Star-Kist Foods, Inc. v. County of Los Angeles

• Decision Date: 30 June 1986
• Docket Number: STAR-KIST
• Citation: 227 Cal.Rptr. 391,719 P.2d 987,42 Cal.3d 1
• Court: California Supreme Court
• Parties: , 719 P.2d 987, 8 ITRD 1330 FOODS, INC., Plaintiff and Appellant, v. COUNTY OF LOS ANGELES et al., Defendants and Respondents. L.A. 31918.

Page 391

227 Cal.Rptr. 391

42 Cal.3d 1, 719 P.2d 987, 8 ITRD 1330

STAR-KIST FOODS, INC., Plaintiff and Appellant, v. COUNTY OF LOS ANGELES et al., Defendants and Respondents.

L.A. 31918.

Supreme Court of California,

In Bank.

June 30, 1986.

Ajalat & Polley, Charles R. Ajalat, Terry L. Polley and Richard J. Ayoob, Los Angeles, for plaintiff and appellant.

Mandel, Kavaller & Manpearl, Gerald T. Manpearl and Kent Ten Brink, Beverly Hills, as amici curiae on behalf of plaintiff and appellant.

De Witt W. Clinton, Co. Counsel, Donald K. Byrne, Chief Deputy Co. Counsel, and Edward G. Pozorski, Philip Hickok, Deputy Co. Counsels, Los Angeles, for defendants and respondents.

REYNOSO, Justice.

We consider two questions: whether counties and municipalities may challenge the constitutionality of a statute exempting from ad valorem taxation business inventories of foreign origin or destination which are transhipped through the state; and if so, whether such exemption violates the commerce clause. We conclude that counties and municipalities may raise such a challenge, and that the statute in question offends the commerce clause.

The parties stipulated to the relevant facts. For tax year 1976-1977, defendants, Los Angeles County and the Cities of Los Angeles and Long Beach, assessed and levied ad valorem taxes on plaintiff Star-Kist Foods, Inc.'s ¹ inventory of canned tuna present in its California warehouses on March 1, 1976, the lien date. ² Star-Kist paid the tax, but sought a refund of the $44,197 assessed on that portion of Star-Kist's inventory that had been manufactured or produced outside the United States and brought into California for shipment to other states for sale in the ordinary course. ³

Star-Kist based its refund claim on the exemption contained in newly enacted REVENUE AND TAXATION CODE SECTION 225⁴, which provided an exemption from taxation for "[p]ersonal property manufactured or produced, (1) outside this state and brought into this state for transshipment out of the United States, or (2) outside of the United States and brought into this state for transshipment out of this state, for sale in the ordinary course of trade or business...." ⁵

After exhausting its administrative remedies, Star-Kist brought suit in Los Angeles County Superior Court for refund of the contested taxes. Defendants asserted that the statutory exemption was invalid in that it violated the commerce clause of the federal Constitution (U.S. Const., art. I, § 8, cl. 3) by interfering with Congress' plenary power over commerce, in that it discriminated against interstate commerce.

Relying on Zee Toys, Inc. v. County of Los Angeles (1978) 85 Cal.App.3d 763, 149 Cal.Rptr. 750, hearing denied, January 17, 1979, affirmed without opinion by an equally divided court in Sears, Roebuck and Co. v. County of Los Angeles, 449 U.S. 1119, 101 S.Ct. 933, 67 L.Ed.2d 106, in which the Court of Appeal held that section 225 violated the commerce clause and was void, the trial court denied plaintiff's refund claim. This appeal followed.

I

Before reaching the merits of defendants' charge that section 225 violates the commerce clause, we must determine whether defendants have "standing" to raise such a challenge to a state law. The term "standing" in this context refers not to traditional notions of a plaintiff's entitlement to seek judicial resolution of a dispute, ⁶ but to a narrower, more specific inquiry focused upon the internal political organization of the state: whether counties and municipalities may invoke the federal Constitution to challenge a state law which they are otherwise duty-bound to enforce.

Counties and cities must look to the state Constitution and the Legislature for their creation and delegated powers. (Cal.Const., art. XI, §§ 1, 2.) Counties are "merely [ ] political subdivision[s] of state government, exercising only the powers of the state, granted by the state, created for the purpose of advancing 'the policy of the state at large....' " (County of Marin v. Superior Court (1960) 53 Cal.2d 633, 638-639, 2 Cal.Rptr. 758, 349 P.2d 526.) Though municipalities may enjoy a greater degree of automony with regard to local affairs (Wilson v. Beville (1957) 47 Cal.2d 852, 858-859, 306 P.2d 789 [charter cities] ), they too are subject to the sovereign's right to extend, withdraw or modify the powers delegated. (Trenton v. New Jersey (1923) 262 U.S. 182, 187, 43 S.Ct. 534, 536, 67 L.Ed. 937. See People v. California Fish Co. (1913) 166 Cal. 576, 606, 138 P. 79.) ⁷

This legislative control over cities and counties is reflected in the well-established rule that subordinate political entities, as "creatures" of the state, may not challenge state action as violating the entities' rights under the due process or equal protection clauses of the Fourteenth Amendment or under the contract clause of the federal Constitution. "A municipal corporation, created by a state for the better ordering of government, has no privileges or immunities under the federal constitution which it may invoke in opposition to the will of its creator. [Citations.]" (Williams v. Mayor of Baltimore (1933) 289 U.S. 36, 40, 53 S.Ct. 431, 432, 77 L.Ed. 1015. Accord Newark v. New Jersey (1923) 262 U.S. 192, 196, 43 S.Ct. 539, 540, 67 L.Ed. 943 [equal protection clause]; Trenton, supra, 262 U.S. at pp. 185-187, 43 S.Ct. at p. 536 [contract clause and Fourteenth Amendment]; Mallon v. City of Long Beach (1955) 44 Cal.2d 199, 209, 282 P.2d 481 [contract clause]; City of Los Angeles v. City of Artesia (1977) 73 Cal.App.3d 450, 457, 140 Cal.Rptr. 684 [contract clause and due process clause].) This rule's application beyond Fourteenth Amendment and contract clause challenges remain unsettled.

In City of South Lake Tahoe v. California Tahoe (9th Cir.1980) 625 F.2d 231, certiorari denied, 449 U.S. 1039, 101 S.Ct. 619, 66 L.Ed.2d 502 (White, Marshall, JJ., dis.) the Ninth Circuit interpreted this "no standing" rule as absolutely barring political subdivisions from challenging state statutes on any federal constitutional ground. Regrettably, the South Lake Tahoe decision provides little guidance as to the court's reasoning in choosing a per se rule.

The plaintiffs in South Lake Tahoe, the city and individual city council members, brought an action for declaratory and injunctive relief, attacking the validity of certain land use regulations and transportation plans adopted by a regional planning agency on four separate constitutional grounds: the plans and regulations violated the Fifth and Fourteenth Amendments in arbitrarily discriminating between similarly situated landowners, violated the right to travel, resulted in the taking of property without just compensation and conflicted with regulations of a congressionally approved bi-state planning agency in violation of the supremacy clause. The court rejected the city's claim of standing to raise the constitutional claims based on the regulation's injurious effects on its municipal finances. After noting that " '[p]olitical subdivisions may not challenge the validity of a state statute under the Fourteenth Amendment,' " and pointing out that it makes no difference whether the challenge is to the state or to a political subdivision thereof, the court simply concluded, "[t]hus, the city may not challenge [the] plans and ordinances on constitutional grounds." (South Lake Tahoe, supra, 625 F.2d at p. 233.) The court also denied the individual council members standing for lack of a personal stake in the matter, remarking in passing: "[t]he councilmembers do not seek here to represent the City's interests; if they did their claims would be barred along with the City's." (Id., at p. 237.)

Other courts have declined to read the "no standing" rule as an absolute bar to federal constitutional challenges by political subdivisions. These courts have held that the rule does not extend to supremacy clause challenges to state laws. (Rogers v. Brockette (5th Cir.1979) 588 F.2d 1057, cert. den., 444 U.S. 827, 100 S.Ct. 52, 62 L.Ed.2d 35; San Diego Unified Port Dist. v. Gianturco (S.D.Cal.1978) 457 F.Supp. 283, affd 651 F.2d 1306, cert den., 455 U.S. 1000, 102 S.Ct. 1631, 71 L.Ed.2d 866; Triplett v. Tiemann (D.Neb.1969) 302 F.Supp. 1239; Carlsbad Union School District of San Diego County v. Rafferty (S.D.Cal.1969) 300 F.Supp. 434 affd. (9th Cir.1970) 429 F.2d 337; Douglas Independent School District No. 3 v. Jorgenson (D.S.D.1968) 293 F.Supp. 849; Hergenreter v. Hayden (D.Kan.1968) 295 F.Supp. 251.) Rogers and Gianturco provide meaningful insight into the purpose of the "no standing" rule and its one established exception.

The Rogers court recognized a school district's standing to raise a supremacy clause challenge to a state law requiring a district with a substantial number of low income students to participate in a federally subsidized school breakfast program. The court also upheld the statute against the school district's challenge.

In resolving the standing question, the Rogers court studied the historic basis of the "no standing" rule and concluded that the rule has generally been applied in two types of cases: those in which the state has altered political subdivisions' boundaries (e.g., Hunter v. Pittsburgh (1907) 207 U.S. 161, 28 S.Ct. 40, 52 L.Ed. 151), and those involving state modification of a benefit previously granted to a subdivision (e.g., Trenton, supra, 262 U.S. 182, 43 S.Ct. 534). (Rogers, supra, 588 F.2d at p. 1067.) The court then went on to suggest that "... these cases are substantive interpretations of the constitutional provisions involved" (id., at p. 1068), and, as such, simply "adhere to the substantive principle that the Constitution does not interfere with a state's internal political organization." (Id., at p. 1070.) Because there is no comparable limit on Congress' power to "interfere" in a state's internal political organization, the court concluded, a subdivision of the state may raise...