Prudential Insurance of America v. City & County of San Francisco

This case involves a dispute between respondent Prudential Insurance Company of America (Prudential) and appellant City and County of San Francisco, as represented by its assessor’s office (the Assessor), over the amount of real property taxes owed on a hotel purchased by Prudential. The central issue is whether a debt at a below-market interest rate which a buyer assumes from a seller must be discounted to its cash equivalent value in determining for purposes of property tax the value of the property sold. We hold that such discounting is required by state law. We also hold the court properly awarded Prudential attorney fees under Revenue and Taxation Code section 5152. Finally, we reverse the judgment in part and direct the superior court to remand the case to the assessment appeals board (AAB) for resolution of factual questions related to the discounting.

I. Facts

Prudential purchased the Hyatt on Union Square Hotel (hotel) from the Bank of America on July 31, 1980, for $85 million. Prudential paid $69,028,926.61 in cash and assumed a loan from the Bank of America of $15,971,073.39. The loan required monthly payments of $166,214.21 for an additional 12 years and 6…