Legal Question in Real Estate Law in California

The property taxes have probably been assessed and paid based upon the legal description of your lot, as recorded, rather than on the basis of where the house sits or any other factor that is only discoverable from a field inspection. This isn't always the case, but usually. So, payment of taxes would only serve to confirm the recorded "legal" dimensions of your property. Unless there is a dispute under way with the neighbor over something, I'd put the fence where the surveyor says the lot-line is. If this went to court, I'd think the judge would uphold the surveyor's finding of where the described-in-the-deed lot line is, rather than granting any adjustment to conform to the way the house is built or where the roof overhang is, based on a recent case I was involved in in Stockton. On the other hand, the court would probably rule that you had acquired an easement for the overhang (encroachment) of your roof into the neighbor's air space, so there is no trespass and no ground for forcing you to alter your roof.

I hope you can work this out without a dispute and without going to court.

As to the possible reasons why this came about in the first place, high on the list I'd put buildr error in constructing the houses back in 1912-13, followed by a 1912 surveyor error, plus some other possible causes including a slight possibility that your modern survey is in error or that there has been some soil movement over the last century.