Thrifty Corp. v. County of Los Angeles

Opinion

McCLOSKY, J,

Defendants County of Los Angeles (County) and City of Torrance (City) appeal from the summary judgment entered against them and in favor of plaintiff Thrifty Corporation.

Thrifty filed this action for refund of documentary transfer tax and for declaratory relief due to defendants’ insistence that it pay $2,621.85 as a documentary transfer tax growing out of Thrifty having leased a parcel of real property for 20 years with an option to renew for an additional 10 years. In granting Thrifty’s motion for summary judgment, the trial court ruled that “a documentary transfer tax under Section 11911 of the California Revenue and Taxation Code may not validly be applied to the recordation of leases or leasehold interests.” This appeal follows.

The sole issue presented by this appeal is when, if ever, can a leasehold interest in real property constitute “realty sold” for purposes of triggering taxation under Revenue and Taxation Code section 11911 (section 11911). Section 11911 provides in pertinent part:

“The board of supervisors of any county or city and county, by an ordinance adopted pursuant to this part, may impose, on each deed, instrument, or writing by which any lands, tenements, or other realty sold within the county shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by his or their direction, when the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale) exceeds one hundred dollars ($100) a tax at the rate of fifty-five cents ($0.55) for each five hundred dollars ($500) or fractional part thereof.”

In 1984, the County amended its regulations enacted pursuant to section 11911 and began taxing leases. The City of Torrance did likewise.

As we now explain, while leases are generally not taxable under section 11911 a lease which is of sufficient longevity to approximate a transfer in fee

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does warrant taxation. The conclusion that a lease generally does not constitute “realty sold” as that term is used in section 11911 follows from an examination of the legislative history of that section. An early incarnation of the bill that was eventually enacted as section 11911 expressly made taxable “transfers of lands and other realty . . . .” While this phrase was broad enough to encompass all leaseholds, the bill specifically limited its application to “lease[s] . . . under which possession is given to the purchaser .. . while title is retained by the vendor as security for payment of the purchase price.” Thus, in this early version of the bill, the Legislature expressly dealt with which leases were taxable and which were not.