Clark v. City of San Pablo

• Decision Date: 26 February 1969
• Citation: 270 Cal.App.2d 121,75 Cal.Rptr. 726
• Court: California Court of Appeals Court of Appeals
• Parties: James E. CLARK and Leatha M. Clark, Plaintiffs and Appellants, v. CITY OF SAN PABLO, a municipal corporation, Leland F. Reaves, Edward E. McCombs, Gertrude Yurko, Roland Hoblitt and Walter A. Pedretti, Defendants and Respondents. Civ. 25189.

Page 726

75 Cal.Rptr. 726

270 Cal.App.2d 121

James E. CLARK and Leatha M. Clark, Plaintiffs and Appellants, v. CITY OF SAN PABLO, a municipal corporation, Leland F. Reaves, Edward E. McCombs, Gertrude Yurko, Roland Hoblitt and Walter A. Pedretti, Defendants and Respondents.

Civ. 25189.

Court of Appeal, First District, Division 1, California.

Feb. 26, 1969.

Phillip M. Millspaugh, Richmond, for appellants.

Leland F. Reaves, Richmond, for respondents.

SIMS, Associate Justice.

Plaintiffs, the owners and operators of an apartment house consisting of four rental units, have appealed from an adverse judgment in an action in which they seek a declaration that an ordinance of the City of San Pablo, which imposes a license tax on the business of operating an apartment house, is invalid and unenforceable because it unconstitutionally discriminates against plaintiffs and the other owners of apartment houses consisting of four or more rentals units by failing to impose a tax on owners and operators of single family, duplex and triplex rental units. In their complaint against the city and the city officials who adopted and administer the provisions of the ordinance, plaintiffs have set forth their status, the express terms of the ordinance ¹ and their conclusions concerning its validity. The defendants' general demurrer was sustained with leave to amend. The plaintiffs failed to amend after service of notice of the court's ruling, and the judgment from which this appeal has been taken was entered in favor of defendants.

Plaintiffs contend that the ordinance is discriminatory and unconstitutional because there is no reasonable basis for exempting the rental of single family dwellings, duplexes and triplexes when the purpose of the ordinance is for the collection of revenue only. They allege, 'Said Ordinance is arbitrary, unreasonable, improper and therefore invalid and unenforceable as a violation of the equal protection mandate of the Fourteenth Amendment of the Constitution of the United States and similar guarantees contained under Article I, Section 11 and 21, and Article IV, Section 25(19), (20) and (33) of the Constitution of the State of California. * * *' (Cf. Fox etc. Corp. v. City of Bakersfield (1950) 36 Cal.2d 136, 138, 222 P.2d 879.) A review of the applicable precedents reflects that the classification inherent in the provisions of the ordinance is not so arbitrary or discriminatory as to invalidate the tax. The judgment must be affirmed.

The principles governing the imposition of occupational license taxes ² and the classification and subclassification of occupations for such purposes are well established. The problems arise with the application of the principles to particular facts.

It has been suggested that the renting of property cannot be a taxable occupation because renting is one of the inherent rights of property ownership. (See City of Los Angeles v. Lankershim (1911) 160 Cal. 800, 801, 118 P. 215, and Annotation, Renting-Realty-License Tax (1964) 93 A.L.R.2d 1136, 1139--1141 and 1151--1153.) In Edwards v. City of Los Angeles (1941) 48 Cal.App.2d 62, 119 P.2d 370, the court ruled, 'When the owner of the realty engages in the business of supplying accommodations to lodgers, he is conducting a business different from that of letting property to tenants.' (Id., p. 70, 119 P.2d, p. 374. See also Gowens v. City of Bakersfield (1961) 193 Cal.App.2d 79, 81--83, 13 Cal.Rptr. 820.) In Burks v. Poppy Construction Co. (1962) 57 Cal.2d 463, 20 Cal.Rptr. 609, 370 P.2d 313, the court observed, 'The word 'business' embraces everything about which one can be employed, and it is often synonymous with 'calling, occupation, or trade, engaged in for the purpose of obtaining a livelihood or gain.' (See Mansfield v. Hyde, 112 Cal.App.2d 133, 137, 245 P.2d 577, 581; 5 Words and Phrases, Business (perm.ed.1940) p. 970 et seq.)' (Id., p. 468, 20 Cal.Rptr., p. 612, 370 P.2d, p. 316.) In Swann v. Burkett (1962) 209 Cal.App.2d 685, 26 Cal.Rptr. 286, this definition was applied to include an owner of a triplex who operated it for rental. (Id., pp. 694--695, 20 Cal.Rptr. 609, 370 P.2d 313.) It is concluded that the operation of an apartment house is a business that may be taxed under the general authority granted to municipal corporations under state law. (See Gov.Code, § 37101; 16 McQuillan, Municipal Corporations (3d ed. 1963 rev.) § 44.191, pp. 589--590; and Sato, Municipal Taxes (1965) 53 Cal.L.Rev. 801, 810.) The question remains whether the classification adopted by the city is proper.

'It is well settled that occupations and businesses may be classified and subdivided for purposes of taxation, and it is within the discretion of the legislature to exact different license taxes from different classes or subclasses of businesses, subject only to the limitations of the State and Federal Constitutions in regard to equal protection of the laws. No constitutional rights are violated if the burden of the license tax falls equally upon all members of a class, though other classes have lighter burdens or are wholly exempt, provided that the classification is reasonable, based on substantial differences between the pursuits separately grouped, and is not arbitrary. (Citations.)' (Fox etc. Corp. v. City of Bakersfield, supra, 36 Cal.2d 136, 142, 222 P.2d 879, 884. Accord: Gillum v. Johnson (1936) 7 Cal.2d 744, 759, 62 P.2d 1037, 63 P.2d 810, 108 A.L.R. 95; Los Angeles etc. Corp. v. City of Los Angeles (1912) 163 Cal. 621, 627, 126 P. 594; Bramman v. City of Alameda (1912) 162 Cal. 648, 653, 124 P. 243; Ex parte Lemon (1904) 143 Cal. 558, 562, 77 P. 455, 65 L.R.A. 946; Web Service Co. Inc. v. Spencer (1967) 252 Cal.App.2d 827, 833, 61 Cal.Rptr. 493; Gowens v. City of Bakersfield, supra, 193 Cal.App.2d 79, 83--84, 13 Cal.Rptr. 820; National Schools v. City of Los Angeles (1955) 135 Cal.App.2d 311, 325, 287 P.2d 151; City of San Mateo v. Mullin (1943) 59 Cal.App.2d 652, 659, 139 P.2d 351. Cf. Barker Bros. Inc. v. City of Los Angeles (1938) 10 Cal.2d 603, 606--607, 76 P.2d 97; Matter of Application of Richardson (1915) 170 Cal. 68, 73, 148 P. 213; City of Los Angeles v. Lankershim, supra, 160 Cal. 800, 802, 118 P. 215; and Gowens v. City of Bakersfield (1960) 179 Cal.App.2d 282, 285, 3 Cal.Rptr. 746; and see Burks v. Poppy Construction Co., supra, 57 Cal.2d 463, 475, 20 Cal.Rptr. 609, 370 P.2d 313; Dept. of Mental Hygiene v. McGilvery (1958) 50 Cal.2d 742, 754, 329 P.2d 689 (disapproved on other principles Dept. of Mental Hygiene v. Kirchner (1964) 60 Cal.2d 716, 723, 36 Cal.Rptr. 488, 388 P.2d 720, 20 A.L.R.3d 353); and Swann v. Burkett, supra, 209 Cal.App.2d 685, 695, 26 Cal.Rptr. 286.)

Conversely, it has been stated, 'It is elementary that there must be equality and uniformity in the imposition of license taxes for revenue purposes, and that any classification, providing different charges for those engaged in the same business, a charge for some and exemption for the others, must be one founded upon some natural and reasonable distinction pertinent to the matter.' (Matter of Application of Richardson, supra, 170 Cal. 68, 73, 148 P. 213, 215. See also City of Los Angeles v. Lankershim, supra, 160 Cal. 800, 802, 118 P. 215; Barker Bros., Inc. v. City of Los Angeles, supra, 10 Cal.2d 603, 607, 76 P.2d 97; and Gowens v. City of Bakersfield, supra, 179 Cal.App.2d 282, 285, 3 Cal.Rptr. 746.)

In the application of these mutually exclusive principles, the city is aided by the following doctrine, 'When a legislative classification is questioned, if facts reasonably can be conceived that would sustain it, their existence is presumed, and the burden of showing arbitrary action rests upon the one who assails the classification. (Citations.)' (Burks v. Poppy Construction Co., supra, 57 Cal.2d at p. 475, 20 Cal.Rptr. at p. 616, 370 P.2d at p. 320. See also Dept. of Mental Hygiene v. McGilvery, supra, 50 Cal.2d 742, 760, 329 P.2d 689; Ex parte Lemon, supra, 143 Cal. 558, 563--564, 77 P. 455, 65 L.R.A. 946; Web Service Co., Inc. v. Spencer, supra, 252 Cal.App.2d 827, 837, 61 Cal.Rptr. 493; Gowens v. City of Bakersfield, supra, 193 Cal.App.2d 79, 84, 13 Cal.Rptr. 820; National Schools v. City of Los Angeles, supra, 135 Cal.App.2d 311, 325--326, 287 P.2d 151; and City of San Mateo v. Mullin, supra, 59 Cal.App.2d 652, 659, 139 P.2d 351.) Nevertheless, the burden so imposed 'does not mean that the court must shut its ears to reason and declare in every case that Because an ordinance has been passed there must be valid reasons for its existence.' (City of Los Angeles v. Lankershim, supra, 160 Cal. 800, 803, 118 P. 215, 217.)

Most of the foregoing precedents are reviewed along with many others in Web Service Co. v. Spencer, supra (252 Cal.App.2d at pp. 834--835, 61 Cal.Rptr. 493) and in City of San Mateo v. Mullin, supra (59 Cal.App.2d at pp. 654--658, 139 P.2d 351). No good purpose would be served by further exposition in this opinion. Each case appears to depend upon its particular facts and the predilections of the reviewing tribunal as to what is arbitrary and discriminatory.

An apartment has been defined as follows: 'The word 'apartment' in its usual and ordinary connotation signifies that its occupant acquires exclusive possession and is a tenant rather than a roomer. (Citation.)' (Stowe v. Fritzie Hotels, Inc. (1955) 44 Cal.2d 416, 421--422, 282 P.2d 890, 893. See also Erwin v. City of San Diego (1952) 112 Cal.App.2d 213, 216--217, 246 P.2d 105; Edwards v. City of Los Angeles, supra, 48 Cal.App.2d 62, 66--67, 119 P.2d 370; Fox v. Windemere Hotel Apart. Co. (1916) 30 Cal.App. 162, 164, 157 P. 820; Health & Saf. Code, former § 15002 (repealed Stats.1961, ch. 1844, § 7, p. 3919, but see Id. § 14 and § 17913 as added by Stats. 1965, ch. 152, § 3, p. 1107); and 24 Cal.Admin.Code, §§ 704.02 and 704.05.)

In Edwards, as has been noted above, the court distinguished between the business of renting lodging space to a guest or...