City of Los Angeles v. Rancho Homes, Inc.

• Decision Date: 28 April 1953
• Citation: 256 P.2d 305,40 Cal.2d 764
• Court: California Supreme Court
• Parties: CITY OF LOS ANGELES v. RANCHO HOMES, Inc. L. A. 22379.

Page 305

256 P.2d 305

40 Cal.2d 764

CITY OF LOS ANGELES v. RANCHO HOMES, Inc.

L. A. 22379.

Supreme Court of California, in Bank.

April 28, 1953.

Rehearing Denied May 21, 1953.

Robert S. McClean, Los Angeles, for appellant.

Ray L. Chesebro, City Atty., Bourke Jones, Asst. City Atty., and James A Doherty, Dep. City Atty., Los Angeles, for respondent.

EDMONDS, Justice.

The City of Los Angeles sued Rancho Homes, Inc., to recover the amount assertedly due the city for license taxes. The corporation's appeal from a judgment in favor of the city requires the construction of the ordinance which is the basis of the controversy.

Rancho Homes was organized, among other purposes, 'to carry on the business of acquiring, subdividing, improving, selling and otherwise dealing in and disposing of real property'. Commencing in 1948, the corporation erected 150 houses on land which it owned. Between 1949 and 1951, it sold all of them, realizing gross proceeds in the amount of $1,539,445.

No license to transact this business was obtained by the corporation, nor did it pay a license tax based upon the amount of the sales. Acting under section 21.190 of the city's licensing ordinance, Los Angeles Municipal Code, art. I, Ch. 2; General Ordinance No. 77,000, the city clerk notified the corporation that an assessment had been levied against it for delinquent license taxes and penalties.

Upon the corporation's refusal to pay the assessment, the city commenced the present action. Each party filed a motion for summary judgment with supporting affidavits; the trial court granted the city's motion and denied that of Rancho Homes. The appeal is from the judgment in favor of the city.

Article I, Chapter 2 of the Municipal Code of Los Angeles, provides that no person may engage in any business, profession, trade or occupation specified in the article without first having obtained a license and paid the required license fee. §§ 21.10 and 21.49. At the time this action was commenced, section 21.190 read in part: '(a) Every person engaged in any trade, calling, occupation, vocation, profession or other means of livelihood, as an independent contractor and not as an employee of another, and not specifically licensed by other provisions of this Article, shall pay a license fee in the sum of $12.00 per calendar year or fractional part thereof for the first $12,000 or less of gross receipts, and in addition thereto, the sum of $1.00 per year for each additional $1,000 or fractional part thereof, of gross receipts in excess of $12,000.'

As ground for a reversal of the judgment, Rancho Homes contends that section 21.190 expressly excludes from its operation the sale of realty by its owner. The city takes the position that the manifest intention of the city council, as well as a long-standing administrative interpretation, is to the contrary.

The corporation construes the section as applicable only to persons rendering personal services. This construction is made clear it is argued, by the use of the phrases 'trade, calling, occupation, vocation, profession or other means of livelihood' and 'as an independent contractor'.

Although such terms commonly embrace persons engaged in rendering personal services, they are not limited to that activity. 'Trade' has been defined as 'equivalent to occupation, employment, or business, whether manual or mercantile. Whenever any occupation, employment, or business is carried on for the purpose of profit, or gain, or livelihood, not in the liberal arts or in the learned professions, it is constantly called a trade'. Babcock v. Laidlaw, 113 N.J.Eq. 318, 321, 166 A. 632, 633; see also State v. Worth, 116 N.C. 1007, 1010, 21 S.E. 204. "The word 'occupation,' * * * is an extremely broad term sufficient to include any business, trade, profession, pursuit, vocation, or calling." State v. Van Daalen, 69 S.D. 466, 474, 11 N.W.2d 523, 526; see also Everett v. Standard Acc. Ins. Co., 45 Cal.App. 332, 342, 187 P. 996.

The activities of Rancho Homes were more than simply those of a landowner who sells his realty. As shown by its articles of incorporation, the corporation's purposes included 'acquiring, subdividing, improving, selling and otherwise dealing in and disposing of real property'. Such a course of conduct reasonably may be denominated a 'trade' or 'occupation'. See Milwaukee Land Co. v. State, 188 Wash. 52, 55, 61 P.2d 996.

For the proposition that 'independent contractor' refers only to the rendition of services, several decisions are cited which define the term, using the words 'personal services'. However, those cases were decided under workmen's compensation laws or dealt with an employer's liability under the theory of respondeat superior, and the scope of inquiry was whether one performing personal services did so in the capacity of an independent contractor or as an employee. No decision is cited which holds specifically that one may not be an independent contractor without performing personal services. That term may assume a variety of meanings according to the intent with which it is used in particular legislation. Cf. N. L. R. B. v. Hearst Publications, 322 U.S. 111, 121-122, 64 S.Ct. 851, 88 L.Ed. 1170.

The legislative history of the ordinance, as stated in the uncontroverted affidavit of the city clerk, demonstrates an intent to make the scope of operation of section 21.190 a very broad one. Pursuant to a resolution of the city council preparatory to study and enactment, the city attorney proposed the addition of section 21.190 for the purpose of 'taxing all businesses not otherwise specifically licensed'. The mayor rejected the ordinance passed by a the council with written objections which placed his disapproval upon the ground that it might be construed as including the earnings of employees.

Subsequently, the mayor approved an ordinance in a revised form. This enactment included a qualification that the business be conducted 'as an independent contractor and not as an employee of another'. Ordinance No. 90,555; approved May 29, 1946. It further stated: 'The term 'independent contractor' is used in this section as defined in Section 3353 of the Labor Code of the State of California, and the term 'employee' is used in this section as defined in Section 3351 of said code.' Two months later, the section was amended to delete reference to the Labor Code sections. (Ordinance No. 90,736; adopted July 31, 1946.) The reason for the change, as shown by the report of the city council's committee on revenue and taxation, was that 'inclusion of the term 'independent contractor' and the definition of that term operates to severely curtail the scope of the ordinance in a manner contrary to the intention of the Council when the ordinance was first adopted'.

Even if the section may be construed as including transactions other than the rendition of personal services, the corporation asserts, it does not include sales of real property. This contention is based upon sections 21.08(i) ¹ and 21.08(s) ² of the code, purporting to define the terms 'gross receipts' and 'sales'. According to those definitions, it is argued, gross receipts may include only those sales which result from a transfer of tangible personal property.

Section 21.49, the general provision requiring the obtaining of a license and payment of a license fee, assigns to each subsequent section in the same article two functions: first, specifying the businesses to be licensed, and secondly, prescribing the amount of license fee or tax. Each of the sections is in substantially the same form. It first designates the business required to be licensed and follows with a statement of the amount of the license fee. Section 21.190 is typical of that arrangement. Starting with a description of the businesses required to be licensed ('any trade, calling, occupation, vocation, profession or other means of livelihood * * * not specifically licensed by other provisions of this article * * *'), it follows with a specification of the sum to be paid ('shall pay a license fee in the sum of $12.00 per calendar year or fractional part thereof for the first $12,000 or less of gross receipts. * * *').

The corporation's position may be sustained only if the term 'gross receipts', as used to specify the amount of the license fee, was intended to be a limitation upon the types of businesses for which a license is required to be obtained.

A literal reading of the section...