City of Los Angeles v. Belridge Oil Co.

• Decision Date: 26 May 1954
• Citation: 271 P.2d 5,42 Cal.2d 823
• Court: California Supreme Court
• Parties: CITY OF LOS ANGELES v. BELRIDGE OIL CO. L. A. 22586.

Page 5

271 P.2d 5

42 Cal.2d 823

CITY OF LOS ANGELES v. BELRIDGE OIL CO.

L. A. 22586.

Supreme Court of California, In Bank.

May 26, 1954.

Rehearing Denied June 23, 1954.

Ray L. Chesebro and Roger Arnebergh, City Attys., Bourke Jones, Asst. City Atty., and James A. Doherty, Deputy City Atty., Los Angeles, for appellant.

Wellborn, Barrett & Rodi, Vernon Barrett and F. C. L. Head, Los Angeles, for respondent.

CARTER, Justice.

Plaintiff appeals from a judgment in an action to recover business license taxes from the defendant. All the facts were stipulated to, and each party moved for summary judgment. The motion of defendant company was granted.

By its complaint in this action plaintiff sought a judgment in the amount of $9,768.30 as unpaid business license taxes owing for the years 1948-1950, inclusive. This claim is based on the ground that plaintiff has a right, under the provisions of sections 21.166 of the Los Angeles City Tax Ordinance, to impose a business license tax on defendant measured by the company's gross receipts. Section 21.166 provides that 'Every person manufacturing and selling any goods, wares or merchandise at wholesale, or selling goods, wares, or merchandise at wholesale, and not otherwise specifically licensed by other provisions of this Article, shall pay for each calendar year, or portion thereof, the sum of $8.00 for the first $20,000, or less, of gross receipts, and, in addition. * * *'

Defendant company is engaged in the production and sale of crude oil and natural gas. All of its wells are located in Kern County which is the scene of all productive operations. The filed office of the defendant is located in Kern County while the main office is situated in the city of Los Angeles. Its various products which are marketed under long-term contracts, are delivered to the purchasers directly at the field plants and never enter the territorial limits of the city of Los Angeles.

The board of directors of defendant company meets in Los Angeles, most of the company's bankng is done in Los Angeles and the corporate officers spend the major portion of their time at the main office in Los Angeles. Negotiations for the sale of defendant's products are conducted in part at the main office, in part at the offices of purchasers and in part by mail, telegraph or telephone communications between the defendant's main office in Los Angeles and the customer. Defendant company signs all contracts at its main office.

All obligations, including payrolls, are paid from the head office except emergency wage payments and disbursements for miscellanous items, which are paid from a checking account in Bakersfield carrying an average balance of between $2,000 and $3,000. The main office makes all purchases, except those of an emergency nature, and payment for the sales of all items sold by defendant are received from purchasers at the main office and deposited in Los Angeles bank accounts. Based upon these facts the plaintiff city takes the position that the defendant company is engaged in selling in the City of Los Angeles the oil and gas it prdouces in Kern County, and that it is therefore subject to the tax provided for in section 21.166 of the Los Angeles City Tax Ordinance.

Defendant's theory of the case is that the company's operations are not such as to make it taxable under the provisions of section 21.166, and that even if that section is applicable, plaintiff city has no constitutional right to levy a tax under its provisions based on defendant's total gross receipts. Defendant also contends that the city's right to a recovery for the year 1948 is barred by the applicable limitation provisions of section 338, subd. 1, of the Code of Civil Procedure.

In substance the principal problem presented is one of construction construction as to the scope and intended purview of section 21.166 of the Los Angeles Tax Ordinance. Plaintiff city contends that defendant company is a person selling goods, wares and merchandise at wholesale within the meaning of section 21.166. Defendant company claims that it is not.

Defendant argues that section 21.166 covers two types of business. Those which are engaged in the 'manufacturing and selling' of goods, wares or merchandise at wholesale and those which are engaged in 'selling' of goods, wares or merchandise at wholesale. This contention is based upon the ground that if 'selling' by its own force includes 'manufacturing and selling' there would have been no reason to separately mention 'manufacturing and selling.' In view of this language, defendant argues that the term 'selling' is not intended to include 'manufacturing and selling' and therefore it necessarily follows that the term 'selling' was not intended to include such activities as 'producing and selling' or 'mining and selling.' Based upon this premise, defendant concludes that the inference is clear that the term 'selling' is only intended to cover businesses of a merchandising nature, where selling, rather than the creation or capture of something to sell, is the essence of the enterprise; and therefore since the dominant portion of defendant's business is the capture of something to sell, section 21.166 is not applicable.

There seems to be no doubt that the defendant company was engaged in selling, since a company which derives several million dollars a year from the sale of petroleum products is obviously engaged in selling those products. However, we still have the problem of whether the defendant company was a person 'selling' within the meaning of section 21.166.

In analyzing the scope and meaning of a tax ordinance of this type, we are aware that tax laws are to be construed against the municipality and in favor of the taxpayer, but it must also be remembered that such a rule does not take precedence over other fundamental rules of statutory construction. It is fundamental that 'judicial construction should be in keeping with the natural and probable legislative purpose, and avoid conflict, and harmonize all the applicable provisions of the law on the subject, if possible.' McQuillian, Municipal Corporation, 3rd Ed., Vol. 16, Taxation, § 44.12. Also where the problem involves the construction of a particular section of a taxing ordinance, the ordinance should be looked to in its entirety and its provisions construed together. Bramman v. City of Alameda, 162 Cal. 648, 124 P. 243.

In the case at bar, the section in question (21.166) is but one small part of Ordinance No. 77,000 which is the license ordinance of the City of Los Angeles. Considering the ordinance as a whole, we find that it contains various introductory sections covering such items as definitions, interpretation, enforcement, penalties, and license transfers; followed by a great many sections setting out the tax liability of specific business enterprises such as hotels, laundries, theaters, oil wells located in the City of Los Angeles, etc. Aside from the sections referring to specific businesses, the ordinance contains three so-called 'catch-all' sections: Section 21.166 provides that 'Every person manufacturing and selling any goods, wares, or merchandise at wholesale, or selling goods, wares, or merchandise at wholesale, and not otherwise specifically licensed by other provisions of this Article, shall pay; * * *'; section 21.167 covers those who manufacture and sell or sell goods at retail and who are not licensed by other provisions; and section 21.190 provides that '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 * * *.' While these other sections are not in issue here, a study of their provisions and of the ordinance as a whole is helpful in construing the intended scope and meaning of section 21.166.

An analysis of the ordinance in its entirety makes it apparent that even though several hundred types of businesses are specifically provided for it is almost impossible to cover each and every type of business by a specific section. For this reason the legislative body found it expedient to include three 'catch-all' sections which were intended to cover those business enterprises not specifically taxed by the other sections. Such 'catch-all' provisions are not considered too vague and they have been upheld by the courts. City of Los Angeles v. Rancho Homes, Inc., 40 Cal.2d 764, 256 P.2d 305.

There can be no doubt that the legislative body intended the 'catch-all' sections to be sufficiently broad to cover all business enterprises not licensed under other sections of the ordinance. With this purpose in mind it is obvious that the language used in each of the three 'catch-all' sections was intended to be such as would cover a wide range of activities. Our problem here is to determine whether the language of one of these 'catch-all' sections, section 21.166, is sufficiently broad to include the business operations of defendant company.

Keeping in mind the broad scope and purpose of section 21.166 it becomes apparent that it was intended to cover all businesses engaged in manufacturing and selling at wholesale in the city and also those businesses which merely engaged in selling at wholesale in the city. Thus all businesses which are engaged in selling goods, wares or merchandise at wholesale in the City of Los Angeles and which are not licensed by other sections of the ordinance come within section 21.166. This is true regardless of whether they are engaged in 'manufacturing and selling' or merely 'selling.' The important thing is that they are engaged in selling within the City of Los Angeles. If they are so engaged, all gross receipts attributable to selling in the City of Los Angeles are subject to the business license tax provided for by section 21.166. The fact that the goods sold are produced in remote areas is...