UNIVERSAL CONSOLIDATED OIL COMPANY (a Corporation), Respondent, v. H. L. BYRAM, as County Tax Collector, etc., Appellant; LONG BEACH HARBOR OIL COMPANY (a Corporation), Respondent, v. H. L. BYRAM, as County Tax Collector, etc., Appellant, 25 Cal. 2d 353

CURTIS, J. Universal Consolidated Oil Company and Long Beach Harbor Oil Company duly filed with the Board of Supervisors of the County of Los Angeles, sitting as the board of equalization for said county, applications for reduction of the valuations placed by the assessor for the year 1940-1941 upon certain of their oil leases in the Long Beach Harbor-Wilmington Field. The applications were denied by the board, and the oil companies thereupon commenced these actions to enjoin collection of the taxes and to have the court revalue the leasehold interests for assessment purposes.

As the premise of their respective claims to relief, the plaintiffs charged that the particular method of assessment used in relation to their leases produced valuations which were unfair, unjust and excessive as compared with other property holdings of substantially the same character and value and similarly situated in the. county, and so imposed an unequal burden upon the complainants; that the clear purport of the testimony presented at the hearing before the board established these matters as proper cases for equalization, but that the hoard, in its

summary denial of the applications for reduction, intentionally failed and refused to consider the evidence before it and, in disregard thereof, expressly, deliberately, and wilfully withheld decision of the questions of fact in issue; and that their constitutional rights to due process and equal protection of the laws have thereby been invaded.

In their individual complaints the plaintiffs also recited their tender to the tax collector, and his rejection, of certain amounts which they estimated as properly representative of the taxes due for the year in question under a fair valuation of their leases, and such sums, together with the respective balances purportedly owing upon the basis of the assessed values, were deposited in court as a condition to the issuance of temporary injunctions in restraint of the collection of the challenged taxes pending the final determination of these matters. (County of Los Angeles v.

Ballerino, 99 Cal. 593, 597 [32 P. 581, 34 P. 329] ; County of Los Angeles v. Ransohoff, 24 Cal.App.2d 238, 245 [74 P.2d 828].) The defendant tax collector in his respective answers denied the material charges of the complaints as to the illegality of the method of computing the taxes in question and the failure of the board to determine the points in controversy upon the merits.

The actions were consolidated for trial, and there was introduced in evidence the applications for reduced valuations as mentioned, the reporter’s transcript of the testimony at the hearing before the board, and certain exhibits there presented. In addition, further evidence was introduced, over the objection of the defendant, as to the assessor’s method of assessment of the leases in question and as to the relative value of the plaintiffs’ and adjacent leasehold interests.

It was stipulated at the trial that it was the general method of assessment in Los Angeles County in 1940 to assess leasehold interests as here involved “at not to exceed 50 per cent of their market value. ’ ’ Counsel for the parties also agreed by stipulation as to the then prevailing tax rate for such property holdings. After a full hearing in these cases, the trial court found in favor of the plaintiffs on all material issues in dispute and made considerable reductions in the challenged valuations.

The taxes on the leasehold interests were then computed at the stipulated rate, and the clerk of the court, from the moneys previously deposited with him by the plaintiffs, was directed to pay the amounts so calculated as a full discharge of the disputed tax claims and to refund to the plaintiffs the respective segregable balances remaining. From the separate judgments so entered in favor of the plaintiffs, the defendant has appealed. As heretofore consolidated, the eases are presented on appeal upon one record and involve identical questions.

The principal point in controversy between the parties concerns the propriety of the plaintiffs’ recourse to the court for relief from the adverse determination of the county board of equalization.

It must be conceded, of course, that it is well settled in this state that to the authorized county board of equalization has been confided the duty of determining “the value of the property under consideration for assessment purposes upon such basis as is used in regard to other property, so as to make all the assessments as equal and fair as is practicable”; that in discharging this duty, “the board is exercising judicial functions, and its decision as to the value of the property and the fairness of the assessment so far as amount is concerned constitutes an independent and conclusive judgment of the tribunal created by law for the determination of that question,” adjudicating necessarily that “the property is assessed at the same value proportionately as all the other property in the county”; that such adjudication “cannot be avoided unless the board has proceeded arbitrarily and in willful disregard of the law intended for their guidance and control, with the evident purpose of imposing unequal burdens upon certain of the taxpayers’ ... or unless there be something equivalent to fraud in the action of the board”; and that “Mere errors in honest judgment as to the value of the property will not obviate the binding effect of the conclusion of the board.” (Los Angeles etc.

Co. v. County of Los Angeles, 162 Cal. 164, 169-170 [121 P. 384, 9 A.L.R. 1277]; see, also, Southern Pac. Land Co. v. San Diego County, 183 Cal. 543, 546 [191 P. 931] ; Birch v. County of Orange, 186 Cal. 736, 741 [200 P. 647] ; Wild Goose Country Club v. County of Butte, 60 Cal.App. 339, 342 [212 P. 711] ; Merchants Trust Co. v. Hopkins, 103 Cal.App. 473, 477-478 [284 P. 1072] ; Montgomery Ward & Co. v. Welch, 17 Cal.App.2d 127, 132 [61 P.2d 790] ; Southern Cal. Tel. Co. v.

Los Angeles County, 45 Cal.App.2d 111, 116-117 [113 P.2d 773].) While not classifiable with any aspect of fraud or bad faith, the lack of due process distinguishing the procedural phase of these equalization matters as submitted to the board furnishes an equally appropriate basis for the court’s intervention in protection of the plaintiffs’ constitutional rights.

From the transcript of the proceedings before the board, which was in evidence at the trial, it appears that on July 18, 1940, testimony in these cases was presented before three members: Supervisors Jessup, Hauge and McDonough; that at the termination of the oral hearing the matters were taken under advisement; and that a final ruling on the applications was made on August 1, 1940, at a formal meeting of the board, when, in addition to the above-named members, Supervisors Ford and Smith were also present, neither of whom had attended the previous hearing nor heard the testimony.

Two other applications were before the board at the same time for disposition; namely, those of Signal Oil & Gas Company, No. 268, and Long Beach Oil Development Company, No. 269. At this final meeting, when neither the complainants nor their counsel were present, the following colloquy incident to the denial of the applications in question took place: “Chairman Jessup: Signal Oil & Gas Company, No. 268, and Long Beach Oil Development Company, No. 269. Mr. McDonough: This is a possessory interest ? Mr. Ford: I was not in on this. Mr. Smith: 1-2 and 5. Mr. McDonough: This is in the same situation as Signal. Mr.

Smith: Tes. Mr. MeDonough: They are both alike. Mr. Smith: Signal Oil & Gas Company and the Universal Oil Company and Long Beach Oil Company. Mr. McDonough: There is a legal question involved here. Mr. Smith: I think they appeared only to protect their rights in court and made very little showing and I think we should deny it. Mr. McDonough: Well, I still think we should have an opinion of the County Counsel attached to the application for the advice of the Board and also in the event it is pursued in court. Mr. Smith: It is in court right now. Mr. McDonough: Let’s set it aside for a moment. Mr.

Smith: I made a statement during the hearing. . . . “Chairman Jessup: Now, on the Signal Oil & Gas Company, No. 268, Long Beach Oil Development Company, No. 269, Universal Oil Company, No. 1020, and Long Beach Harbor Oil Company, No. 1021. Mr. McDonough: Mr. Boiler [Deputy County Counsel] is here. Mr. Boiler: Yes. Mr. McDonough: Now, these oil applications that we heard, they indicated that the applications show a contractor’s lease with the land owners for the purpose of drilling of wells. Mr. Boiler: Yes, on Signal Oil & Gas and Long Beach Oil Development Company. Mr.

Smith: Universal and Long Beach Harbor Oil Company were similar. Mr. Boiler: I think the two were the only ones Mr. Holmes handled. Mr. McDonough: Holmes appeared for- Mr. Boiler: For Signal Oil & Gas Company and the Long Beach Oil Development Company. Mr. Smith: Didn’t you make a statement at the time of the hearing that they were here appearing in regard to protecting their rights ? Mr. Boiler: That was as to the Signal Oil & Gas and the Long Beach Oil Development Company only. Mr. Smith: The other two would be the same. Mr. Boiler: There is no question but what that is so on the two eases Mr. Holmes presented.

Mr. Smith: I move that the Long Beach Oil Development Company- Mr. McDonough: Wait a minute, I want to ask Mr. Boiler would it help the case any if it was referred to thfe County Counsel. Mr. Boiler: No. Mr. Smith: Move that it be denied. Mr. Boiler: On the Long Beach Oil Development Company the application was for cancellation and was heard in the same hearing and is to be acted upon by the Board of Supervisors. Mr. McDonough: That is another < application on a case coming to us. Mr. Boiler: You have answered on that. Mr. Smith: I move that the Signal Oil & Gas Company be denied. Chairman Jessup: So ordered. Mr.

Smith: I move that the Long Beach Harbor Oil Company be denied and Universal Oil Company No. 1020 be denied. Chairman Jessup: So ordered. Mr. Smith: That these four be denied. Chairman Jessup: So ordered. Mr. McDonough: On these matters it is a legal question to he determined hy the Court rather than a matter of equalization. Mr. Boiler: It is essentially so in the Signal Oil & Gas Company and the Long Beach Oil Development Company cases. It seems to me the others were factual in their showing. Mr. Smith: It is the same thing, they have a lease and are being assessed on their interests.

They have a contract and are being assessed as though it were a lease. They are protecting their interest and in case the Long Beach Oil Development Company and the other one should win in court, these people are in the same position. Mr. Boiler: Their agreement is not as carefully drawn up with the thought of not being taxable as a lease. Mr. Smith: Yes, the résumé they attach is exactly the same. Mr. Boiler: I didn’t look at them. Mr. McDonough: The basis is the determination of a legal question rather than an appeal on a question of equalization. Mr.

Boiler: It is so as to Signal and the Long Beach Oil Development Company.” (Italics added.) Prom this quoted portion of the record of the board proceedings, it is clear that two members (McDonough and Smith), one of whom had neither heard nor been advised as to the evidence adduced with regard to the two matters here in question, expressed their distinct understanding that they were passing upon four applications which presented wholly a point of law to be settled by the court rather than matters of equalization.

Despite the advice of the deputy county counsel herein concerned that the plaintiffs’ applications raised factual issues before the board, the said members adhered to the belief that all four oil companies were urging like objections to the assessed valuations of their respective properties and that if the complainants Signal Oil & Gas Company and Long Beach Oil Development Company should prevail in court upon the legal proposition which they advanced in their equalization hearing, the plaintiffs also would be sustained upon the same premise, which apparently rested on the claim that the particular form of contract employed would render them entirely exempt from taxation on their holdings.

No such argument had ever been made by the plaintiffs; rather, they had conceded from the outset that their leasehold interests were taxable, query simply having been raised as to the legality of the method of assessment followed in their cases. The plaintiffs had not been notified that their applications were to be considered at this final meeting, their counsel accordingly were not present, and they had no opportunity to clarify the evident confusion in the minds of the board members as to the issues involved.

While three of the board members, as above noted, had heard extensive testimony as to valuation bases with respect to the plaintiffs’ leases, apparently at the subsequent formal meeting of the board they did not correlate this prior hearing of factual evidence with the plaintiffs’ applications.

Thus, at the final meeting Supervisor Ford did not participate; Supervisors Smith and Mc-Donough expressed their mistaken views as above recited; and Supervisors Jessup and Hauge, in failing to deny any of the incorrect statements made incident to the adverse ruling upon the plaintiffs’ applications, manifestly acquiesced therein upon the same erroneous premise. Such affirmative showing in the record that the board acted without regard for the evidence before it overcomes the presumption that it performed its official duty “to equalize the valuation of taxable property in the county.” (Humboldt County v.

Dins-more, 75 Cal. 604, 607-608 [17 P. 710]; Hagenmeyer v. Board of Equalization, 82 Cal. 214, 218 [23 P. 14] ; Rancho Santa Margarita v.

San Diego County, 135 Cal.App. 134, 143 [26 P.2d 716].) But even if it were reasonable to assume that the silence of Supervisors Jessup and Hauge at the final meeting on these matters did not demonstrate their acquiescence in the confused views of their associates but that, on the contrary, they, as the result of attendance at the first hearing, had the character of the plaintiffs’ applications firmly in mind when they joined in the adverse decision thereon, still such determination by two rather than three qualified members (McDonough, Jessup and Hauge) of the tribunal authorized to equalize assessments would not satisfy the statutory requirement that at least a majority of the board must act upon the evidence presented. (Bandini Estate Co. v.

Los Angeles County, 28 Cal.App.2d 224, 229-230 [82 P.2d 185].) The fundamental premise of the plaintiffs’ recourse to the court for relief rests upon the proposition that, as with any ad valorem tax, their constitutional right to an equalization hearing comprehends a decision in the light of the evidence there introduced before any determination becomes final as to them. (Bandini Estate Co. v. Los Angeles County, supra, at p. BCJ; Londoner v.

Denver, 210 U.S. 373, 386 [28 S.Ct. 708, 52 L.Ed. 1103].) As any tax proceeding is in invitum in nature, each step must be taken in compliance with law or the proceeding is void. The equalization stage is no exception to this rule. Compliance with the constitutional requirement for an equalization hearing is not met unless the substance as well as the form of the hearing is granted to the complaining taxpayer. (Bandini Estate Co. v.

Los Angeles County, supra, at p. 227.) Typical illustrations of the denial of procedural due process which have been held to invalidate purported equalization determinations are: One man hearings (Bandini Estate Co. v. Los Angeles County, supra, at pp. 228-230); the taking of evidence without the presence of the taxpayer or his representative (Carstens v. Pillsbury, 172 Cal. 572, 577 [158 P. 218] ; Bandini Estate Co. v. Los Angeles County, supra, at p. 231); the refusal to allow reasonable opportunity for cross-examination (Interstate Commerce Com. v. Louisville a Nash. R.

R., 227 U.S. 88, 93 [33 S.Ct. 185, 57 L.Ed. 431]); the refusal to permit reasonable argument (Londoner v. Denver, 210 U.S. 373, 386 [28 S.Ct. 708, 52 L.Ed. 1103]); reliance in the concluding steps upon the advice of the assessor or the assessor’s attorney, particularly if done secretly (Morgan v. United States, 304 U.S. 1, 19-20 [58 S.Ct. 773, 82 L.Ed. 1129]); and the attempted determination of a case by members of the board who did not hear the evidence, if their vote be necessary to the determination (Hawkins v. Gd. Rapids Common Council, 192 Mich. 276, 291-292 [158 N.W. 953, Ann.Cas.1917E 700]).

In line with these instances of the denial of procedural due process are the present cases. The concluding steps of the equalization proceeding are many times the most essential to the preservation of the taxpayer’s rights. Thus, in Morgan v.

United States, supra, it is pertinently said in this regard (304 U.S. 20): “The requirements of fairness are not exhausted in the taking or consideration of evidence but extend to the concluding parts of the procedure as well as to the beginning and intermediate steps.” (Italics added.) Adverting to the above recited conduct of the board at its final meeting with respect to the plaintiffs’ applications, it is plain that there was no adjudication as to the facts in issue and no consideration of the evidence or the merits of the objections raised.

The decision of the board was simply that it had nothing to decide, and it accordingly failed to function as an equalization tribunal. In the light of its mistaken understanding as to the factual background of the applications before it for appropriate disposition, the consequences of the board’s omission to act upon the evidence presented were just as disastrous to the plaintiffs’ cases as would have been the board’s refusal to take jurisdiction of the proceedings or to accord the plaintiffs a hearing.

But the mistake of the board in the respect noted does not sanction the court’s undertaking to resolve the conflicting issues of fact bearing upon the taxable value of the plaintiffs’ leasehold interests. As appears from the numerous authorities cited in the forepart of this opinion, the respective county board of equalization is the fact-finding body designated by law to remedy excessive assessments (Cal. Const., art. XIII, § 9), and when that tribunal, after due hearing and within the limits of reasonable discretion, makes its findings on the facts, such decision is final and conclusive.

The present eases involve a dispute as to the proper method of assessment of plaintiffs’ property interests, there was a conflict in the evidence on that issue as presented to the board, and that tribunal should decide the merits or demerits of the complaint before it. It is essential to the performance of governmental functions that an orderly system of assessment and collection of taxes shall be maintained, and that the amounts of the assessments be fixed with certainty in a prescribed manner.

The prevailing statutory scheme in this state on equalization matters provides for a method of reviewing the values fixed by the assessor and a tribunal to pass upon any claims of overvaluation. (Rev. & Tax.

Code, § 1601 et seq.) While considerations of procedural due process here nullify the force of the authorized tribunal’s ruling and sustain its avoidance by the court in response to the plaintiffs’ applications for relief therefrom, the intent of the law governing equalization proceedings would require that these cases be remanded to the board for completion upon the basis of the evidence submitted at the hearing before it. True, the life of a board of equalization is limited by statute (Rev. & Tax.

Code, § 1603), but that provision is directory only and does not deflect from the statutory scheme that the authorized tribunal pass upon matters properly within its jurisdiction though in the completion of its work it must act at a time beyond the prescribed period. (Buswell v. Board of Supervisors of Alameda County, 116 Cal. 351, 354 [48 P. 226]; Whiting Finance Co. v. Hopkins, 199 Cal. 428, 436 [249 P. 853].) While in the ease of Bandini Estate Co. v.

Los Angeles County, supra, upon establishment of the invalidity of the equalization proceeding by reason of defects in the composition of the board and in the conduct of the hearing amounting to a lack of procedural due process, “it [was] ordered that the judgment [against the taxpayer] be reversed, and the cause remanded to the trial court to ascertain the proper values of the various parcels in question, and determine the amount of the taxes due thereon” (28 Cal.App.2d 232), it does not appear from the opinion, with but such passing treatment of the point, that the question of the proper tribunal to which valuation issues for purposes of assessment should first be submitted was thére raised or received considered judgment.

Insofar as the quoted language is contrary to the views herein expressed, it must be disapproved. The foregoing discussion renders it unnecessary to consider other propositions presented on these appeals relative to the conduct of the trial incident to the court’s determination of the merits of plaintiffs’ equalization claims. The judgment is reversed with directions to the trial court to remand these matters to the Los Angeles County Board of Equalization for further consideration and action in accordance with due process of law.

It is also ordered that the money placed on deposit herein by the plaintiffs as representative of their tax liability under the assessed valuations of their property interests and as a condition of their application for equitable relief, be retained by the court pending the determination of these equalization matters by the board.

While on this point the present cases present a peculiar question of procedure, “There is nothing particularly unusual or contrary to good practice for the court in the exercise of its equity powers to retain jurisdiction of the parties and the subject matter of the action, when the circumstances of the case warrant the same, until the appropriate remedy may be finally accorded by the judgment in the action” (Murphy v. Bucke’s Department Store, 199 Cal. 194, 198 [248 P. 668]), and upon analogous reasoning a like principle should prevail here to assure justice to all parties concerned.

Accordingly, the final disposition of these cases must await the board’s ruling on the merits of the plaintiffs’ claims and the court’s disbursement of the fund on deposit herein in conformity with the terms thereof. Shenk, J., Schauer, J., Edmonds, J., concurred. Carter, J., concurred in the judgment of reversal.