Villa
Clemente v.
Filed 9/4/12 Villa San Clemente v. County of Orange CA4/3
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH
APPELLATE DISTRICT
DIVISION
THREE
VILLA SAN
CLEMENTE LLC,
Plaintiff and Appellant,
v.
COUNTY
OF ORANGE,
Defendant and Appellant.
G045984
(Super. Ct. No. 30-2010-00339719)
O P I N I O N
Appeals from a judgment
and an order of the Superior Court
of
County, Franz E. Miller, Judge. Affirmed.
Cahill, Davis &
O’Neall, C. Stephen Davis, and Andrew W. Bodeau for Plaintiff and Appellant.
Nicholas S. Chrisos, County
Counsel and Laurie A. Shade, Deputy
County Counsel for Defendant and Appellant.
Plaintiff Villa San
Clemente LLC (Villa) brought suit against defendant County of Orange (the
County) for a tax refund on property taxes collected on 59.168 acres of land
(the property) Villa owns in Orange County after the Assessment Appeals Board
No. 1 (assessment appeals board, or board) assessed the property at
$78,547,385. The assessor’s expert and
Villa’s expert both used the same method of assessing the value of the
property, comparable sales, but arrived at different results. The trial court denied Villa relief on two of
its arguments, but remanded the matter to the board to consider Villa’s claim
that construction costs for building a bridge on the property and a freeway
off-ramp, as well as certain other costs of developing the property, reduce the
valuation of the property. Villa
appeals, contending the assessor’s method of assessing the value of the property
was flawed in that certain downward adjustments were required, but not made,
and a portion of the expense of building a mandated parking structure should
have been deducted.
The trial court awarded
Villa $70,806.71 in attorney fees under Revenue and Taxation Code section
1611.6.
court should have awarded substantially less.
For the reasons that
follow, we affirm the judgment and the order awarding Villa $70,806.71 of the
requested $108,453.75 in attorney fees.
I
FACTS
In 1999, Villa arranged
to purchase 13 parcels of real property consisting of 59.168 acres in San
Clemente for approximately $20 million. The plan was to develop the property into a
mixed high-end residential and commercial property development with a
manufacturer’s outlet mall, entertainment center, hotel, and conference
center. Portions of the property
overlook the Pacific Ocean. The sale was not completed until May 11, 2006, due to delays in
obtaining development permits from the California Coastal Commission. By that time the purchase price was adjusted
to $25.7 million. It is undisputed the
purchase price did not reflect the fair market value of the property. The assessor initially enrolled the property
as having a value of $100,933,000.
Villa filed applications
to change the assessments. At the
hearing before the appeals assessment board, the County presented an adjusted
assessment value of $78,547,385, calculated at $35 per square foot on approximately
51 and a half buildable acres. The
adjusted value did not include the cost of any infrastructure required to be
built on the property.
Villa and the County
each used five comparable sales in an effort to reach a fair market value for
the property. Of the five comps used by
each side, four were the same. Al
Saguero of the assessor’s office testified on behalf of the County. The first comp property he used is located on
the corner of Sunflower and Highland
in Costa Mesa. South Coast Home Furnishings was later built
on the property. That property is
substantially smaller than Villa’s, is irregularly shaped, and was purchased in
August 2005 for $29 million. Saguero
said that piece of property has inferior ingress and egress, describing it as
“just awful.” After adjustments, the first
comp property was assessed at $35.02 a square foot.
The second comp is
located on the corner of Irvine Center
and Lake Forest in Irvine. That commercially zoned property sold in
November 2005 for $29,650,000, or $37.09 per square foot. It too, is substantially smaller than Villa’s
property, but Saguero felt it was a superior piece of property. Because property in Irvine
tends to sell for more, Saguero made a five percent adjustment on the property.
The third comp is a
Costco site on the corner of Katella and Walker in Cypress. Also smaller than Villa’s property, it sold
for $18.8 million in September 2004.
Adjusting for time and the inferiority of the property (including its
irregular shape) compared to Villa’s property, the price per square foot was
set at $30.08.
The fourth and fifth
comps are part of the District Development in Tustin. The first was purchased for $70 million in
November 2004. It is slightly larger
than Villa’s property. After adjusting
for the older sale, the property adjusted out to $31.90 per square foot. The last is a Costco and gas station
site. Substantially smaller than Villa’s
property, this site sold in October 2005 for $23.5 million. After adjusting for the time of that sale,
Saguero adjusted price to $35.44 per square foot.
None of the comps had a
hotel or meeting center on the premises.
Using the above comparable sales, Saguero arrived at $35 per square foot
for the recommended value of Villa’s property.
He said the accepted value would require considering certain
infrastructure costs. Although smaller
lots have sold at a premium in the past — i.e., for a higher price per square
foot over larger pieces of property — Saguero stated it is very rare to have
parcels over 10 acres in Los Angeles or Orange County, so a downward adjustment
on a large piece of property is not warranted in this instance. He said a different result may be called for
in the Inland Empire or somewhere else where large
pieces of property are not rare. Saguero
did not believe the requirement that Villa build a parking structure called for
an adjustment. It was apparent he
concluded the parking structure was an enhancement to the property.
Wells Fargo Bank
retained Keith A. Strohl of Walden-Marling, Inc. to appraise the property at a
time when Wells Fargo was considering financing the property. Strohl’s evaluation was made in September
2005, not May 2006, the date Villa became the owner of the property. Strohl said he worked independently of Villa
in deciding the property’s appraised value.
The assessor’s appraiser and Strohl each used the comparable sales
method of valuating the property. Strohl
said he and Saguero used similar data.
In fact, Strohl used four of the County’s five comparable sales. He also used a comp for a piece of property
in Riverside County and conceded that property was “the weakest” of the
comps. He used the Riverside County
property due to its size. Because Strohl’s
evaluation was made in September 2005, he admitted his evaluation ($61.7 million)
would have to be adjusted. However,
Strohl did not give an estimate of the fair market value of the property as of
May 2006. He did not do so because he
had not been contracted to make that evaluation.
Strohl’s first
comparable property was the fourth property used by the assessor. He considered this comp to be one of the
best, based on size of the property and the large scale development of the
required infrastructure.
Strohl said he did not
agree with the assessor’s refusal to make an adjustment based on the fact that
Villa’s property is larger than most of the comps used by the parties. Strohl believed a downward adjustment should
have been made on Villa’s property based on its larger size.
With respect to the
requirement that Villa build a parking structure to support the 600,000 square
feet of proposed space, Strohl testified a downward adjustment should also be
made as none of the comparable sales required the building of such a parking
structure and Villa would be unable to build out the property to its designed
square footage without building the parking structure. He said an adjustment should be made, but not
a “dollar-for-dollar” deduction for the cost of building the garage since the
structure benefits Villa. Strohl said
because the cost of building the parking structure increased since his 2005
evaluation, his assessed value would have to be reduced.
Additionally, Villa
urged the board to make adjustments based on the cost of building the
infrastructure necessary to support the development. According to Villa’s tax agent, the original
developer, SunCal, was going to incur improvement costs of approximately $22.3
million. The improvements included
building a bridge over a canyon on the property and building a freeway
off-ramp.
The board found Villa’s
property, portions of which overlook the Pacific Ocean, consists of 59.168
gross acres with an estimated 51.488 buildable acres (2,242,817 square feet)
after adjustment for nonbuildable hillsides, and was purchased on May 11,
2006. The property was a planned mixed
high-end and commercial development purchased to develop a manufacturers’
outlet mall, entertainment center, hotel, and conference center. The property was also intended to have a
parking structure and four restaurants.
The board found the
purchase price of $25.7 million was not the fair market value of the
property. It also found the parking
structure would be an enhancement, adding value to the property, because
without it Villa would be unable to develop 600,000 square feet of commercial
space. It further found the property in
south Orange County to be “prime commercial property,” rents in the area were
increasing and few large-scale parcels of land were available because of high
level development activity in the real estate market. As a result, the board found the assessor’s
comparative sales valuation and the adjustments made by the assessor were not
flawed, and the fair market value of the property was $78,547,385, the amount
established by the assessor. The board
did not address the issue of adjustments for the cost of building the bridge,
the freeway off-ramp, and other development costs.
After the board’s
decision, Villa filed an action in the superior court for a refund of taxes
wrongfully collected on the property in the 2006-2007 tax year. The trial court found in favor of the County
to the extent it upheld the board’s ruling upholding the assessor’s initial
$78.5 million valuation of the property.
However, the court remanded the matter to the board to consider Villa’s
costs for building a bridge on the property, as well as the as a freeway
off-ramp and other finishing costs. The
court found Villa was entitled to its costs and attorney fees.
Villa thereafter filed a
motion for attorney fees pursuant section 1611.6. Although Villa sought $108,453.75 in fees,
the court awarded $70,806.71, finding the hourly rate was reasonable given the
attorneys’ “expertise, but the hours expended are excessive considering that expertise,
and the use of block billing in up to four to seven hour blocks makes it
impossible for the court to determine whether the time was well spent. Further, Villa . . . was successful only on a
portion of its claims, requiring a reduction to ensure attorney fees are only
awarded ‘for the services necessary to obtain proper findings.’”
Pursuant to Villa’s
unopposed request, we take judicial notice (Evid. Code, § 452) of the fact that
after judgment was entered in this matter, the assessment appeals board
accepted a stipulation between Villa and the assessor, reducing the enrolled
values of Villa’s 13 parcels of property for the 2008 and 2009 tax years.
II
DISCUSSION
A. Villa’s
Appeal
The trial court upheld
the board’s determination, rejecting Villa’s contention that the board erred in
failing to make an adjustment to the assessed value based on the large size of
the property (i.e., that it was entitled to a discount because of the large
size) and failed to make an adjustment for a percentage of the cost of building
a parking structure on the property, although the court also remanded the
matter to the board to consider adjusting the value based on certain costs of
developing the property. Villa contends
the assessor’s valuation of its property was arbitrary, the result of an
“illegal methodology,” and not supported by substantial
evidence.
1. Standard
of Review
The assessor and Villa
both used the comparable sales method of determining the value of the property
at issue. Four of the five comparable
sales used by the parties were the same.
When the comparable sales method is used, adjustments may be required to
be made to the value of the property based on differences between the
comparable properties and the property to be valued. Villa’s argument that the board erred in
reaching the value of the property boils down to this: In considering the comparable sales, the
board did not make the adjustments to the value of the property Villa’s expert
made. However, as Villa’s tax agent,
Sean Kelley, acknowledged at the hearing before the board, adjustments made in
comparing properties “are subjective.”
Contrary to Villa’s
assertion, this case does not involve a situation where the “validity of a
method of valuation” used by the assessor is challenged, requiring de novo
review. (County of Orange v. Orange County Assessment Appeals Bd. (1993) 13
Cal.App.4th 524, 529-530.) Comparable
sales, the method used by the assessor and Villa, is the preferred method for
determining the fair market value of property.
(Farr v. County of Nevada
(2010) 187 Cal.App.4th 669, 686.) The
gist of Villa’s argument is the assessor did not make the downward adjustments
Villa asserts should have been made.
There is no evidence the assessor did not consider the issue of adjustments regarding the relative size of
the comp properties and the restriction placed on Villa to build a parking
structure. Rather, the assessor
concluded adjustments were not called for based upon the facts in this case.
[assessor to “[m]ake such allowances as
he deems appropriate for differences between a comparable property at the
time of the sale and the subject property”] italics added; see
must show the assessor’s explanation for making or not making
adjustments].) Thus, the present case is
materially different from Main & Von
Karman Associates v. County of Orange (1994) 23 Cal.App.4th 337, where the
assessor purportedly used the comparable sales method of valuation, but made
4 of title 18 of the California Code of Regulations was merely a guideline the
assessor was not required to follow. (
Because both parties
used the comparable sales method of valuating the property, the assessor did
make certain adjustments based on the comparable sales, and Villa’s complaint
is the assessor erred in failing to make other adjustments, we apply the substantial
evidence standard of review. “When a
taxpayer challenges an assessment on the ground that a ‘valid method’ has been
‘erroneously applied,’ the trial court reviews the record that was before an
assessment appeals board and may overturn its decision only if the board’s
decision was not supported by substantial evidence. [Citation.]”
(Georgiev v. County of Santa Clara
(2007) 151 Cal.App.4th 1428, 1437.) The
same test is used on appeal. (
of Lake (1993) 12 Cal.App.4th 634, 640.)
Thus, factual determinations made by the board are entitled to deference
and are upheld if supported by substantial evidence. (Cochran
v. Board of Supervisors (1978) 85 Cal.App.3d 75, 80.)
2. The
Board’s Findings Are Supported by Substantial Evidence
Section 4 of title 18 of
the California Code of Regulations states the preferred method of valuating
property is by reference to sales prices “[w]hen reliable market data are
available.” When using sales of comparable
pieces of property, the assessor must “[m]ake such allowances
between a comparable property at the time of sale and the subject property on
the valuation date, in physical attributes of the properties, location of the
properties, legally enforceable restrictions on the properties’ use, and the
income and amenities which the properties are expected to produce.” (Cal. Code Regs. tit. 18, § 4 subd. (d),
italics added.)
title="">[4] This provision is at the heart of this
appeal. Villa argues the assessor was
required as a matter of law to make adjustments between the comparable sales
and Villa’s property. The County asserts
the assessor must consider adjustments, but the only adjustments required are
those the assessor deems appropriate. The County has the better argument.
The assessor used the
appraisal method set forth in the California Code of Regulations, title 18,
section 4. This was the same appraisal
method used by Villa. In fact, four of the
five properties used as comps by the assessor and Villa were the same. The additional comp used by Villa was a piece
of property in Riverside County, a property Villa’s expert conceded was the
weakest of the comps.
The assessor made
adjustments based on the comps. The
first comp was adjusted to an assessed value of $35.02 a square foot after
considering the property’s inferior ingress and egress and its substantially
smaller size, irregular shape, and the time since its purchase in 2005. The second comp was adjusted to an assessed
value of $37.09 a square foot because though it was substantially smaller than
Villa’s property, the second comp was found to be a superior piece of
property. The third comp, also smaller
was adjusted for the time of the sale, its inferior location and its irregular
shape. The fourth comp involved a
property slightly larger than Villa’s and was adjusted to $31.90 a square
foot. The fifth comp, a property
adjacent to the fourth comp, was adjusted to $35.44 a square foot. The assessor assessed Villa’s property at $35
a square foot before consideration of infrastructure costs, because land prices
were escalating since the sales of some of the comps.
The board upheld the
valuation finding the property, part of a mixed high-end residential and
commercial development, was purchased in May 2006 to build 600,000 square feet
of commercial space including a manufacturer’s outlet mall, four restaurants,
hotel, conference center and a parking structure. The board held the assessor met its burden of
prove on the issue of the fair market value of the property, having rejected
the purchase price as the fair market value.
build out the property to support a 600,000 square foot commercial space
without a parking structure. It concluded
the parking structure added value to the property and is not a detriment,
making a downward adjustment unnecessary.
The board also rejected the notion the assessor was required to make a
downward adjustment based on the fact Villa’s property is larger than all but
one of the assessor’s comps. It found
the fair market value as determined by the assessor was supported by Villa’s
admission there was a “high demand for similar property types” at the time of
its appraisal and the lack of any indication that demand abated by May
2006. Substantial evidence supports the
findings.
Villa argues the
assessor was required to make a downward adjustment based on the smaller size
of the comps; that a discount must be given to larger purchases. We agree with the assessor’s conclusion,
however, that when an area has been built out to such an extent large pieces of
property are rare, a downward adjustment on a larger piece of property is not
required. When there is a large supply
of an item, a discount for a large purchase has its merits. But when the supply is severely limited, the
value of a large amount of the item remains higher.
have the large open space available, unlike in the Inland Empire.
Neither was a downward
adjustment required for the parking structure, as a negative restriction on the
property. Construction of the parking
garage means less land devoted to parking and more land devoted to the planned
commercial development, including a hotel, something none of the comps
had. It was not unreasonable for the
board to conclude the parking structure would be an enhancement to the
property, not a detriment. Accordingly,
we find substantial evidence supports the board’s decision and the trial court
did not err in so holding.
B. Attorney
Fees
The trial court remanded
the matter to the assessment appeals board to consider making adjustments based
on certain development expenses the board did not consider. As a result, the board’s initial action was
deemed arbitrary and capricious, entitling Villa to recover reasonable attorney
fees. (§ 1611.6.) Villa’s amended memorandum of costs requested
$108,453.75 in attorney fees. The trial
court awarded $70,806.71. The County
appealed the award. It did not contend
below, and does not contend here, Villa is not entitled to attorney fees. The County’s contention is the amount of fees
awarded Villa is excessive. The County
argues the trial court abused its discretion in setting the amount of attorney
fees to be awarded, allegedly because the court did not follow the letter of
the law and its findings are not supported by substantial evidence.
We review the trial
court’s award of attorney fees for an abuse of discretion. (Serrano
v. Stefan Merli Plastering Co., Inc. (2011) 52 Cal.4th 1018,
1025-1026.) “The ‘experienced trial
judge is the best judge of the value of professional services rendered in his
court, and while his judgment is of course subject to review, it will not be
disturbed unless the appellate court is convinced that it is clearly
wrong.’ [Citations.]” (Serrano
v. Priest (1977) 20 Cal.3d 25, 49.)
Government Code section
800 authorizes the recovery of attorney fees in a civil action to review a
determination of any administrative proceeding, but limits the award to no more
than $100 an hour and a total of $7,500.
(Gov. Code, § 800, subd. (a).)
Section 1611.6 authorizes the award of attorney fees if the court finds
the county board’s findings are “so deficient that a remand to the county board
is ordered to secure reasonable compliance with the elements of findings
required by Section 1611.5.” When a
party is entitled to attorney fees under section 1611.6, “[t]he dollar
limitation set forth in Section 800 of the Government Code [does] not apply.” (§ 1611.6.)
The County contends
Villa asserted three theories for downward adjustments to the value of the
property (size, a portion of the cost of building a parking structure, and
costs in developing the property) and prevailed on but one (costs in developing
the property), so the award for attorney fees should have been limited to
one-third of the fees incurred.
name="_ftnref7" title="">[7] That seems an arbitrary determination. After all, Villa could equally argue it
raised five adjustments it believed should have been made by the assessor
(size, a portion of the cost of building parking structure, cost of building a
bridge, cost of building an off-ramp, and the cost of other, unspecified
costs), it prevailed on three of them, and additionally defeated the County’s
argument that the issue of development costs had been waived, an argument the
County raised in connection with the adjustment for development costs. Thus, Villa could argue it prevailed on four
of six issues litigated and should therefore be compensated by a minimum of 66
percent of its billed hours.
name="_ftnref8" title="">[8]
In any event, we do not
think it generally appropriate to merely divide the number of compensable
theories upon which a party prevailed by the total number of theories urged to
arrive at the percentage of the billed attorney fees to which the prevailing
party is entitled. (See
144 Cal.App.4th 140, 157 [“‘fees need not be apportioned when incurred for
representation of an issue common to both a cause of action for which fees are
permitted and one for which they are not’”].)
Because the statute authorizes the award of attorney fees only “for the
services necessary to obtain proper findings” (§ 1611.6), there perforce must
be some apportionment when less than
all the attorneys’ services are deemed necessary to obtain proper findings.
“The fact that a trial
judge deciding attorney fees may appropriately ‘allocate’ or ‘apportion’ fees
is well known.” (Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill
Condominium Assn. (2008) 166 Cal.App.4th 103, 129.) However, “[a]pportionment is not required
when the issues in the fee and nonfee claims are so inextricably intertwined
that it would be impractical or impossible to separate the attorney’s time into
compensable and noncompensable units.
[Citations.]” (
make an appropriate apportionment (Wysinger
v. Automobile Club of Southern California (2007) 157 Cal.App.4th 413, 430),
and as we noted above, we will not reverse the trial court’s award of attorney
fees absent a showing the trial judge’s determination was “clearly wrong.” (Serrano
v. Priest, supra, 20 Cal.3d at p.
49.) The trial judge did not award Villa
all the fees it sought. The judge
awarded Villa 65 percent of the fees sought.
The County has not carried its burden of proving the trial judge’s award
was clearly wrong.
We also reject the
County’s argument that the trial court disregarded that portion of section
1611.6 limiting the award of attorney fees to those “necessary to obtain proper
findings.” The court’s minute order
awarding the fees belies the County’s argument:
“The court grants the motion for attorney fees in the amount of
$70,806.71. The [court] finds the
attorneys’ hourly rates are reasonable given their expertise, but the hours
expended are excessive considering that expertise, and the use of block billing
in up to four to seven hour blocks makes it impossible for the court to determine
whether the time was well spent.
only on a portion of its claims, requiring a reduction to ensure attorney fees
are only awarded ‘for the services necessary to obtain proper findings.’” (Italics added.) The court clearly considered the limitation
imposed by section 1611.6.
Lastly, it is worth
noting section 1611.6 authorizes the award of attorney fees only to successful
fees to a county that successfully defeats the taxpayer’s lawsuit. Thus, the section contains a unilateral
fee-shifting provision. “Such
nonreciprocal fee provisions ‘are created by legislators as a deliberate
stratagem for advancing some public purpose, usually by encouraging more effective
enforcement of some important public policy.’
[Citations.]” (
provision is a desire to encourage injured parties to broadly litigate an improper
assessment. (Cf. Ibid. [purpose of statute is to encourage litigation of Cartwright
Act violations].) The Legislature’s
amendment of section 1611.6 in 1995 (Stats. 1995, ch. 498, § 12) to
specifically exempt attorney fees awarded under that section from the general
limitation placed on similar awards by Government Code section 800 negates the
County’s implied argument that review of the appropriateness of an attorney fee
award under section 1611.6 must be viewed with more scrutiny than that used in
any other civil matter where attorney fees are awarded, because taxpayers must
foot the bill when attorney fees are awarded in a matter such as this. The bottom line is: whether it is a nongovernmental party or
taxpayers who must foot the bill, the trial court’s decision must stand absent
a showing the court clearly abused its discretion, and that showing has not
been made here.
We do not find the trial
judge abused his discretion in apportioning the amount of attorney fees to be
awarded Villa. Accordingly, we affirm
the trial court’s award.
III
DISPOSITION
The judgment and order
of the superior court are affirmed. Each
party shall bear its own costs.
MOORE,
ACTING P. J.
WE CONCUR:
IKOLA, J.
THOMPSON, J.
All statutory references are to the Revenue and Taxation Code unless otherwise
stated.
name="_ftn2" title="">[2]
A member of Villa’s team acknowledged the parking structure would enhance the
property to the extent it permits development of the planned square footage.
