Guild Wineries & Distilleries v. County of Fresno

Opinion

In August 1971, appellant petitioned the Board of Supervisors of Fresno County, sitting as a county board of equalization, for a reduction of the assessment made by the county assessor for the tax year 1971-1972 on appellant’s winery and distillery plant in Fresno. Appellant did not challenge the value placed by the assessor upon the land or inventory but contended that the assessed value of the improvements was excessive; using the replacement cost approach to appraise the improvements, the assessor valued the plant at $3,023,340.

At the hearing before the board, appellant presented evidence to show that appellant is a large agricultural cooperative engaged in the crushing and selling of wine products and that on February 26, 1971, three days before the lien date, it purchased the Roma Wine Division of Schenley Industries for the total purchase price of $12,807,137; the purchase encompassed the winery plant in Fresno, a winery in Kingsburg, a winery in Delano, vineyards in Tulare and Kern Counties, brands and trademarks, and supplies and inventories. Then, using data prepared by its accountants, appellant attempted to prove that the value of the Fresno plant was $1,451,935.

Following is a brief résumé of the method used by the accountants in arriving at that value.

After appellant purchased the Roma Wine Division of Schenley Industries, it sold the vineyards in Tulare and Kern Counties to the Buttes Gas and Oil Company for $4 million; the accountants deducted $4 million from the initial $12,807,137 purchase price, leaving a balance of $8,807,137.

In a third step, the accountants used the assessed value placed upon the land on which each of the three wineries was located; they determined that the sum of $378,800 was the combined fair market value of the lands. They deducted this amount from the $2,750,735 balance, leaving $2,371,935 as the combined value of all improvements on the three plants; the accountants fixed the value of the Fresno winery, the largest of the three, at $1,451,935, the value of the Delano winery at $595,000, and the value of the Kingsburg plant at $325,000.

At the conclusion of the hearing, the board denied appellant’s petition. Appellant then instituted this action in the court below for judicial review; after observing that the sale of the Roma Wine Division of Schenley Industries was not an open market sale, the court upheld the decision of the board of supervisors. This appeal followed.

Appellant concedes that in reviewing the decisions of a county board of supervisors in equalization matters, it is not the function of an appellate court, nor was it the function of the trial court, to weigh the evidence; while sitting as the county board of equalization, the board of supervisors is performing a constitutional function, and the test, on judicial review, is whether there is any substantial evidence to support the decision. (Westlake Farms, Inc. v. County of Kings, 39 Cal.App.3d 179 , 183-185 [ 114 Cal.Rptr. 137 ]; see also American Chemical Corp. v. County of Los Angeles, 42 Cal.App.3d 45 , 51-52 [ 116 Cal.Rptr. 751 ]; Hunt-Wesson Foods, Inc. v. County of Alameda, 41 Cal.App.3d 163 , 169-176 [ 116 Cal.Rptr. 160 ].)

Appellant maintains that the evidence proves, as a matter of law, that the sale of the Roma Wine Division of Schenley Industries to appellant was an open market, arm’s length transaction and that this single sale established an “actual market” for the Fresno Winery and Distillery Plant. Appellant reasons that when there is an “actual market” for a

Initially, we agree with appellant’s position that the evidence presented at the hearing before the board of supervisors proved, as a matter of law, that the sale of the Roma Wine Division of Schenley Industries was an open market transaction. An “open market” transaction is one where the sale price is negotiated between the buyer and seller as distinguished from a sale resulting from the submission of bids where the seller sells to the highest bidder or the buyer buys from the lowest bidder. (See Harvey v. City and County of Denver, 92 Colo. 114 [ 18 P.2d 321 , 322]; Albany Supply and Equipment Co. v. City of Cohoes, 47 Misc.2d 312 [ 262 N.Y.S.2d 603 , 605].) The fact that the sale in question was not advertised is immaterial.

Secondly, we agree with appellant’s contention that the evidence proved, as a matter of law, that the sale of the Roma Wine Division of Schenley Industries was an arm’s length transaction. There was no relationship whatsoever between the two corporate entities and the sale was consummated only after extensive negotiations between the officers of the companies; the uncontradicted evidence shows that appellant was contacted in 1970 by a business opportunities broker concerning the possible acquisition of the Roma Wine Division, and almost six months transpired before the sale was completed.

of the transfer and which affect the price agreed upon by the parties. Market value, therefore, is generally established by numerous sales of the same or comparable property and, although the price paid for property may be admissible to prove its market value, that fact alone is not conclusive.’

“Although a single arm’s length transaction does not establish market value, and the price indicated thereby is not controlling as to the value of the property, such price may be considered as one factor in arriving at the full cash value of the property in question.”

Appellant, therefore, would have us overextend the holding of the De Luz court. In that case, when the Supreme Court held that a property owner cannot escape taxation simply because there is no “actual market” for his property, it was equating an “actual market” with an “active market.” (See Kaiser Co. v. Reid, 30 Cal.2d 610 , 623 [ 184 P.2d 879 ].) It was in this context that the court stated that where there is no “actual market” for the property the assessor must then use other recognized appraisal methods to arrive at its taxable value. It is significant that the De Luz court was referring to “. . . industrial properties, where their special purposes in use or their mammouth size preclude the creation of an ‘active market’ for their disposition.” (Kaiser Co. v. Reid supra, 30 Cal.2d 610 , 623.) It is also significant that in the De Luz opinion the court stated; “Assessors generally estimate value by analyzing market data on sales of similar property, replacement costs, and income from the property [citations], and since no one of these methods alone can be used to estimate the value of all property, the assessor, subject to requirements of fairness and uniformity, may exercise his discretion in using one or more of them.” (Supra, 45 Cal.2d at pp. 563-564.)

In the case at bench appellant presented no reliable market data from which the value of the Fresno Wineiy and Distillery Plant could be calculated. It merely presented evidence of a single, open market, arm’s length sale of a substantial business enterprise by one large corporation to another, of which the Fresno plant was only one of many components; appellant then attempted to fix the value of the plant by evaluating each of the components separately. It is common knowledge that the sale price of a large business enterprise consisting of many components does not reflect, necessarily, the true value of any one component were that component to be sold separately. It is also common knowledge that the value business men ascribe to the various components of a large business enterprise often is guided by tax consequences and other business