Blue Star Line, Inc. v. City and County of San Francisco
| Decision Date | 08 February 1978 |
| Docket Number | HOEGH-UGLAND |
| Citation | 77 Cal.App.3d 429,143 Cal.Rptr. 647 |
| Court | California Court of Appeals Court of Appeals |
| Parties | The BLUE STAR LINE, INC., et al., Plaintiffs and Appellants, v. The CITY AND COUNTY OF SAN FRANCISCO, Defendant and Respondent.AUTO LINERS et al., Plaintiffs and Appellants, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant and Respondent. Civ. 39195. |
Graham & James, F. Conger Fawcett, David C. Nolan, San Francisco, for plaintiffs and appellants.
Thomas M. O'Connor, City Atty., John J. Doherty, Deputy City Atty., City and County of San Francisco, San Francisco, for defendant and respondent.
Respondent City and County of San Francisco levies a tax upon the payrolls of employers who conduct business within its territorial limits. In two actions brought against it by appellants and other plaintiffs, they asserted the claim that various provisions of the United States Constitution invalidated the levy, as to them, because their local business activity engaged them in maritime foreign commerce at the ocean port of San Francisco. The appeal is from a portion of a declaratory judgment, entered in the actions as consolidated, which denies the constitutional claim as to appellants.
The consolidated cause was submitted upon the pleadings, a lengthy written statement of stipulated facts, and some selected depositions and documentary exhibits which were stipulated into evidence. These sources support the following recitals (in which the direct quotations are from the statement of stipulated facts):
The Payroll Tax
The tax is levied pursuant to a "Payroll Expense Tax Ordinance" adopted by respondent in 1970. Pertinent provisions of the ordinance are quoted in the margin. 1 It is also described in decisions which have previously adjudicated its validity and effect in various respects. (See A. B. C. Distributing Co. v. City and County of San Francisco (1975) 15 Cal.3d 566, 125 Cal.Rptr. 465, 542 P.2d 625; Western States Bankcard Assn. v. City and County of San Francisco (1977) 19 Cal.3d 208, 137 Cal.Rptr. 183, 561 P.2d 273.) For purposes of its imposition upon appellants, all of whom are corporations, they must be divided into the three distinct classes next described.
The "Steamship Lines"
Ten of the appellants (the so-called "steamship lines") own oceangoing vessels and operate them in international commerce. 2
The steamship lines' vessels call at the port of San Francisco from time to time. For this reason, each line "has appointed a steamship agent" who represents it there. (These "steamship agents" are in an appellant class of their own, as described below.) Some of the steamship lines maintain funds in San Francisco bank accounts which are held in the names of the respective principal and agent in each instance. Each steamship line maintains a listing, under its own name, in the San Francisco telephone directory. In addition, each employs one or more so-called "owner's representatives" who work for it there.
The owner's representatives are full-time salaried employees who occupy office space in San Francisco, "generally within the offices of the particular line's steamship agent." Their duties involve attending to the "operational side" of their employers' visiting ships, such as arranging for fuel, provisions, and repairs. Much of their work is performed in San Francisco proper, but their "sphere of operation(s)" includes the entire Pacific Coast of the United States and Canada. The "Steamship Agents"
These appellants include 22 corporations, each of which is "organized and existing under the laws of one of the United States" and maintains an office in San Francisco. Each performs certain services for one or more of the steamship lines and other shipowners in international maritime commerce. These services are performed under contract. Some of them involve details of the "operational side" of the various principals' ships which call at San Francisco, and parallel or overlap the functions of the steamship lines' owner's representatives in these respects. When a steamship agent performs these services, it acts as "husbanding agent" and is paid on an "agreed fee per vessel basis."
Other contract services provided by the steamship agents include the coordination of cargo shipment and handling, arranging for and overseeing the "stevedoring" of ships, and the solicitation and "booking" of cargo and passengers. They act as "general agents" (or "port agents") when they discharge these functions, for which they are paid commissions based upon percentages of cargo and passenger "revenues" generated and collected.
So far as appears, all or most of these services are performed by salaried employees of the steamship agents. They work in San Francisco and elsewhere, and much of the traffic they produce originates and moves at places outside the City and County. Their activity nevertheless involves the ownership and use of personal property within its limits, the maintenance of records, bank accounts and telephone directory listings there, and the operation of motor vehicles on San Francisco streets.
The "Stevedore Firms"
This class includes four corporations which are organized and existing under the laws of California or other states of this nation. Each of them maintains one or more offices in San Francisco, some own and operate "terminal facilities" there, and all perform services for the steamship lines and other shipowners whose vessels call at San Francisco. These services principally include the actual loading and unloading of cargo to and from ships, and to and from railroad cars in some instances, at San Francisco docks. The physical labor involved in the loading and unloading function is performed by longshoremen who are hired by the job and paid by the hour. They work under the supervision of "full-time" salaried employees of the stevedoring firms. In loading or unloading a particular ship the longshoremen and supervisory personnel "are variously on the dock, on ship's deck, and in ship's hold."
Some of the stevedore firms also provide "terminal services," which involve "the receipt and checking of outbound cargo and the checking, sorting and releasing of inbound cargo." These activities are performed "within the port and terminal area of the Port of San Francisco," but not on the docks. In addition, the stevedore firms occasionally rent cargo-handling equipment in San Francisco and sell "used or obsolete equipment" there. The terminal, rental and sale activities are apparently conducted by salaried employees.
In the conduct of all the activities described, the stevedore firms also maintain bank accounts in San Francisco, own and use personal property there, operate motor vehicles on local streets, and maintain listings in the San Francisco telephone directory.
Respondent asserts the right to levy its tax upon the payrolls of all members of the three appellant classes, measured by the wages and salaries paid to their various employees for work performed in San Francisco as described above. Appellants contended below (1) that the levy upon the steamship lines' payrolls was prohibited by "certain treaties"; and that it otherwise violated the provisions of the United States Constitution which appear in (2) the fifth and sixth clauses of section 9 of Article I, (3) the Import-Export Clause, and (4) the Commerce Clause as it pertains to foreign commerce. 3
The trial court announced its decision in a detailed memorandum opinion upon which it entered a declaratory judgment. 4 Part II of the judgment declares in effect that the payroll tax is validly levied upon the steamship lines' payrolls reflecting the compensation paid to their owner's representatives, and upon all payrolls of the steamship agents and the stevedore firms, subject in each instance to the apportionment formula whereby the taxable "payroll expense" is limited to work performed in San Francisco. (See §§ 3 and 4 of the tax ordinance, quoted in fn. 1, ante.) On the appeal, which is from this part of the judgment only, 5 appellants renew the four-point challenge of the tax they asserted below. (See the text at fn. 3, ante.) Each point requires separate analysis.
The steamship lines contend that the levy of the payroll tax upon them is invalid because it is prohibited by international "treaties," to which this nation is said to be a party, on the subjects of reciprocal taxation or avoidance of taxation. Although the real substance of this contention has not been acknowledged in the briefs, it raises the additional constitutional point that the alleged effect of the "treaties" immunizes the foreign-based steamship lines from the payroll tax by operation of the Supremacy Clause. 6
Pursuing the point on appeal, the steamship lines refer to tax "treaties" between this country and two other nations only. They identify both by naming the nations as Japan and France, but not by express citation. They follow the references with a categorical statement that "(t)he United States has such treaty commitments . . . with the following countries, representing essentially all of the nations whose carrier-nationals are represented here: Australia, France, Germany, India, Israel, Italy, Japan, the Netherlands, Norway, Philippines, Sweden, and the United Kingdom."
The sum of this context refers us to an unknown number of possibly pertinent tax treaties (or "treaty commitments") which might exist...
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