day. The laudatory goal of
section 69.5 does not afford property tax relief to an individual who has made a business
decision to transfer a residence to a corporation.” (Id. at p. 1164.)
       Here, plaintiffs have met all the requirements of section 69.5. They sold their
original property and constructed a replacement property which, at the time of their
claim, they owned and occupied as their primary residence. They are precisely the
persons for whom the statute was intended to provide property tax relief. The fact that, to
satisfy a bank requirement, they made temporary use of an LLC before taking title to
their replacement property provides no justification under the terms of the statute or in
logic or fairness for denying them the relief provided by section 69.5. We emphasize that
our conclusion would be different if title to the property had remained in the name of the
LLC when the claim under section 69.5 was submitted.
       Since plaintiffs did not file their own motion for summary judgment, we are
without authority to direct the entry of judgment in their favor. However, we shall reverse
the judgment entered in favor of the county and remand for further proceedings
consistent with this opinion.




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                                         Disposition
       The judgment is reversed and the matter is remanded for further proceedings
consistent with this opinion. Plaintiffs shall recover their costs on appeal.




                                                   _________________________
                                                   POLLAK, P. J.


WE CONCUR:


_________________________
STREETER, J.


_________________________
BROWN, J.




A153687



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Trial court:                             San Mateo County Superior Court

Trial judge:                             Honorable Richard H. Du Bois

Counsel for plaintiffs and appellants:   Charles H. Rible

Counsel for defendant and respondent:    John C. Beiers
                                         Rebecca M. Archer




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A153687




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