Kraft, Inc. v. County of Orange

In this case, we decide whether a California Constitution, article XIII A change of ownership of corporate real property is triggered by a corporate reorganization and merger when the shareholders of the acquired corporation become majority shareholders in the new parent corporation.

I.

In 1980, Kraft, Inc. (Kraft), and Dart Industries, Inc. (Dart), formed a new corporation, Dart & Kraft, Inc. (DKI). DKI set up two wholly owned subsidiary corporations which were then merged into Kraft and Dart. As a result, DKI owned Kraft and Dart and all of their assets but Kraft and Dart each continued to operate as separate subsidiaries.

As part of the transaction, the Kraft and Dart shareholders converted their respective shares of stock into shares of DKI stock. The former Kraft shareholders became owners of 51.5 percent of DKI stock; the former Dart shareholders received the other 48.5 percent. The DKI board of directors consisted of 13 Kraft nominees and 10 Dart nominees.

The County of Orange reassessed the Kraft properties located in the City of Buena Park. (Rev. & Tax. Code, § 64, subd. (c); Cal. Const., art. XIII A.) Kraft paid the taxes but appealed. After exhaustion of…