Zantop Air Transport v. San Bernardino County

• Decision Date: 14 November 1966
• Citation: 54 Cal.Rptr. 813,246 Cal.App.2d 433
• Court: California Court of Appeals Court of Appeals
• Parties: ZANTOP AIR TRANSPORT, Plaintiff and Appellant, v. COUNTY OF SAN BERNARDINO, Defendant and Respondent. Civ. 8001.

Page 813

54 Cal.Rptr. 813

246 Cal.App.2d 433

ZANTOP AIR TRANSPORT, Plaintiff and Appellant, v. COUNTY OF SAN BERNARDINO, Defendant and Respondent.

Civ. 8001.

Court of Appeal, Fourth District, Division 2, California.

Nov. 14, 1966.

Hearing Denied Jan. 18, 1967.

[246 Cal.App.2d 435] Finch, Bell, Duitsman & Margulis and Roger G. Duitsman, Inglewood, for plaintiff and appellant.

Stanford D. Herlick, County Counsel, and Robert R. Walker, Deputy County Counsel, for defendant and respondent.

OPINION

TAMURA, Justice.

Plaintiff, a non-domiciliary corporation engaged in interstate air transportation of cargo and passengers under Government contracts, appeals from an adverse judgment in its action against the County of San Bernardino to recover ad valorem taxes levied on an apportioned value of plaintiff's flight equipment.

The case was submitted to the trial court on the following stipulated facts:

Plaintiff is a Michigan corporation with its principal office in Detroit. Its sole business is the fulfillment of two contracts with the United States Air Force for air transportation of cargo and, occasionally, upon approval of the Air Force, passengers between air bases in the United States both in and out of California, including Norton Air Force Base in San Bernardino County and bases in Santa Barbara, Solano and Sacramento Counties. In the performance of the contracts, plaintiff owned a fleet of 20 C--46s and 4 DC--6As which it operated on regularly scheduled flights, either daily or on alternate days. A specific plane was not regularly assigned to the same scheduled run, the planes being substituted from time to time. No corporate officers were stationed in San Bernardino County. All matters relating to its contracts and the administration thereof were handled from the plaintiff's home office in Detroit. It did maintain in San Bernardino County a facility for the repair and maintenance of its equipment but the tax thereon was separately assessed and paid and is not involved in this action.

For the tax year 1962--1963, defendant's assessor assessed the planes on the basis of their average physical presence during the year using the following method: He determined the average daily plane hours of physical presence in the County for each type of aircraft by taking the ground time at Norton Air Force Base and adding thereto, for direct flights to and from Norton and out-of-state bases, 'flight time' within California or, for flights to and from bases within the state, one-half of the air time. For flights occurring on alternate days, he divided the total by two. By multiplying the market value of the aircraft by the ratio which the total average plane hours thus derived bore to twenty-four, he arrived at an apportioned value continuously present during the tax year for each type of aircraft making regularly scheduled stopovers at Norton. There was no dispute concerning the market value which the assessor assigned to the aircraft.

It was stipulated that the counties of Santa Barbara, Solano, and Sacramento levied a similar tax on plaintiff's aircraft.

Plaintiff paid the tax under protest and brought this action. The complaint alleged nine causes of action, each stating a separate ground of attack on the assessment, but by stipulation of the parties all but three were dismissed. ¹ It was stipulated that the remaining causes of action presented only two legal issues for determination: (1) Whether, under the Constitution and statutes of California, defendant was empowered to levy an ad valorem tax on migratory flight equipment, and (2) whether the inclusion of 'flight time' in the apportionment formula was proper.

The trial court made findings in accordance with the stipulation, concluded that the assessment was valid, and entered judgment for defendant.

Plaintiff concedes that under the rule enunciated in Braniff Airways, Inc. v. Nebraska State Board of Equalization, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967, California has jurisdiction to levy an ad valorem tax on plaintiff's aircraft on a properly apportioned basis, but contends that it has not exercised that power. To support that contention, plaintiff relies upon the language of section 10, article XIII of the California Constitution and section 404 of the Revenue and Taxation Code implementing it, providing for the assessment of property '* * * in the county * * * in which it is situated.' The argument is that the taxation of migratory flight equipment could not have been contemplated because by its nature such property is not 'permanently situated' in a particular county. If plaintiff's contention is sound it would be in the enviable position of enjoying tax exemption on the value attributable to use in California both in this State and in the domiciliary State of Michigan. Michigan would be precluded from taxing values having a taxable situs in this State whether or not California elected to tax. (Central R.R. Co. of Pa. v. Com. of Pa., 370 U.S. 607, 82 S.Ct. 1297, 8 L.Ed.2d 720.)

The word 'situated', however, as used in section 10, article XIII of the Constitution and section 404 of the Revenue and Taxation Code is synonymous with 'situs'; it means having such contacts as confer jurisdiction to tax. (Brock & Co. v. Board of Supervisors, 8 Cal.2d 286, 65 P.2d 791, 110 A.L.R. 700; Town of Cady v. Alex Construction Co., 12 Wis.2d 236, 107 N.W.2d 267, 108 N.W.2d 145; City of Dallas v. Texas Prudential Ins. Co., 156 Tex. 36, 291 S.W.2d 693.) Plaintiff admits that under Braniff Airways, Inc. v. Nebraska State Board of Equalization, supra, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967, a properly apportioned value of its aircraft has a taxable situs in this state. Past decisions have implicitly, if not expressly, determined that the situs of such property within the state is in the county in which it is present on a regular and ascertainable portion of its life. (Flying Tiger Line, Inc. v. County of Los Angeles, 51 Cal.2d 314, 333 P.2d 323; Slick Airways, Inc. v. County of Los Angeles, 140 Cal.App.2d 311, 295 P.2d 46.) The fact that section 14, article XIII of the Constitution providing for the centralized assessment of railroad, utility, and certain other types of property fails to include aircraft cannot be taken as an intention to exempt such property from taxation. It is a constitutional mandate (section 1, article XIII), implemented by legislation (Rev. and Tax.Code, §§ 201, 401, 404), that all property, not otherwise exempt, shall bear its fair and equal burden of taxation. (Feather River Power Co. v. State Board of Equalization, 206 Cal. 486, 274 P. 962.) There are no constitutional or statutory provisions exempting interstate migratory flight equipment.

The cases of People v. Niles, 35 Cal. 282; Rosasco v. County of Tuolumne, 143 Cal. 430, 77 P. 148; Church v. City of Los Angeles, 96 Cal.App.2d 89, 214 P.2d 550, and Brock & Co. v. Board of Supervisors, supra, 8 Cal.2d 286, 65 P.2d 791, 110 A.L.R. 700, cited by plaintiff do not support its narrow definition of the word 'situated'. They merely hold that temporary presence of property on lien date does not confer jurisdiction to tax (People v. Niles, supra; Rosasco v. County of Tuolumne, supra; Church v. City of Los Angeles, supra), and, conversely, that temporary absence on tax day does not terminate taxable situs. (Brock & Co. v. Board of Supervisors, supra.) They do not deal with the situs of migratory property habitually employed in a county.

We conclude that a portion of the value of plaintiff's flight equipment was 'situated' in and subject to taxation by defendant-County.

Turning to the propriety of including 'flight time' (air time in the State) in the apportionment formula, both parties agree that the question has never been squarely decided. But plaintiff contends that the decision in Flying Tiger Line, Inc. v. County of Los Angeles, supra, 51 Cal.2d 314, 333 P.2d 323, by implication, prohibits such inclusion. We find no basis for so construing that case. The issue there was whether California (the airline's commercial domicile) through Los Angeles County (the home base of the aircraft), could tax the full value of the airline's planes flown in foreign and interstate commerce where they habitually spent a portion of their time outside the state. The court held that Los Angeles County could not tax the full value and affirmed a judgment of the trial court awarding the taxpayer the amount it sought to recover; namely, the difference between the tax paid and the amount which would have been levied on an apportioned value based upon average physical presence in the county. Justice (now Chief Justice) Traynor dissented on the ground that the commercial domicile may tax the full value where the property has not acquired a taxable situs elsewhere. ² Plaintiff argues that Justice Traynor's observation, that the 'physical presence test compelled by the majority' would result in inequities because values represented by 'bridge time' would escape taxation, requires the majority opinion to be read as implying that 'flight time' may not be considered in determining average physical presence. ³ It is apparent, however, that the 'bridge time' which was of concern to Justice Traynor was air time over the high seas or over states with which the aircraft did not have sufficient contacts to confer jurisdiction to tax. He was of the view that a multi-factored apportionment formula, such as arrivals and departures, revenue tons, and originating revenues as used by Nebraska in Braniff Airways, Inc. v. Nebraska State Board of Equalization, supra, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967, would provide for a more equitable apportionment of value among the states. If physical presence was to be a factor, he suggested that 'bridge time' be excluded from the calculations completely. This would allow each state to tax that proportion of the value which time spent within the state bears to total time spent within...