Japan Line, Ltd. v. County of Los Angeles

• Citation: 20 Cal.3d 180,141 Cal.Rptr. 905,571 P.2d 254
• Court: United States State Supreme Court (California)
• Decision Date: 18 November 1977
• Parties: , 571 P.2d 254, 1977 A.M.C. 2675 JAPAN LINE, LTD., et al., Plaintiffs and Respondents, v. COUNTY OF LOS ANGELES et al., Defendants and Appellants. L.A. 30703.

Page 905

141 Cal.Rptr. 905

20 Cal.3d 180, 571 P.2d 254, 1977 A.M.C. 2675

JAPAN LINE, LTD., et al., Plaintiffs and Respondents, v. COUNTY OF LOS ANGELES et al., Defendants and Appellants.

L.A. 30703.

Supreme Court of California.

Nov. 18, 1977.

As Modified Dec. 28, 1977.

Rehearing Denied Dec. 29, 1977.

[571 P.2d 255] John H. Larson, County Counsel, and James Dexter Clark, Deputy County Counsel, Los Angeles, for defendants and appellants

Graham & James, Reed M. Williams and Ronald L. Young, Long Beach, for plaintiffs and respondents.

MANUEL, Justice.

In this action for recovery of ad valorem personal property taxes paid under protest, defendants City of Los Angeles and County of Los Angeles appeal from a judgment entered after a nonjury trial in favor of plaintiffs and against defendants for the recovery of said taxes together with interest and costs. After decision by the Court of Appeal, Second Appellate District, Division Three, reversing the judgment, we granted a hearing in this court for the purpose of giving further consideration to the issues raised. Having made a thorough examination of the cause, we have concluded that the opinion of the Court of Appeal prepared by Justice Cobey and concurred in by Acting Presiding Justice Allport and Justice Potter correctly treats and disposes of the issues involved and we adopt such opinion as and for the opinion of this court. That opinion (with appropriate additions and deletions) is as follows: ^*

The sole question presented by this appeal upon an agreed statement from a tax refund judgment is whether appellants, the County of Los Angeles and the City of Los Angeles, may impose an apportioned ad valorem tax upon cargo shipping containers, taxed in Japan, used here essentially exclusively in foreign commerce and owned and controlled by Japanese taxpayers. These taxpayers are six shipping lines incorporated under the laws of Japan which have their principal places of business and commercial domiciles there.

FACTS

The facts as stipulated between the parties disclose that the containers at issue are in constant transit save for repair time and time awaiting new cargo. They are only intermittently physically present within the jurisdictions of appellants for an average stay of less than three weeks. They are used exclusively for the transportation of cargo for hire in foreign commerce. They are either full or empty. The full containers are loaded with cargo inbound from or outbound to foreign ports. The empty containers are moved intrastate within California and interstate from California solely to pick up cargo to be carried in foreign commerce or to return the containers themselves to ports (principally Los Angeles) for placement aboard the taxpayers' outbound vessels. The containers are never used for either intrastate or interstate transportation of cargo except in continuation of international voyages.

The Taxpayers' Contentions

Since the judgment under appeal was rendered, ( ) (this court) decided unanimously in the case of Sea-Land Service, Inc. v. County of Alameda (1974) 12 Cal.3d 772, 775-776, 117 Cal.Rptr. 448, 528 P.2d 56, that a California county may tax such containers, under circumstances of use essentially identical to those before us, where the containers were used mainly in foreign commerce ¹ but were owned by a shipping company incorporated and commercially domiciled within this country.

The taxpayers contend that the Sea-Land decision is not dispositive of this case because, there, Sea-Land conceded that its containers were subject to local taxation within the United States. Its position was that such taxation must be done exclusively at the home port of its vessels. (Sea-Land, supra, at pp. 781, 786, 117 Cal.Rptr. 448, 528 P.2d 56.) Here, the home ports of the taxpayers' vessels which are specifically designed to carry the containers at issue, are in Japan. The taxpayers' vessels are likewise registered there rather than in the United states.

The initial position of the taxpayers on this appeal was that under both the home-port doctrine and the most favored nation provisions of the 1953 treaty between the United States and Japan their containers are not subject to taxation by any jurisdiction except Japan. ² In this connection, we note that the containers of the taxpayers are subject to property taxation in Japan and have actually been so taxed there. Similar containers, similarly used in Japan but owned and controlled by steamship At oral argument (before the Court of Appeal) counsel for the taxpayers advanced a new ground and an additional factual basis for their position that their containers notwithstanding the continuous use of the containers in the United States within appellants' jurisdictions, are not subject to property taxation by any government except that of Japan. They there argued that the property taxes at issue constitute indirect tonnage duties prohibited by article I, section 10, clause 3 of the United States Constitution and, in support of one of their initial contentions that these taxes are also prohibited by applicable treaties, called our attention for the first time to the existence of the supplementary convention of 1964 (15 U.S.T. 1824) to the 1939 convention between Sweden and the United States on double taxation. (54 Stat. 1759.)

companies domiciled in the United States, have not been so taxed there.

We could disregard this new matter without any consideration thereof because, without any showing of justification therefor, it was presented after the normal briefing process had been concluded. (See Lotts v. Board of Park Commrs. (1936) 13 Cal.App.2d 625, 636, 57 P.2d 215; Sinclair v. Aquarius Electronics Inc. (1974) 42 Cal.App.3d 216, 229, 116 Cal.Rptr. 654.) But in the interest of being as fully informed as reasonably possible on the fundamental tax issue presented, ( ) (the Court of Appeal) waived this obvious impropriety in the taxpayers' appellate procedure and asked for and obtained from the parties supplemental briefs on the new matter.

DISCUSSION

1. The Home-port Doctrine

The taxpayers concede that in the field of interstate commerce the home-port doctrine has been superseded by the apportionment doctrine, but they argue that it is still extant in the area of foreign commerce where apportionment cannot be substituted except perhaps by treaty or other agreement. ( ) (They urge that) in Scandinavian Airlines System, Inc. v. County of Los Angeles (1961) 56 Cal.2d 11, 15, 17, 33, 36-37, 14 Cal.Rptr. 25, 363 P.2d 25 (hereafter SAS ), (this court) applied the home-port doctrine to foreign owned, based, registered and taxed airplanes flying exclusively in foreign commerce and using Los Angeles quite infrequently as their sole United States terminus and thereby struck down the apportioned property taxes upon such planes which appellants had imposed.

[ ] ]However, in Sea-Land we specifically addressed this very contention (12 Cal.3d at pp. 784-786, 117 Cal.Rptr. 448, 528 P.2d 56), namely that the home-port doctrine retained vitality with respect to foreign commerce as distinguished from interstate commerce pursuant to our decision in SAS, and clearly rejected it. First, we concluded that "we are not inhibited by SAS from concluding that the home-port doctrine does not shield the property of a taxpayer from a fairly apportioned ad valorem tax levied by a nondomiciliary jurisdiction with which the taxpayer has sufficient contacts, even if the taxpayer is engaged in foreign commerce . . . . The principles of apportioned taxation enunciated in Pullman, Ott (Ott v. Mississippi Barge Line, 336 U.S. 169, 69 S.Ct. 432, 93 L.Ed. 585) and Braniff (Braniff Airways v. Nebraska Board, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967) are to be applied to instrumentalities so engaged." (Id. at p. 786, 117 Cal.Rptr. at p. 458, 528 P.2d at p. 66.) Second, we specifically adopted the reasoning of Justice Traynor in his dissent in SAS to the effect that the threat of double taxation from foreign taxing authorities has no role in commerce clause considerations of multiple burdens, since burdens in international commerce are not attributable to discrimination by the taxing state and are matters for international agreement. (Id. at p. 788, 117 Cal.Rptr. 448, 528 P.2d 56.)

The only asserted distinction between the case at bench and Sea-Land is that the cargo shipping containers in Sea-Land were owned by a United States corporation whereas the containers herein are owned by foreign corporations. The taxpayers have failed to cite any authority which would support a conclusion that instrumentalities of commerce used in foreign commerce are subject to different constitutional protection depending upon whether they are owned by foreign or domestic corporations. Existing authority supports the opposite conclusion. For example in Canadian Pac. Ry. Co. v. King Co. (1916) 90 Wash. 38, 155 P. 416, the Washington Supreme Court rejected the home-port doctrine and applied to a Canadian railway corporation the apportionment rule applied by the United States Supreme Court to the rolling stock of a domestic railway corporation used in foreign commerce in Pullman's Car Co. v. Pennsylvania (1891) 141 U.S. 18, 23, 11 S.Ct. 876, 35 L.Ed. 613. Sea-Land is fully dispositive of the commerce clause and federal exclusivity issues raised in the case at bench.)

2. The Tonnage Duty Prohibition

Article I, section 10, clause 3 of the United States Constitution prohibits the imposition by states ( ) of tonnage duties. The taxpayers contend that this prohibition invalidates the local property taxes at issue since they in practical effect are tonnage duties upon the cargo containers.

We disagree. In the recent case of Michelin Tire Corp. v. Wages (1976) 423 U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495, the United States Supreme Court held that the assessment by Georgia of a nondiscriminatory ad valorem property tax against imported tires was not within the...