Coast Elevator Co. v. State Bd. of Equalization

• Decision Date: 15 January 1975
• Citation: 118 Cal.Rptr. 818,44 Cal.App.3d 576
• Court: California Court of Appeals Court of Appeals
• Parties: COAST ELEVATOR COMPANY, a corporation, Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION of the State of California, Defendant and Respondent. Civ. 42226.

Page 818

118 Cal.Rptr. 818

44 Cal.App.3d 576

COAST ELEVATOR COMPANY, a corporation, Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION of the State of California, Defendant and Respondent.

Civ. 42226.

Court of Appeal, Second District, Division 5, California.

Jan. 15, 1975.

Rehearing Denied Feb. 13, 1975.

Hearing Denied March 12, 1975.

Clyde R. Maxwell, Newport Beach, and Karl F. Geiser, Beverly Hills, for plaintiff and appellant.

Evelle J. Younger, Atty. Gen., and Philip C. Griffin, Deputy Atty. Gen., for defendant and respondent.

LORING, ^* Associate Justice (Assigned).

Coast Elevator Company, a corporation, (Coast) filed an amended complaint against the State Board of Equalization of the State of California, (Board) on a claim (Exhibit A) and amended claim Exhibit B) to recover refund of sales taxes paid under the protest in the sum of $13,241.56. (Amended by proposed amended complaint to be the sum of $17,511.00; amended by stipulation to be the sum of $4,929.04.) After answer to amended complaint, Coast made a motion for summary judgment supported by affidavit of William M. Shrum, Jr. (President of Coast) and affidavit of E. D. Oliver (a specialist-consultant). The parties entered into a stipulation which provided, inter alia, that the court might decide the issues as if a cross motion for summary judgment on the same question had been filed by Board and that in lieu of the affidavits of Shrum and Oliver it should be deemed that Shrum and Oliver would testify as set forth in the stipulation. The stipulation then set forth in precise verbiage the 'deemed' testimony of the two witnesses.

Pursuant to the request of Coast for findings the court made findings that certain portions of the deemed testimony of Shrum and Oliver was untrue. ¹ The court found that certain designated parts and components of an elevator constituted fixtures subject to sales tax and designated how such tax was to be computed and that certain designated components constituted materials which were subject to sales tax at the contractor's cost of acquisition. These findings were the same as previously made by the Board. The court found that Board's regulation 1521 (formerly rule 11) was a valid regulation and the court concluded that Coast was not entitled to a refund of sales tax. Judgment was entered in favor of Board. Coast appeals from the judgment.

CONTENTIONS

Appellant contends:

'I THE BOARD'S REGULATIONS 1521 (FORMERLY RULE 11, 18 CAL. ADMIN. CODE § 1921) AND GENERAL BULLETINS 67--8 AND 67--9 ISSUED PURSUANT THERETO, ARE VAGUE, UNCERTAIN, AMBIGUOUS, CONFLICTING AND UNREASONABLE AND ARE, THEREFORE, VOID ON THEIR FACE. THEY ARE ALSO IN CONFLICT WITH THE BOARD'S REGULATION 1615 (FORMERLY RULE 12, 18 CAL. ADMIN. CODE § 1922).

'II THE CASE OF GENERAL ELECTRIC CO. V. STATE BOARD OF EQUALIZATION (1952) 111 CAL.APP.2d 180, 244 P.2d 427, IS NO LONGER THE LAW OF THIS STATE INSOFAR AS IT PURPORTS TO UPHOLD THE VALIDITY OF REGULATION 1521 (FORMERLY RULE 11) AND REGULATION 1615 (FORMERLY RULE 12).

'III THE CALIFORNIA SUPREME COURT AND THE COURT OF APPEAL HAVE CONSISTENTLY HELD THAT THE CONSTRUCTION CONTRACTOR IS A USER AND CONSUMER OF PERSONAL PROPERTY WHICH HE INSTALLS AND IS TAXABLE ON THE COST OF THE MATERIALS.

'IV THE LOGICAL EFFECT OF THE POSITION TAKEN BY RESPONDENT IS TO ATTEMPT TO LEVY A TAX UPON THE SALE OF REAL ESTATE (IMPROVEMENTS) AND NOT A TAX ON TANGIBLE PERSONAL PROPERTY, WHICH IS NOT AUTHORIZED BY THE SALES AND USE TAX LAW.

'V AN ADMINISTRATIVE BODY IS WITHOUT POWER TO ENLARGE THE SCOPE OF THE STATUTES BY ADMINISTRATIVE REGULATIONS.

'VI CONTINUED CONTEMPORANEOUS ADMINISTRATIVE CONSTRUCTION LENDS NO VALIDITY TO A RULE OR REGULATION WHEN THE CONSTRUCTION IS INCORRECT.

'VII FINAL RESPONSIBILITY FOR INTERPRETATION OF THE LAW AND OF ADMINISTRATIVE REGULATIONS RESTS WITH THE COURTS.

'VIII REENACTMENT OF A STATUTE WITHOUT CHANGE DOES NOT CONSTITUTE LEGISLATIVE APPROVAL OF AN EXISTING REGULATION IF THE REGULATION IS ERRONEOUS.

'IX IN A CASE SUCH AS THIS WHERE THE DEFENDANT ADMINISTRATIVE AGENCY HAS EXCEEDED ITS AUTHORITY THERE IS NEVER ANY BASIS FOR AN ESTOPPEL AGAINST THE TAXPAYER.

'X THE ADMINISTRATIVE AGENCY MUST CONFINE ITSELF TO A REASONABLE INTERPRETATION OF THE STATUTE CREATING IT IN ADOPTING REGULATIONS. IF IT GOES BEYOND THAT THE LEGISLATIVE AREA HAS BEEN INVADED AND THE REGULATION IS VOID.

'XI THE RULE OF LAW IS SETTLED THAT TAXING STATUTES ARE STRICTLY CONSTRUED AGAINST THE TAXING AUTHORITY AND IN FAVOR OF THE TAXPAYER; AND THAT NEITHER THE COURTS (NOR ADMINISTRATIVE AGENCIES) MAY BY INTERPRETATION EXTEND TAX PROVISION BY IMPLICATION BEYOND THE CLEAR IMPORT OF THE LANGUAGE; NOR ENLARGE THEIR OPERATION TO EMBRACE MATTERS NOT SPECIFICALLY INCLUDED.'

FACTS

The stipulation that Shrum and Oliver should be deemed to have testified as therein set forth constituted the only evidentiary basis for the motion of Coast for a summary judgment. No declaration or evidence was submitted in behalf of Board. Necessarily, therefore the Board took the position that as a matter of law its rule 1521 was valid and no issue of fact had been raised to indicate its invalidity or the manner in which it had been applied to elevators constructed by Coast. In the summary of the testimony of Oliver he stated inter alia that he had examined the tax returns and book and records of Coast 'and determined that shop labor plus ten percent on elevator systems installed in permanent structures had been improperly included as taxable in its sales tax returns.' But he explained the basis for such conclusion was that all new elevator systems installed by Coast constitute an integrated portion of the structure in which they are instaned. He stated:

'Pursuant to the terms of Ruling 11 and Bulletins 67--8 (Exh. 'B') and 67--9 (Exh. 'C'), the Board auditors, in a superceding audit (Exh. 'C'), determined that certain portions of the plaintiff's elevator installations constituted materials integrated into the structure and that other portions of the elevator systems were fixtures and subject to a different and higher measure of tax than that imposed upon the contractor for materials integrated into a structure. The various portions of the plaintiff's systems determined to be fixtures by the auditors of the Board are described in Bulletin 67--9 of the Board of Equalization. The auditors determined from an examination of forty elevator jobs the ratio of total 'materials' to the 'materials' which were incorporated into 'fixtures' listed in Bulletin 67--9 and applied that ratio to total overhead and direct labor to arrive at the cost of overhead and direct labor. The cost of overhead and direct labor attributable to 'fixtures' was added to the cost of 'materials' used in 'fixtures' to arrive at the measure of tax for 'fixtures."

Attached to the stipulation was a copy of General Bulletin 67--9 ² issued by Board regarding the application of ruling 11 (now rule 1521) to elevator installations. That bulletin provided in part:

'Following are examples of components constituting part of the cage or platform and its hoisting machinery, and which are fixtures under Ruling 11:

alarm bell

cab or car

car doors

car platform and sling

door hanger on cab

door openers

door operator on cab or car

door safety edge on cab

door sills on cab

electronic door protector

jack assembly (except oil return and

outer casing)

motors

power units and control boxes

pumps

pushbuttons on cab

wire and piping (if attached only to 'fixtures')

'Following are examples of components constituting 'materials' when attached to realty:

car guides

casing section of jack assembly

guide rails

hanger supports

hoistway doors

hoistway door frames

hoistway door safety edge

hoistway door sills and jambs

hoistway door supports

hoistway entrance

pushbuttons on hoistway

rail brackets

sills, struts

sound insulating panels on 'materials'

structural steel (unless part of cab, car, or other 'fixture')

valve strainer

wire and piping attached to 'materials'

'Measure of Tax for Fixtures

'When the contract does not specify the selling price of those components constituting 'fixtures' as herein defined, the selling price consists of either:

'(1) The purchase price paid by the installing contractor for a fixture ready for installation, or

'(2) In the case of fixtures manufactured or purchased in component parts and assembled in whole or in part prior to or during installation,

(a) the prevailing price at which similar fixtures in similar quantities ready for installation would be sold to contractors, or if such a prevailing price cannot be ascertained,

(b) the manufactured cost to the contractor-manufacturer.

'Jobsite fabrication labor and its prorated share of manufacturing overhead must be included in the fixture cost. Jobsite fabrication labor includes assembly labor performed prior to attachment of a component or a fixture to a structure or other real property.'

In its petition to Board for redetermination of tax (which was attached to the amended complaint) Coast conceded 'In this connection I am willing to concede that the (elevator) cab itself is probably a fixture.'

DISCUSSION

We note at the outset that contrary to the requirements of Code of Civil Procedure section 437c the prevailing party (Board) did not present any affidavit or declaration is support of its motion for summary judgment. '. . . Summary judgments may be granted only upon declarations or affidavits setting forth competent evidence.' (Orange County Air Pollution Control Dist. v. Superior Court, 27 Cal.App.3d 109 at 114, 103 Cal.Rptr. 410 at 414.) Normally the Board's motion for summary judgment therefore should be treated as a motion for judgment on the pleadings. (Magna Development Co. v. Reed, 228 Cal.App.2d 230, 234, 244, 39 Cal.Rptr. 284.)

However, where there are no issues of fact to be tried and the sole question is one of law that question may appropriately be determined on a motion for summary judgment. (Jones-Hamilton Co. v....