Sav-On Drugs, Inc. v. County of Orange

Under article XIIIA of the California Constitution, increases in appraised values of taxable real property are severely restricted; but a change in ownership will permit reassessment. In this case we are called upon to decide whether a corporate merger constituted a “change of ownership,” as that phrase is defined in the Revenue and Taxation Code and, if so, whether the Legislature’s interpretation of article XIII A, as expressed in that code, is constitutional.

I

Two corporations owning real property brought suit against the County of Orange and 15 municipalities for refunds of ad valorem property taxes paid under protest. The case was tried on stipulated facts with the county counsel representing all defendants.

The agreed facts may be summarized as follows: Jewel Companies, Inc. (Jewel) formed a wholly owned subsidiary, Jewel Development Company (JDC), which made a combined cash and stock tender offer for all the shares of then existing Sav-on Drugs, Inc. (Sav-on). Sav-on Realty, Inc. (Realty) was Sav-on’s wholly owned subsidiary; both corporations held title to real property.

JDC initially bought 28.3 percent of Sav-on’s issued shares for cash; and on November 6,…