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San Diego Property Owner Fails to Win Tax Relief

William W. Abbott, Abbott & Kindermann, LLP on
Jun 13, 2012

One of the many key features of 1978's Proposition 13 was the rolling back of the taxes, and limiting annual increases. A change in ownership was treated as a triggering event for purposes of establishing property valuation, and in turn, the recalculated property tax liability. Duea v. County of San Diego clarifies as aspect of how, and when, tax liability may be recalculated. 

Over time, one of the important considerations in applying tax liability was whether a transfer took place. Subsequent to Proposition 13, the Legislature enacted legislation for purposes of defining certain transfers as not constituting a triggering event. Exemptions include acquisition through eminent domain, acquisition by a public entity, or governmental action resulting in a judgment of inverse condemnation. 

David Duea, as trustee for a revocable trust, sold property to a private developer active in the development/redevelopment of San Diego's downtown baseball complex, today known as Petco Park. Following the sale of the property, Duea acquired replacement property. Duea then filed a request with the county tax assessor to have the tax base from the sold property transferred to the acquired property. The assessor rejected the request on the basis that the property was not acquired by a public entity. 

Duea appealed to the Board of Equalization, arguing that the acquisition was the functional equivalent to an eminent domain proceeding (which would be a basis for base transfer). Backing up Duea, The city's development corporation, responsible for the ballpark and related projects, issued a letter to Duea indicating that had he not sold, the city would have condemned the property. The Board of Equalization affirmed the decision of the assessor.

Duea filed a Superior Court action. At trial, Duea argued that the developer-buyer was acting as an agent for the city, but the trial court rejected this argument on the basis that Duea had not presented this issue to the Board of Equalization, thereby failing to exhaust administrative remedies. 

The Court of Appeal affirmed, concluding that Duea had administratively pursued the "eminent domain" argument, but not the acquisition by agency legal theory and that the trial court was not obligated to consider the alternative theory. Recognizing the long line of cases which vest the primary legal proceeding with the local board of equalization, the appellate court declined to broaden the authority of the trial court.

The Case: 

Duea v. County of San Diego (Feb. 29, 2012, D058333), certified for publication March 27, 2012, 204 Cal.App.4th 691; 2012 Cal.App. LEXIS 350

The Attorneys:

James Ellis Schneider, LL.M., Inc., and James Ellis Schneider for Plaintiff and Appellant. 

Thomas E. Montgomery, County Counsel, and Walter Joseph DeLorrell III, Deputy County Counsel, for Defendant and Respondent.