ROY HANSON JR MFG v. COUNTY OF LOS ANGELES (1980)

This is an appeal from a summary judgment. The sole and important question presented is whether the tax limitation on real property set forth in article XIII A of the California Constitution applied to certain property on the unsecured portion of the assessment roll in Los Angeles County for the year 1978-79.

The case arises out of an action filed by plaintiff Roy E. Hanson Mfg. Co. to obtain a refund of $14,720.46 paid in property taxes to the named defendants, County of Los Angeles, City of Los Angeles and the City of Montebello.¹

Both plaintiff and defendants made motions for summary judgment in the trial court; a factual stipulation was presented to the court, as it was agreed that the issue upon which the parties disagreed was a question of law. Judgment was awarded to plaintiff and this appeal followed.

We first summarize the facts to which the parties stipulated. For each fiscal year, which commences on July 1, the county assessor prepares an assessment roll setting forth the full value and the assessed value of all taxable real and personal property located in the county as of the preceding March 1.

The assessment roll is divided into the secured and unsecured portions of the roll. “The ‘secured roll’ is that part of the roll containing State assessed property and property the taxes on which are a lien on real property sufficient, in the opinion of the assessor, to secure payment of the taxes. The remainder of the roll is the ‘unsecured roll.’ ” (Rev. & Tax.Code, s 109.)

As of July 1, 1978, the secured roll for 1978-79 in Los Angeles County contained $27,436,363,085 in full value of real property and $1,584,427,335 in full value of personal property. The unsecured roll contained $947,284,567 in full value of real property and $3,622,768,059 in full value of personal property.²

On December 23, 1977, Proposition 13, also known as the Jarvis-Gann Initiative, was certified by the California Secretary of State for the June 6, 1978 primary election. More than 1,264,000 qualified voters signed petitions to place Proposition 13 on the ballot; the initiative was widely publicized and debated before the election. Pursuant to section 3568 of the Elections Code, the California Secretary of State issued the California Voters Pamphlet in May 1978 to voters registered for the June 6, 1978 primary election. The summary and analysis contained in the pamphlet informed the voters that the proposed tax limitation contained in the initiative would result in a loss of property tax revenue for 1978-79 of approximately 7 billion dollars. While not expressly stated as such, this figure was based upon the advice of the Legislative Counsel of the State of California that Proposition 13 would apply to the entire assessment roll in Los Angeles and other counties for the year 1978-79 if Proposition 13 became law.

On June 6, 1978, Proposition 13 was so approved by a majority of California voters, and became article XIII A of the California Constitution.³

After the passage of the Initiative in June 1978, the Attorney General of the State of California issued Opinion CV 78/76, advising county auditors and tax collectors that the 1 percent limitation set forth in Proposition 13, now article XIII A of the California Constitution, applied not only to the secured portion of the assessment roll but to the unsecured portion as well. As a consequence, the appropriate officials in 37 of California's 58 counties applied the 1 percent limitation to property on the unsecured roll for 1978-79 as well as to property on the secured roll; the remaining 21 counties, including Los Angeles County, did not. Of the 37 counties applying the 1 percent limitation to the 1978-79 unsecured roll, some established the rate with respect to indebtedness (as described in s 1, subd. (b), art. XIII A) by reference to the amount found necessary for such debt service for the 1978-79 fiscal year. Other counties utilized the debt service figure available from 1977-1978 data. It was stipulated that, in Los Angeles County, there was no material difference between the debt service rate for 1977-78 and 1978-79 with respect to the indebtedness described in section 1, subdivision (b), of article XIII A.

On July 28, 1978, the Attorney General and others sought a writ of mandate in the California Supreme Court to require all the counties to apply the 1 percent limitation to the current unsecured roll. The petition was denied on August 16, 1978, without comment.

Plaintiff herein owned both real and personal property in Los Angeles County on March 1, 1978. On April 28, 1978, plaintiff filed its 1978 Business Property Statement with the Los Angeles County Assessor. Plaintiff's property was placed by the Assessor on the unsecured portion of the 1978-79 assessment roll. On June 19, 1978, plaintiff received its tax bills. They did not reflect the 1 percent limitation imposed by article XIII A. On the contrary, the rates were based on those established for the secured roll for the 1977-78 fiscal year. The bills showed application of rates of approximately $14 per $100 of assessed value, as opposed to the “Proposition 13” rate of approximately $5 per $100 of assessed value. Thus, plaintiff was required to pay almost three times as much tax as were taxpayers whose property was on the secured roll for 1978-79.

Plaintiff paid the taxes before the August 31, 1978 deadline. On October 20, 1978, plaintiff filed a claim for refund pursuant to Revenue and Taxation Code sections 5096-5097; the claim was denied October 30, 1978. Plaintiff then filed this action in timely fashion in the superior court. The amount of refund sought was computed by application of the 1 percent limitation set forth in section 1, subdivision (a), of article XIII A and the portion of the 1977-78 secured roll rate, relating to indebtedness described in section 1, subdivision (b), of article XIII A.

In the stipulation made below, the parties declared that “(p)laintiff and defendants agree that Proposition 13 applies to taxes levied on real and personal property assessed on the secured portion of the 1978-79 assessment roll, and the tax rate limitation established by Proposition 13 has been so applied by defendants for the 1978-79 fiscal year. Plaintiff contends that the tax rate limitation applies to real and personal property assessed on the unsecured portion of the 1978-79 assessment roll as well. Defendants contend that Proposition 13 does not affect such taxes. . . . A final judgment in this case will affect the determination of refunds to all unsecured taxpayers in Los Angeles County for 1978-79.”

We take cognizance of the fact that on September 22, 1978, the California Supreme Court upheld the constitutionality of article XIII A against multiple challenges in Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281. Discussing and rejecting the argument that the tax limitation initiative revised rather than amended the California Constitution and that such revision could only be accomplished by a constitutional convention, the court made the prescient observation that “the majority of . . . changes . . . pertain to a single existing constitutional provision, article XIII, which already contains 33 separate sections dealing with the subject of taxation and assessment procedure. Since article XIII doubtless was premised upon the assumption that local taxation would be unrestricted by any tax rate and assessment limitations such as those adopted by XIII A, it is not surprising that many of these sections may be said to be affected by the new taxation scheme. . . .” (Id. at p. 224, 149 Cal.Rptr. at p. 244, 583 P.2d at 1286.)

The Amador court approved the exercise of judicial restraint in dealing prospectively with every provision of article XIII A; it indicated that “ ‘adjudication of these matters must await an actual controversy, and should proceed on a case-by-case basis as the need arises.’ ” (Amador, supra, 22 Cal.3d 208, 247, 149 Cal.Rptr. 239, 259, 583 P.2d 1281, 1301.)

The dispute presents essentially the problem of harmonizing, insofar as it is possible to do so, the old and the new: the old referring to various sections of article XIII which were part of the California Constitution before the taxpayer revolt of 1978 (as well as certain implementing sections of the Revenue and Taxation Code, enacted by the Legislature), and the new being article XIII A.

In order to understand the basic contention made by defendants on this appeal, we will set forth herein the pertinent old provisions, both constitutional and code, which bear on that contention.

Section 1 of article XIII mandates uniformity of valuation of all taxable property. Section 2 of that article provides that “the tax per dollar of full value shall not be higher on personal property than on real property in the same taxing jurisdiction.” Thus, equality of taxation for real and personal property is mandated, and neither of these general sections make any distinction between property placed on the secured roll and that placed on the unsecured roll.

Section 12 of article XIII provides: “(a) Except as provided in subdivision (b), taxes on personal property, possessory interests in land, and taxable improvements located on land exempt from taxation which are not a lien upon land sufficient in value to secure their payment Shall be levied at the rates for the preceding tax year upon property of the same kind where the taxes were a lien upon land sufficient in value to secure their payment. (P) (b) In any year in which the assessment ratio is changed, the Legislature shall adjust the rate described in subdivision (a) to maintain equality between property on the secured and unsecured rolls.” (Emphasis added.)⁴

Pursuant to these provisions, it has long been the practice for assessors to tax the unsecured portion of the assessment roll at the rate Established in the preceding year for the secured roll. This was the rate applied to plaintiff's property.

As explained in Amador, article XIII A, as enacted by the voters on June 6, 1978, “contains four distinct elements. The first imposes a limitation on the Tax rate applicable to real property: ‘The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. . . .’ (s 1, subd. (a).) (This limitation is made specifically inapplicable, under subdivision (b), to property taxes or special assessments necessary to pay prior indebtedness approved by the voters.) The second is a restriction on the Assessed value of real property. Section 2, subdivision (a), provides: ‘The full cash value means the County Assessors valuation of real property as shown on the 1975-76 tax bill under ”full cash value,“ or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. . . .’ Subdivision (b) permits a maximum 2 percent annual increase in ‘the fair market value base’ of real property to reflect the inflationary rate. (P) The third feature limits the method of changes in State taxes: . . . The fourth element is a restriction upon Local taxes: . . .” (Amador, supra, 22 Cal.3d 208, 220, 149 Cal.Rptr. 239, 242, 583 P.2d 1284.) (Emphasis in original.)

As part of the implementation of article XIII A, the Legislature added section 2237 to the Revenue and Taxation Code. Section 2237 provides, in relevant part: “(a) Notwithstanding any other provision of law, except as provided in subdivision (b), no local agency, school district, county superintendent of schools, or community college district shall levy an ad valorem property tax, other than that amount which is equal to the amount needed to make annual payments for the interest and principal on general obligation bonds or other indebtedness approved by the voters prior to July 1, 1978 or the amount levied pursuant to Part 10 (commencing with Section 15000) of Division 1 and Sections 39308, 39311, 81338, and 81341 of the Education Code. (P) (b) A county shall levy an ad valorem property tax on taxable assessed value at a rate equal to four dollars ($4) per one hundred dollars ($100) of assessed value. . . . ”⁵

As may be seen, Revenue and Taxation Code section 2237 does not make any distinction between the secured and unsecured portions of the assessment roll. There is no question but that the Legislature had the power to enact such legislation. Section 20 of article XIII declares that “(t)he Legislature may provide maximum property tax rates and bonding limits for local governments.”

I

On this appeal, the basic argument of the public entity defendants is that they were entitled to tax property on the unsecured roll in Los Angeles County for the year 1978-79 at the rate established the preceding year for the secured roll by virtue of section 12, subdivision (a), of article XIII of the California Constitution and of section 2905 of the Revenue and Taxation Code, and that the newly enacted article XIII A did not preclude such taxation. It is further contended that if the two constitutional provisions are in direct conflict, an effort should be made to harmonize the provisions by interpreting section 12, subdivision (a), of article XIII as the applicable provision in this circumstance and thereby avoiding the disfavored doctrine of “repeal by implication.” If section 12, subdivision (a), is to be deemed the controlling provision, we would necessarily reverse the trial court judgment in favor of plaintiff and direct the entry of summary judgment for defendants instead.

In interpreting and harmonizing constitutional provisions, there exists the principle that interpretation proceeds not “ ‘according to narrow or supertechnical principles, but liberally and on broad general lines, so that it (the Constitution) may accomplish in full measure the objects of its establishment and so carry out the great principles of government.’ ” (Amador, supra, 22 Cal.3d 208, 244-245, 149 Cal.Rptr. 239, 257, 583 P.2d 1299.) In another context, Amador speaks of the assistance in interpretation provided by resort to “common-sense construction”; to the “natural and ordinary meaning of its words”; and to “contemporaneous construction of the Legislature or of the administrative agencies”; and in the case of an initiative, by the voters themselves. (Ibid.) In addition, it has long been established that the original purpose of a law or constitutional provision is of substantial relevance in determining its appropriate meaning under present circumstances.

Section 12, subdivision (a), of article XIII of the California Constitution, adopted in 1974 by the voters and amended in 1976, replaced section 9, subdivision (a), of article XIII, which became part of the Constitution in 1924. Prior to 1924, it had long been the practice in California for assessors to declare due, and commence the collection of, taxes on the unsecured portion of the assessment roll on March 1. The rationale advanced was that early efforts to collect unsecured taxes were necessary to prevent avoidance of tax liability. The efforts to collect such taxes began prior to the time the taxable rate for the current fiscal year was established; that normally occurred sometime between July 1 and September 1; by that time many unsecured taxes had been paid. An administrative nightmare was generated by the time frame; after the tax rate was set, it would be necessary to adjust annually, by refund or supplemental assessment, the taxes already collected by the local entity. Section 9, subdivision (a), of article XIII, was added to the Constitution to ameliorate the administrative problem by providing that taxes on the unsecured roll could be computed according to the rate established in the previous taxable year for the secured roll, thereby ending the annual adjustments. (See Abrams v. San Francisco (1941) 48 Cal.App.2d 1, 4-5, 119 P.2d 197.) Later, Revenue and Taxation Code section 2905 was enacted pursuant to the constitutional provision.

The original section 9 of article XIII became present section 12(a) of the same article; in 1976, as part of an effort for tax reform (which failed in other respects) subdivision (b) of section 12 was added to article XIII providing the adjustment by the Legislature of the tax rate “(i)n any year in which the assessment ratio is changed” for the purpose of maintaining “equality between property on the secured and the unsecured rolls.”

In seeking to harmonize section 12, subdivision (a), of article XIII with newly added article XIII A, we must determine the appropriate relationship between a collection procedure designed for administrative convenience and the initiative which constitutes “ ‘in essence a Legislative battering ram which may be used to tear through the exasperating tangle of the traditional legislative procedure and strike directly toward the desired end’ ” (Amador, supra, 22 Cal.3d 208, 228, 149 Cal.Rptr. 239, 247, 583 P.2d 1281, 1289) (emphasis in original), i. e., in this case, tax reform.

We see no need for a declaration that section 12, subdivision (a), of article XIII has been repealed by implication with the introduction of article XIII A to the California Constitution. A common-sense interpretation and harmonization of these provisions can readily be accomplished by giving effect to section 12 of article XIII in its Entirety, that is, by reading subdivisions (a) and (b) thereof together. It is subdivision (b) of section 12 which contains reference to the concern that secured and unsecured taxes be imposed on the basis of Equality, and mandates that the Legislature Shall equalize the treatment in any year in which the assessment ratio is changed.

The year 1978 was such a year, and, pursuant to section 12, subdivision (b), and section 20 of article XIII, the Legislature enacted Revenue and Taxation Code section 2237 which Limited local governments and taxing jurisdictions to the 1 percent maximum of article XIII A. In short, section 12, subdivision (a), By itself, had no application to the 1978-79 unsecured tax roll in Los Angeles County, It was, therefore, untenable for the governmental entity defendants to tax plaintiff's property at almost Three times the 1 percent rate. We are convinced that the voters intended that the tax reform represented by the Proposition 13 initiative was designed to benefit All holders of taxable property, whether secured or unsecured. In view of the harmonization we find that exists between section 12, subdivisions (a) and (b) of article XIII, and article XIII A, there is no need for us to resort to other rules of construction.

II

One other argument of defendants requires some discussion. This is the argument that article XIII A may not be applied retroactively to taxes on the unsecured roll in Los Angeles County in 1978-79 because the right to those taxes became “vested” in the governmental entity defendants prior to June 6, 1978, when the Proposition 13 Initiative was passed by the voters, effective (except for section 3) for the fiscal year beginning July 1, 1978. We take note of the observation made in Schettler v. County of Santa Clara (1977) 74 Cal.App.3d 990, 1003, 141 Cal.Rptr. 731, 739: “Of course, we have no quarrel with respondent's argument that the tax lien is a vested right of the taxing body; that the tax lien for taxes attaches on the first day of March preceding the fiscal year for which the taxes are levied (s 2192; (citation)); and that as a general proposition the Legislature cannot by a subsequent act increase or decrease the rate, remit the tax or in any way surrender, impair or limit rights that have become fixed and vested (citation).” (Emphasis added.)

We point out that the stipulation made below set forth that the 1 percent limitation of Proposition 13 was Applied to the secured roll in the 1978-79 fiscal year and that the argument concerning “vested” rights could be made with Equal force as to the secured roll, since taxes payable on that portion of the roll also presumably “vest” the preceding March 1. (See, particularly, Rev. & Tax.Code, s 2192, as well as ss 2187 and 401.3.)

It is significant that section 5 of article XIII A specifically provided that the initiative would be applicable to taxes imposed for the fiscal year commencing July 1, 1978, and, in our view, this expression of intent makes it perfectly clear that the voters intended the tax limitation to extend to all taxes Collectible for that fiscal year, Regardless of when tax collection activity commenced.

III

It is also contended here that Revenue and Taxation Code section 2237 is unconstitutional as an excess of legislative power on the theory that it conflicts with section 12, subdivision (a), of article XIII of the Constitution. As we have indicated, however, subdivision (a) of section 12, by itself, does not apply to the situation presented here, and section 20 of this same article gives the Legislature the power to control local taxation by setting as the maximum rate therefor that which is set forth in article XIII A. We cannot ignore that section 12, subdivision (b), mandates equal treatment of secured and unsecured taxes. It is understandable that defendants should argue that administrative interpretation of new constitutional provisions is of little value, especially in a situation where all the administrative and legislative resources counselled the various counties of California to apply the 1 percent limitation to All taxpayers on the assessment roll. While we recognize the stringent financial circumstances in which local governments found themselves after the passage of Proposition 13, the administrative and legislative advice given in this instance was, in retrospect, sound.

The amendment by the Legislature of Revenue and Taxation Code section 107 after the passage of the initiative (Stats.1978, ch. 576, s 4.7, p. —-) allowing the (retroactive) transfer of possessory interests on the unsecured roll to the secured roll in order that those taxpayers might reap the benefits of the 1 percent limitation in counties which refused to extend that limitation to the unsecured roll, offers no support for the governmental entity defendants' claim that the amendment signified recognition by the Legislature of a legitimate distinction between the two portions of the assessment roll. Rather, it was an attempt by the Legislature, to the extent possible, to introduce equal treatment where certain entities appeared determined to implement Proposition 13 selectively. We find it unnecessary to discuss equal protection considerations at length in the case at bench, since we have determined that the California Constitution, as presently written, Requires equal taxation of taxpayers on either portion of the assessment roll, and we so hold in the case at bench.

The judgment is affirmed.

FOOTNOTES

1.  The refund was sought pursuant to Revenue and Taxation Code section 5140, which provides, in pertinent part, that “(t)he person who paid the tax . . . may bring an action in the superior court against a county or a city to recover a tax which the board of supervisors of the county or the city council of the city has refused to refund on a claim filed pursuant to Article I (commencing with Section 5096) of this chapter. . . .”The parties stipulated that “(a) portion of the property taxes here in issue were collected by defendant County on behalf of defendant Cities, and said Cities are joined as defendants herein pursuant to Section 5148 of the California Revenue and Taxation Code.” In our discussion, section references will be to that Code, unless otherwise indicated.

2.  As may be seen, real property comprised more than 20 percent of the unsecured roll in Los Angeles County for the tax year 1978-79.

3.  Article XIII A, as adopted on June 6, 1978 and amended on November 7, 1978, provides:“Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.“(b) The limitation provided for in subdivision (a) shall not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any indebtedness approved by the voters prior to the time this section becomes effective.“Sec. 2. (a) The full cash value means the county assessor's valuation of real property as shown on the 1975-76 tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. All real property not already assessed up to the 1975-76 full cash value may be reassessed to reflect that valuation. For purposes of this section, the term ‘newly constructed’ shall not include real property which is reconstructed after a disaster, as declared by the Governor, where the fair market value of such real property, as reconstructed, is comparable to its fair market value prior to the disaster.“(b) The full cash value base may reflect from year to year the inflationary rate not to exceed 2 percent for any given year or reduction as shown in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced to reflect substantial damage, destruction, or other factors causing a decline in value.“Sec. 3. From and after the effective date of this article, any changes in State taxes enacted for the purpose of increasing revenues collected pursuant thereto whether by increased rates or changes in methods of computation must be imposed by an Act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature, except that no new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property may be imposed.“Sec. 4. Cities, counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.“Sec. 5. This article shall take effect for the tax year beginning on July 1 following the passage of this Amendment, except Section 3 which shall become effective upon the passage of this article.“Sec. 6. If any section, part, clause, or phrase hereof is for any reason held to be invalid or unconstitutional, the remaining sections shall not be affected but will remain in full force and effect.”

4.  Pursuant to article XIII, section 12, subdivision (a), the Legislature enacted section 2905 of the Revenue and Taxation Code which provides: “In collecting taxes on unsecured property the tax rate to be used is the rate for property of the same kind on the secured roll last fixed before the lien date for the taxes to be collected. In collecting taxes on unsecured property that escaped taxation in any prior year or years the rate to be used shall be the rate to which the property would have been subject if it appeared upon the roll in the year when it should have been lawfully assessed. The taxes on unsecured property shall be computed in dollars and cents, rejecting the fractions of a cent.” Section 2905 was amended in 1978, the amendment to become operative on January 1, 1981. (See Stats.1978, ch. 1207, s 24, p. —-.)

5.  Under Revenue and Taxation Code section 401, a tax rate of $4 per $100 of assessed value was the mathematical equivalent of the $1 per $100 of full cash value mandated by article XIII A. The effect of section 2237 was thus to provide a property tax levy for the fiscal year commencing the following July 1 in accordance with the maximum tax rate established by article XIII A.

JEFFERSON, Associate Justice.

FILES, P. J., and ROGAN (Assigned by the Chief Justice of California), JJ., concur.