Opinion
For Opinion on Hearing, see 58 Cal.Rptr. 733, 427 P.2d 509.
Rutan & Tucker, Homer L. McCormick, Jr., and James E. Erickson, Santa Ana, for petitioners and appellants.
Adrian Kuyper, County Counsel of Orange County, and Ronald Steelman, Deputy County Counsel, for defendants and respondents.
OPINION
WHELAN, Justice.
This appeal is taken from a judgment of the superior court denying mandate.
Petitioners initiated a proceeding before the Board of Supervisors of Orange County (Board) to incorporate the district of FACTS
Petitioners properly initiated a proceeding for the incorporation of a city in an area having a population of about 7,500 persons by filing a petition with the Board (Gov.Code § 34303).
A hearing was set for September 18, 1963, to consider protests which might be filed. Government Code, section 34311, then provided:
"If * * * the board * * * determines that written protests to the proposed incorporation have been filed with the board, signed by owners of land within the boundaries of the proposed incorporation representing 51 percent of the total assessed valuation of the land within said boundaries, the jurisdiction of the board of supervisors shall cease * * *."
At the September 18 hearing, an attorney who represented the committee opposed to incorporation stated to Board that his committee had obtained protests of owners representing $806,270 of the assessed value of land and that $1,617,394 was 51 per cent of the assessed valuation of all land within the boundaries. At his request, the hearing was continued to October 24, at 2:00 p.m.
At the second hearing, a deputy county assessor reported that protests had been received signed by owners of land and of separately assessed mineral rights representing 57.5 per cent of the total assessed value of such land and such rights.
At the request of petitioners, so that they might present further evidence, the hearing was continued until October 30 at 3:00 p.m., until which time opponents to the incorporation were to be allowed to file additional protests.
At the final hearing the County Assessor made the following report to Board:
"Total assessed value of land described within said petition including public utility values, $3,337,770. Total assessed value of separately assessed mineral rights, $783,900. Total, $4,121,670. * * Total assessed value of land signed for by petition for exclusion and protest to date, equal 49.62% or $1,656,330. Total mineral rights separately assessed and signed for as of October 24th, 1963, amounted to $765,630."
The total value of mineral rights represented by protests was then adjusted, because of duplications by protests, and of additional protests filed after October 24, at $764,080, which represented 97.47 per cent of all separately assessed mineral rights.
After protests made by persons who did not any longer own the land at the time of the signing had been disallowed, the value of the land and separately assessed mineral rights represented by protests was reported to be $2,420,410, or 58.72 per cent of the total assessed valuation of such land and mineral rights.
Petitioners presented evidence by way of statements made under penalty of perjury that the persons making such statements were the owners of certain parcels rather than persons who signed protests based upon claimed ownership of such parcels. They also represented to the Board that certain other parcels had not been owned by persons signing protests. The basis of that representation was the claim that proponents of incorporation had found deed records of such changes of ownership in the office of the county recorder and had made notes of the book and page numbers of such deeds of transfer. All such information was received by Board without accepting the validity of the offered hearsay as to the existence of deeds from persons signing protests anterior to the signing of such The county counsel advised Board that Board was not required to make an independent investigation of reported irregularities in the figures presented by the assessor; that the assessor's report might be accepted in the absence of evidence in the form of affidavit or under penalty of perjury by the true owner of land; that the oil and gas leases must be considered as "land" for the purposes of the protests. based upon that advice Board determined that there was more than a 51 per cent protest and terminated the incorporation proceedings.
At the trial of their petition for writ of mandate, the petitioners attempted to introduce evidence beyond that presented to Board. The court refused to permit the introduction of such evidence on the ground that the scope of review was limited to the record before Board. The court determined that the protest hearings were properly conducted and refused the writ.
ERRORS ASSERTED ON APPEAL
1. That protests signed by owners of lessees' interests under oil and gas leases should not have been considered.
2. That the trial court erred in refusing to accept evidence outside the record of the proceedings before Board.
3. That petitioners did not receive a fair hearing before Board.
WERE SUCH LESSEE INTERESTS PROPERLY CONSIDERED?
Among the conclusions of law is the following:
"The Board of Supervisors acted properly in accepting protests from owners of mineral interest of which substantially all if not all were owners of oil and gas interests, and if these mineral interests were improperly accepted the protests would not represent 51% of the assessed value of the land within the proposed City of Yorba Linda."
It has not been contended that the "mineral rights," whose assessed value were included in the total valuations represented by the protests, were not oil and gas leases. In arguing before the trial court, the attorney for respondents stated:
"Your Honor, I am going to address myself first to the oil and gas leases, inasmuch as they were heard first."
Before the Board, the County Counsel stated: " * * * it is my opinion that the oil leases are to be considered as land for this proceeding." At that same hearing, counsel for the proponents of incorporation submitted statements under penalty of perjury that oil and gas leases were the basis of the protests of one owner whose mineral rights were assessed at $356.060; of another whose mineral rights were assessed at $24,780; and of a third whose mineral rights were assessed at $8,520. Another protest on its face showed the maker to be owner of oil and gas leasehold interests with assessed valuation of $56,160.
The signers of numerous other protests claiming ownership of mineral rights describe themselves as oil companies and petroleum companies.
It is not denied that without such protests Board must have found that the protests represented less than 51 per cent of the total assessed valuation of land within the proposed city. Therefore, a determination that such protests by owners of mineral interest should not have been considered would be dispositive of the appeal.
We start out with the question whether "land," as used in section 34311, includes lessees' interests in oil and gas leases. Krouser v. County of San Bernardino (1947), 29 Cal.2d 766, 178 P.2d 441, held that "land," as used in the statute upon which section 34303 of the Government Code is based, and which prescribed the minimum proportion of assessed valuation necessary to a valid petition for incorporation, was used in its narrow and restricted sense; that sense is set out in the definition of section 659, Civil Code, as:
" * * * the solid material of the earth, whatever may be the ingredients of which it is composed, whether soil, rock, or other substance."
The court further said in Krouser:
"The requirements of section 2 that both numerical and geographic representation in land ownership be disclosed by the petition for incorporation gives the clue to the legislative intent. The requirement of geographic representation of ownership, as well as numerical representation, indicates the intent that numbers of owners alone should not control at least in the first instance." (p. 772, 178 P.2d p. 444)
The court noted also that in Delaney v. Lowery, 25 Cal.2d 561, 571, 154 P.2d 674, it had held that oil lease interests were real property within the broader and all-inclusive meaning of the word "land."
In a proceeding for the annexation of uninhabited territory, the question arose whether owners of mineral rights were entitled to protest the annexation in view of the distinctive language of section 34311, Government Code. In People ex rel. Mosk, etc. v. City of Santa Barbara (1961), 192 Cal.App.2d 342, 13 Cal.Rptr. 423, the owners of certain undefined mineral rights were held to be owners of "one-half of the value of the territory as shown by the last equalized assessment roll"because such rights were listed under the heading "land" on such assessment roll. The qualifying phrase "as shown by the last equalized assessment roll" played a determinative part in the reasoning of the court in People ex rel. Mosk, etc. v. City of Santa Barbara, supra, 192 Cal.App.2d 342, 13 Cal.Rptr. 423. The court there recognized that some mineral rights do not come within the definition of "land" under Civil Code, section 659, but concluded that since all mineral rights alike were included in the assessment roll under the heading "land," that circumstance was controlling.
The Legislature, in prescribing the percentage of assessed valuation sufficient to defeat an annexation of uninhabited territory, in section 35313, Government Code, had used this language:
"[T]he owners of one-half of the value of the territory as shown by the last equalized assessment role * * *."
It then stated that:
"As used in this article, 'value of the territory' means the value of land and improvements thereon."
By contract with section 35313, supra, section 35305, Government Code, defining the percentage of assessed valuation necessary to initiate an annexation of uninhabited territory requires the signatures of:
" * * * owners of not less than one-fourth of the land in the territory by area, and by assessed value as shown on the last equalized assessment role * *."
The distinction between "value of the land" and "value of the territory" was emphasized by the Supreme Court in People ex rel. Averna v. City of Palm Springs (1958), 51 Cal.2d 38, 45, 331 P.2d 4, which held that the word "land," as used in section 35305, Government Code, was used in its restricted sense and did not include improvements.
The court then said, concerning the 1955 amendment to section 35313, which added the definition herein quoted of "value of the territory":
"Since the Legislature has consistently required the petitions to be signed by owners of not less than one-fourth of the 'land * * * by assessed value' (Gov.Code, § 35305), and has at the same time required that annexation proceedings be terminated if protest is made by owners of one-half of the 'value of The contrast between the qualifications of property owners who seek to initiate proceedings for the annexation of uninhabited territory and of those who protest such proceedings is not paralleled by a contrast between the qualifications of those who would initiate incorporation proceedings and those who might protest such proceedings.
It is evident that the Legislature has had different objectives in mind in its choice of different language in sections 34311 and 35313. A determination of the insufficiency of protests against incorporation leads only to the calling of an election on the subject; the authority of Board over the boundaries of the proposed city is such that through exclusion of land it can so reduce the remaining area as to make the number of inhabitants therein insufficient for incorporation. (Peart v. Board of Supervisors, 145 Cal.App.2d 8, 301 P.2d 874.)
Thus it may be concluded that the word "land" in section 34311 has the same restricted meaning as in section 34303. It is the solid material of the earth.
While coal and metalliferous rock in place are the solid material of the earth, it is difficult to see in what sense the subject matter of an oil or gas lease can be said to be the solid material of the earth, since oil or gas often may be drained off by a well drilled wholly upon and under adjoining land. For that reason, the owner of the land's surface is not the absolute owner of the oil and gas in place (Bernstein v. Bush, 29 Cal.2d 773, 778, 117 P.2d 913; Caffroy v. Fremlin, 198 Cal.App.2d 176, 182, 17 Cal.Rptr. 668), nor could he as lessor confer upon his lessee any greater right than he himself possesses.
While an oil and gas lease for an indeterminate term is an incorporeal hereditament and falls within the broad definition of "real estate," and such a lease for a fixed term of years is only a chattel real and is not real estate (Dabney v. Edwards, 5 Cal.2d 1, 53 P.2d 962, 103 A.L.R. 822), interests under such leases of either class can be said to be land only in the broadest sense. (Delaney v. Lowery, 25 Cal.2d 561, 572, 154 P.2d 674.)
For that reason we do not consider it important whether the oil and gas leases under consideration here were for terms of years certain or for so long as petroleum or hydrocarbons might continue to be extracted from the leaseholds.
The following additional matters bear upon the interpretation of section 34311:
The first amendment of the statute to provide for termination of proceedings if the owners of 51 per cent in value of "land" filed written protests was in 1957. At that time, Krouser v. County of San Bernardino, supra, (1947) 29 Cal.2d 766, 178 P.2d 441, discussed herein, had been decided; People ex rel. Mosk, etc. v. City of Santa Barbara (May 1961), supra, 192 Cal.App.2d 342, 13 Cal.Rptr. 423, dealing with the annexation statute and herein discussed, had not been decided.
The statute was next amended in 1959 by the addition of the words:
"For the purposes of this section written requests for exclusion shall be deemed to be protests."
The next amendment was in 1961 by replacing the words: "no further petition for the incorporation of the same or substantially the same area shall be initiated for one year after the date of such determination" with the words: "no further petition for the incorporation of any of the same territory shall be initiated for one year after the date of such determination"; that brought the section to the form applicable to the incorporation proceedings under consideration here.
Land may be excluded from the boundaries of the proposed city under the Board's discretion to establish the boundaries By contrast with the statutory provisions for incorporation, the scheme for the annexation of uninhabited territory contains no provision that a request for exclusion be considered a protest. Prior to a 1955 amendment (Gov.Code § 35313.5), there was no provision for reducing the size of the proposed annexation; until then the city council, even without protest from a majority in value of ownership, might reject the proposed annexation, but could not diminish its area.
Section 34313, Government Code, declares that: "All lands included within the boundaries of a city are a part of the city." That language obviously refers to lands measured by their surface area, a conclusion reinforced by the language of section 34314. Again, the inclusion within the city limits of "lands" requires the inclusion of the surface area.
"The board may permit the inclusion within the city limits of lands not subject to taxation. When nontaxable lands become taxable they become subject to the jurisdiction of the city and to its ordinances and regulations." (Gov.Code § 34314.)
Amendments to the statute were made in 1963 and 1965 which do not affect the decision in this proceeding. However, we may examine them to see if there has been a substantial change in the language by the amendment of 1965, which provided:
"Where there is more than one qualified signer with respect to a parcel, the signature of any one qualified signer shall be sufficient to include the entire assessed value of the parcel."
If, by the use of the quoted language, the Legislature did not intend to make a change with regard to the meaning of the word "land," the language of the amendment is significant.
Firstly, the word "parcel" itself as applied to land generally means a measurable portion of the earth's surface, although county assessors may identify other taxable items as parcels. There are other statutes in which a clear distinction is made between a parcel of land and an interest such as a leasehold interest therein. Section 1248, Code of Civil Procedure, provides in part that the court, jury or referee shall fix:
"the value of the property sought to be condemned, and all improvements thereon pertaining to the realty, and of each and every separate estate or interest therein; if it consists of different parcels, the value of each parcel and each estate or interest therein shall be separately assessed * * *."
That distinction of meaning was recognized in City of Oakland v. Pacific Coast Lumber, etc., Co., 171 Cal. 392, 153 P. 705, and Marblehead Land Co. v. Superior Court, 61 Cal.App. 777, 215 P. 922.
Additionally, in providing for the signature of only one of several qualified signers, the Legislature can hardly have intended to empower the owner of a leasehold interest in a parcel of land to bind the entire parcel by his signature.
On the other hand, the addition to the code section of the quoted language does not create an inconsistency with or apparent departure from the earlier language of the statute so far as the meaning of the word "land" is concerned. A mere change in phraseology, incident to a revision of a statute, does not result in a Hammond v. McDonald,
While there may be reasons for the Legislature to have chosen language that would indicate an intention to give the owners of oil and gas leases a voice in determining whether an incorporation election should be held, we conclude from he language actually used that the interests of lessees under such leases are not "land" within the meaning of Government Code, section 34311.
The following are reasons, not apparent from the language of the statute, why the Legislature might choose to give a voice on the question of incorporation to owners of mineral leases:
OTHER POINTS RAISED
It is claimed by petitioners that the trial court should have received offered evidence as to the manner in which the assessor arrived at his report on the ownership of property within the area, and to show that certain of the protests registered as being by owners of land should not have been registered because of transfers from the persons signing the protests, prior to the making of such protests. However, neither at the hearing before the Board, nor in the trial court, did petitioners undertake to say that the assessed value of land and of oil and gas leases represented by valid protests was less than 51 per cent of the total assessed value. In the absence of the offer of such evidence, it was not error to exclude testimony that certain protests should have been rejected which represented a total insufficient to reduce the protests below 51 per cent.
It is claimed further that the Board conducted the hearing in an arbitrary and capricious manner in not investigating the claims that some of the signers of protests were no longer owners of the parcels of land at the time of signing, and in receiving protests filed as late as the date of, but before, the final hearing. We have read the entire transcript of the proceedings at the hearings on three different days. The proponents were given opportunity to present evidence before the Board; some written evidence under oath was received; while the hearsay objections of proponents were Under the statute in effect at the time the proceedings were commenced, the Board was permitted to consider all protests filed prior to the final hearing. The 1963 amendment became effective between the date of the first hearing and the time to which that hearing was then adjourned. That amendment imposed limitations upon the time within which additional protests might be filed. In view of our holding as to the incompetency of lessees under oil and gas leases to protest, it is immaterial whether protests filed more than 10 days after the first hearing should have been rejected. It is also true that the 60 days within which the final hearing must be had under section 34311 as it existed at all relevant times has long since expired.
See Forest Lawn Co. v. City Council, 244 A.C.A. 407, 53 Cal.Rptr. 452, as to applicability of revised procedure arising from amendment to annexation provisions of the Government Code.
The only substantial ground of appeal is the contention that lessees of oil and gas leases are not owners of land within the meaning of section 34311, Government Code.
The judgment is reversed. The trial court is directed to issue its writ of mandate to the Board that it find and determine that written protests to the proposed incorporation filed with the Board signed by owners of land within the boundaries of the proposed incorporation represent less than 51 per cent of the total assessed valuation of the land within said boundaries; and that the Board thereafter take such proceedings with regard to such proposed incorporation as are provided and permitted under chapter 1 of part 1 of division 2 of title 4, Government Code.
GERALD BROWN, P.J., and COUGHLIN, J., concur.
(a) The known presence of minerals capable of profitable exploitation will enter into the market value of land of which such mineral deposit is a part. In an area in which there is profitable exploitation of mineral rights, such exploitation theoretically may be either by the owner of the surface area or by lessees or by persons to whom mineral rights only have been sold, or to whom they have been reserved.
Section 607.5, Revenue and Taxation Code, was added in 1955 and provides as follows:
"In the event that a separate assessment of rights and privileges appertaining to mines or minerals and land is made, the descriptive words 'mining rights' or 'mineral rights' on the assessment roll shall include the right to enter in or upon the land for the exploration, development and production of minerals, including oil, gas, and other hydrocarbons."
A parcel of land whose mineral deposits are exploited by the owner of the surface area may have a unitary assessed value. Such an owner has the right to register a protest against incorporation, the weight of which is proportioned to the total assessed value of the lands within the district.
If the assessment practice is to reduce the total value of a parcel subject to a mineral lease by the assessed value of such lease, then the owner of the surface of a parcel subject to a mineral lease can register a protest whose weight will represent only the proportion between the total value of his parcel less the appraised value of the mineral rights to the total appraised value of the lands in the district.
In such situation, the owner of a mineral-producing parcel not subject to such lease has a disproportionate share in the decision on incorporation, either as being for or against incorporation.
(b) As owners of property taxable within the area, lessees under oil and gas leases have an interest in being subjected to the power of as few taxing agencies as possible.