Bank of America Nat. Trust & Sav. Ass'n v. Los Angeles County

• Decision Date: 15 January 1964
• Citation: 36 Cal.Rptr. 413,224 Cal.App.2d 108
• Parties: , 6 A.L.R.3d 491 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, Plaintiff and Appellant, v. COUNTY OF LOS ANGELES, City of Los Angeles, City of Montebello, City of Paramount, and City of Covina, Defendants and Respondents. Civ. 27016.
• Court: California Court of Appeals Court of Appeals

Page 413

36 Cal.Rptr. 413

224 Cal.App.2d 108, 6 A.L.R.3d 491

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, Plaintiff and Appellant, v. COUNTY OF LOS ANGELES, City of Los Angeles, City of Montebello, City of Paramount, and City of Covina, Defendants and Respondents.

Civ. 27016.

District Court of Appeal, Second District, Division 4, California.

Jan. 15, 1964.

Hearing Denied March 11, 1964.

Samuel B. Stewart, Robert H. Fabian and Geo. L. Beckwith, Los Angeles, for plaintiff and appellant.

Harold W. Kennedy, County Counsel, and A. R. Early, Deputy County Counsel, for defendants and respondents.

BURKE, Presiding Justice.

Plaintiff seeks a refund of taxes paid under protest to defendants, the County of Los Angeles and certain cities for which it collects taxes. The taxes in question were levied on several electronic computer systems installed in various buildings owned by plaintiff. The trial court held that systems to be fixtures and taxable as improvements to real property. Plaintiff appeals from such judgment.

The sole issue before the trial court was the taxability of such property as fixtures. If such equipment constitutes personal property, defendants admittedly have no power to tax it. (Cal.Const., art. XIII, § 16, subd. 1(a); Rev. & Tax.Code, §§ 23181, 23182.) The excess franchise tax imposed on national banks is in lieu of any tax on personal property. (Rev. & Tax.Code, § 23186.)

Plaintiff contends that an article is not a fixture unless permanently attached to the land or to improvements on the land, citing sections 104 and 105 of the Revenue and Taxation Code and section 660 of the Civil Code ¹; that permanence is a matter of manifested intention, citing M P. Moller, Inc. v. Wilson, 8 Cal.2d 31, 37, 63 P.2d 818, 821, which states: 'This court has recognized the test of intention to make the article a permanent addition to the realty as manifested by the physical facts, and has accepted the character of the annexation and the use for which the article is designed as subsidiary elements employed for the purpose of testing the intention of permanency.'

The physical facts, plaintiff asserts, demonstrate the intention to have the equipment retain its character as personal property, because (a) the function performed is the same as that formerly performed by bookkeepers using manually operated, electrically driven mechanical equipment; (b) the dimension, weight and physical characteristics of the equipment lend to the conclusion that it is personal property (the equipment weighed less than the manually operated counterparts and occupied less area; sorter-readers, for example, are equipped with rollaway casters, and sorters can be divided into three sections which are readily movable); (c) the method of connection between the components manifests a temporary condition (some plug connections were used); (d) the assessed equipment in one building occupied only 5 per cent of the building; the floor design was to obtain flexibility to permit movement of the equipment; the temperature and humidity controls were established with minimums and maximums to satisfy the needs of the employees, not the equipment (the defendants' own witness was in doubt at first as to the proper classification for the equipment; the buildings were designed as accounting centers and this does not render the computer installations improvements to the real property); (e) the bank moved many components in the past and intended to do so in the future; (f) the useful life of the equipment ranges from 6 to 10 years, and that of the buildings approximately 50 years; (g) double taxation would result in this case since national banks pay an excess franchise tax in lieu of personal property taxes from which they are exempt, as heretofore indicated. Plaintiff cites Pajaro Valley Bank v. County of Santa Cruz, 207 Cal.App.2d 621, 24 Cal.Rptr. 639, in which the court held that safe deposit boxes placed in a vault in a national bank were personal property and not assessable. The court there rejected the functional unity and constructive annexation theories relied upon by defendants herein.

Here, the trial court viewed the installations and upon conclusion of the trial decided for defendants. The court made the following findings of fact, in part:

'IV

'All of said systems included several major components as described in plaintiff's Exhibit 12 which were interconnected by a mass of thousands of signal wires and cables housed underneath the floor on which they were installed. Some of the individual major components can be separately operated for special purposes, but the major component parts are principally operated as an accounting unit. Each and every part of each system is essential to the performance of the overall accounting functions for which the systems are designed.

'V

'The component parts of each system were effectively held in place by their substantial weight, by the mass of interconnecting wiring passing beneath the floor on which said components were installed, and by other devices.

'VI

'The two data bossers and related equipment which were the subject of the 1960 tax assessment in the third cause of action in Case No. 758,864 and the subject of the 1961 tax assessment in the eighth cause of action in Case No. 784,689 are effectively held in place by their substantial weight and are further affixed by rigid metal compressed air pipes which join them with an air compressor installed in the same building. They produce credit cards used in plaintiff's business. Because they are now functionally obsolete, plaintiff plans to move one data bosser from Los Angeles to San Francisco for modification, and to replace it with a modified data bosser which was in San Francisco at the time of trial, such modification costing approximately Twenty-Seven Thousand Dollars ($27,000.00)

'VII

'The physical facts indicate that, except for emergencies, plaintiff intends and intended all of these electronic computer systems and the two data bossers and their related equipment to remain in place until necessary to remove them for repair or improvement or because of economic or functional obsolescence.'

Our review of the proceedings indicates that there was substantial evidence to sustain the findings of the trial judge and that the findings support the judgment. We concur in the contention of defendants that the equipment in question was properly taxable as fixtures because:

(1) The buildings themselves (six out of the seven involved) were special purpose...