McDonnell Douglas Corp. v. County of Los Angeles

County of Los Angeles (County) and City of Long Beach (the City; collectively, defendants) appeal from a judgment in favor of McDonnell Douglas Corporation, Inc. (MDC). The effect of the judgment is to vacate the determination by the Los Angeles County Board of Assessment Appeals (Board) that the land value of the subject property be assessed at $45,392,878, and to remand the matter for redetermination by the Board in accordance with the court’s judgment.

We reverse the judgment.

Factual Statement

I. Acquisition of the Subject Property

Prior to December 1981, MDC leased certain real property consisting of about 135 acres (the property) from the City. MDC’s leasehold interest in the property was 47 years. MDC’s rental payments were “exceedingly low.”

In December 1981, MDC exercised its option to buy the property. The purchase price was $15.5 million. The City’s appraiser, however, opined that the fee interest, free and clear of leases, had a fair market value of about $22 million. The acquisition of the subject property by MDC involved a three-sided land swap.

MDC’s acquisition of the subject property from the City constituted a “change of ownership” (see Rev. & Tax.…