City of Los Angeles v. Crawshaw Mortgage & Inv. Co.
Decision Date | 25 September 1975 |
Citation | 51 Cal.App.3d 696,124 Cal.Rptr. 363 |
Court | California Court of Appeals Court of Appeals |
Parties | The CITY OF LOS ANGELES, Plaintiff and Respondent, v. CRAWSHAW MORTGAGE & INVESTMENT COMPANY, Defendant and Appellant. Civ. 46381. |
Frederick J. Kling, Los Angeles, for defendant and appellant.
Burt Pines, City Atty., Thomas C. Bonaventura, Asst. City Atty., and Richard A. Dawson, Deputy City Atty., for plaintiff and respondent.
Respondent, The City of Los Angeles (hereinafter the City), brought suit to collect delinquent business taxes alleged to be owed by appellant, Crawshaw Mortgage and Investment Co., a corporation (hereinafter Crawshaw), in the amount of $2,336.07 plus interest and penalties. By its answer Crawshaw denied liability for the claimed delinquent taxes, maintaining that Los Angeles Municipal Code section 21.108 is unconstitutional as applied to it. Judgment was entered in favor of the City. Crawshaw appeals from the judgment.
Crawshaw contends that 'Section 21.108(b) Los Angeles Municipal Code creates an arbitrary and impermissible classification of persons for the purpose of raising revenue by means of unequal taxation.' Los Angeles Municipal Code section 21.108 provides in pertinent part as follows: 1
Marvin J. Ree, president and sole shareholder of Crawshaw, testified that Crawshaw is engaged in 'the mortgage banking business,' which consists of '(m) aking real estate loans on real estate of various kinds and quantities, . . . (placing) loans for a fee or a commission and servicing loans for various Eastern investors.' Crawshaw does not dispute the trial court's finding that 'Defendant (Crawshaw), during all priods of time material hereto, engaged in business as a mortgage banker and a lender of money with real property taken as security, within the City of Los Angeles,' or that Los Angeles Municipal Code section 21.108(b) was applicable to it. However, Crawshaw contends that the distinction drawn in Los Angeles Municipal Code section 21.108 between money lenders who make loans secured by real property and those who make loans not secured by real property is an unjust discrimination violative of the equal protection clause of the Fourteenth Amendment.
In Bilyeu v. State Employees' Retirement System, 58 Cal.2d 618, at page 623, 25 Cal.Rptr. 562, at page 565, 375 P.2d 442, at page 445, the Supreme Court stated: 'There is no constitutional requirement of uniform treatment, but only that there be a reasonable basis for each classification. In Sacramento Mun. Util. Dist. v. Pacific Gas & Elec. Co., 20 Cal.2d 684 (128 P.2d 529), we said at page 693: 'Wide discretion is vested in the Legislature in making the classification and every presumption is in favor of the validity of the statute; the decision of the Legislature as to what is a sufficient distinction to warrant the classification will not be overthrown by the courts unless it is palpably arbitrary and beyond rational doubt erroneous. (Citations.) A distinction in legislation is not arbitrary if any set of facts reasonably can be conceived that would sustain it.''
The power of a municipality to classify for the purpose of taxation is broad. Thus in Fox etc., Corp. v. City of Bakersfield, 36 Cal.2d 136, at pages 141--142, 222 P.2d 879, at page 883, the court stated: 'We do not think the city over-stepped constitutional limitations in its classification. It must be remembered that, as aptly expressed in speaking of the state sales tax, by the court in Roth Drug, Inc., v. Johnson, 13 Cal.App.2d 720, 733, 57 P.2d 1022, 1027: 'the power of the states to make classifications of persons or property for the purpose of taxation is very broad . . . A statute is presumed to be constitutional until the contrary appears. It has been said that an act may not be held to be unconstitutional merely because it may contain provisions which seem to be unjust or oppressive, or because it may be deemed to violate the natural, social, or political rights of citizens, unless it appears that those features of the act contravene rights which are guaranteed by the Constitution. 1 Cooley's Constitutional Limitations (8th Ed.) p. 341. If a classification of persons or occupations made for the purpose of imposing taxes is founded on antural, intrinsic or fundamental distinctions which are reasonable in their relation to the object of the legislation and otherwise, they will be deemed to be valid and binding. 5 Cal.Jur., p. 824, § 188. . . . While the classification should be reasonable, natural and just, in the absence of a showing to the contrary, it will be assumed there is good grounds for the classification and the act will be upheld. 6 R.C.L., p. 378, §§ 369--376. In the case of People v. Monterey Fish Products Co., 195 Cal. 548, 556, 234 P. 398, 401, 38 A.L.R. 1186, it is said in that regard: (See Associated Home Builders, etc., Inc. v. City of Newark, 18 Cal.App.3d 107, 109--110, 95 Cal.Rptr. 648.)
Mr. Ree testified in some detail as to the nature of Crawshaw's business. 2 A portion of his testimony was as follows: 3
Mr. Ree further testified that after a loan had been sold to an Eastern investor, Crawshaw would service the loan, a procedure which he described as follows: 'The servicing then consisted of, after this purchase of the loan by the investor, we would continue to collect the payments on behalf of that investor each month and make the proper deposits in the trust account for that particular investor and retain a servicing fee for doing this work, and remit the net balances each month to the Eastern investor.'
Mr. Ree explained that Crawshaw realized income at several different stages: Crawshaw realized 'income at 3 points' as a commission for making the original loan; Crawshaw also realized income in the interest earned during the time that Crawshaw's money was involved in the loan and in the servicing fee charged by Crawshaw after the loan had been sold. Crawshaw also realized income in the form of charges for late payments in connection with its activity in servicing loans.
Crawshaw also made construction loans on '(c)ommercial and industrial and income producing properties.' Mr. Ree testified that the construction loans produced income in approximately the same manner, 'the loan fee, the interest on your money, and finally the servicing income when the loan was placed elsewhere.'
Mr. Ree testified that 'at times we had something in the neighborhood of sixty people working in the servicing--loan servicing area.' He...
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