56 Cal.2d 11, 25637, Scandinavian Airlines System, Inc. v. Los Angeles County

Docket Nº:25637
Citation:56 Cal.2d 11, 14 Cal.Rptr. 25, 363 P.2d 25
Opinion Judge:[11] Peters
Party Name:Scandinavian Airlines System, Inc. v. Los Angeles County
Attorney:[7] Harold W. Kennedy, County Counsel, and Alfred Charles De Flon, Deputy County Counsel, for Appellants. [8] Musick, Peeler & Garrett, Elvon P. Musick, Roderick M. Hills, Richard D. Esbenshade and Kenneth E. Scott for Respondent. [9] Condon & Forsyth, Darling, Shattuck & Edmonds, Cyril H. Condon...
Case Date:May 29, 1961
Court:Supreme Court of California

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56 Cal.2d 11

14 Cal.Rptr. 25, 363 P.2d 25

SCANDINAVIAN AIRLINES SYSTEM, INC., (a Corporation), Respondent,


COUNTY OF LOS ANGELES et al., Appellants.

L. A. 25637.

Supreme Court of California

May 29, 1961.

In Bank

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Harold W. Kennedy, County Counsel, and Alfred Charles De Flon, Deputy County Counsel, Los Angeles, for appellants.

Musick, Peeler & Garrett, Elvon P. Musick, Roderick M. Hills, Richard D. Esbenshade and Kenneth E. Scott, Los Angeles, for respondent.

Condon & Forsyth, New York City, Darling, Shattuck & Edmonds, Los Angeles, Cyril H. Condon, New York City, Hugh W. Darling, Los Angeles, Rodolphe J. A. de Seife, Graham, James & Rolph, Robert D. Mackenzie, San Francisco, Foley, James & Conran, Frank J. Foley and James J. Conran, New York City, Pillsubry, Madison & Sutro, Turner H. McBaine, Noel Dyer, San Francisco, Chapman, Walsh & O'Connell, Joseph J. O'Connell, Jr. and Arthur K. Mason, New York City, amici curiae on behalf of respondent.

PETERS, Justice.

Defendants, the County of Los Angeles and the City of Los Angeles, have appealed from a judgment requiring them to refund to the plaintiff certain personal property taxes which were levied against plaintiff's foreign owned and based aircraft flown exclusively in foreign commerce, and which utilized Los Angeles International Airport as their sole United States terminus. The United States Supreme Court, and the highest courts of the several states, have spoken with apparent finality regarding the right to tax and the method of taxation of ocean-going vessels engaged in both foreign and interstate commerce, and the courts have

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had occasion to determine similar questions involving aircraft engaged solely in interstate commerce (Northwest Airlines v. State of Minnesota, 322 U.S. 292, 64 S.Ct. 950, 88 L.Ed. 1283; Braniff Airways, Inc. v. Nebraska State Board, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967; Slick Airways, Inc. v. County of Los Angeles, 140 Cal.App.2d 311), and domestically owned and based airplanes engaged in foreign commerce (Flying Tiger Line, Inc. v. County of Los Angeles, 51 Cal.2d 314). However, the precise problem presented here, wherein the airplanes sought to be taxed locally are: (1) foreign owned, (2) foreign based and registered, and (3) flown solely in foreign commerce with but a single United States port, has not as yet, insofar as we have been advised, been passed on by the appellate courts.

The facts are undisputed. Defendants' general demurrer to plaintiff's complaint was overruled, and the parties then stipulated that the material facts of the complaint be taken as true, that judgment be entered in favor of plaintiff, without necessity of further proof, and that defendants retain their right to appeal from such judgment. The following is a summary of the material allegations of the complaint:

1. Plaintiff operates an air line, solely in foreign commerce, between Copenhagen, Denmark, and Los Angeles, California. All of its airplanes are owned, based and registered in one of three Scandinavian home ports. 1 The service referred to is rendered under a permit granted by the United States Civil Aeronautics Board. The planes stop en route in Canada, but touch the United States only at Los Angeles International Airport.

2. During the period involved herein each of plaintiff's airplanes averaged eight round-trip flights per year, and remained at its Los Angeles terminus for less than 34 hours on each flight. 2

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3. None of the planes was physically present in Los Angeles (or in the United States) on the first Monday of March in the year for which taxes were levied.

4. Defendant County of Los Angeles assessed each of the airplanes upon an 'apportionment' basis, by means of a formula which was intended to determine that portion of the airplane's value measured by the period during which it was physically present in the county. Such formula added one hour 'flying time' per trip, to the actual time spent on the ground in Los Angeles, and divided this figure into the total hours in the tax year. Based upon the assessment so calculated, defendant county levied a personal property tax on each of the airplanes on its own behalf, and upon behalf of the defendant city.

5. During the period for which defendants levied such tax, each of the airplanes was taxed, on an unapportioned basis, in its home port. 3

6. No foreign country levies a property tax on aircraft operated by any United States air line flying planes in foreign commerce. 4

7. The taxes levied by defendants constitute double taxation.

8. Plaintiff's operations in making the Copenhagen-Los Angeles flights are subject to extensive regulation by the United States government (17 specific regulatory measures being alleged), and the United States is party to 19 separate, and specifically alleged, international treaties directly or indirectly regulating and affecting such operations.

9. Plaintiff paid the taxes demanded by defendants, under protest, and subsequently filed a claim for refund.

The pleadings raise no issue regarding the propriety of the procedures taken on the claim for refund, and plaintiff does not question the formula by which defendants 'apportioned' the tax. Hence the sole question involved is the validity of the tax.

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Because of their interest herein, most of the foreign airlines serving California have filed amici curiae briefs.

Contentions of the Parties:

In support of the judgment, plaintiff contends that: (1) the commerce clause of the United States Constitution prohibits the levy of this tax; (2) the tax is further prohibited by the due process clauses of both the federal and California Constitutions; and, (3) there is no California statutory basis for this taxation.

In support of its first contention conflict with the commerce clause plaintiff makes a three-fold argument. First, it claims that since there is no relevant distinction between aircraft flying the international skies and ocean-going vessels plying the high seas, the former should be subjected to the same 'home-port' doctrine of taxation which the United States Supreme Court has applied to the latter. Second, plaintiff claims that taxation of aircraft based and owned in a foreign country is a matter of international concern within the exclusive jurisdiction of the federal government (citging various federal regulatory acts and international treaties alleged to control). Its final argument in regard to the commerce clause is that 'apportioned taxation' by California, together with unapportioned taxation by the government of the aircraft's home port, conflicts with the commerce clause in that it imposes double taxation, and places a far heavier burden upon such foreign aircraft than exists in the case of aircraft owned domestically.

Plaintiff bases its second contention repugnancy to the due process clauses upon the claim that its airplanes have not acquired a taxable situs in California.

Its third contention is predicated upon the argument that California's constitutional and general statutory provisions for taxation of the various forms of personal property do not contemplate the taxation of aircraft owned and based in foreign countries and engaged in foreign commerce, and that without specific legislative authority these defendants are without jurisdiction to levy this tax.

Defendants contend that the commerce clause is inapplicable on several grounds. The first is that although that clause gives Congress the exclusive power to regulate commerce, such power is not denied to the several states until Congress has preempted the field, which defendants claim has not been done. The second is that taxation of personal property does not

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fall within that class of subjects which 'admit only of one uniform system, or plan of regulation,' which phrase has been applied as the test for exclusive legislation by the federal Congress. Defendants also claim that the decisions of the United States Supreme Court indicate a trend away from the 'home-port' doctrine of taxation, and that if the question were to be submitted to that court today it would repudiate its former rule. As a final reply to the contention that the commerce clause prohibits the instant tax, defendants argue that instrumentalities of commerce, by their very nature, acquire more than one taxable situs, and that the undue burden on commerce which would otherwise be imposed is properly avoided by a system of apportioned taxation in each such situs; that the undue burden, if any, imposed on the instant aircraft is not the result of defendants' apportioned tax, but results from the fact that the domiciliary situs has levied taxes on the full value.

Replying to plaintiff's contention that the due process clauses prohibit this tax, defendants contend that the sole test, insofar as due process is concerned, is whether the proposed tax has reasonable relation to the opportunities, benefits or protection conferred or accorded by the taxing state. Defendants then point out that an apportioned tax, based solely upon the percentage of time which the property is actually within the County of Los Angeles, satisfies this test.

In meeting plaintiff's third and last contention (lack of statutory basis for the tax) defendants argue that the California Constitution fixes the liability of the property to taxation and the standard upon which it is based (i. e., in proportion to its value), 5 and that the only further requirement is that the Legislature provide the machinery by which to ascertain such value (citing McHenry v. Downer, 116 Cal. 20, 45 L.R.A. 737, and Crocker v. Scott, 149 Cal. 575). How, or in what manner, the Legislature has met this further requirement is not spelled out in defendants' briefs.

The 'Home-Port' Doctrine:


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