Farmer's Rice Co-op. v. Yolo County

• Decision Date: 23 December 1974
• Citation: 44 Cal.App.3d 1,118 Cal.Rptr. 500
• Court: California Court of Appeals Court of Appeals
• Parties: FARMERS' RICE COOPERATIVE, Plaintiff and Respondent, v. COUNTY OF YOLO, Defendant and Appellant. Civ. 32540.

Page 500

118 Cal.Rptr. 500

44 Cal.App.3d 1

FARMERS' RICE COOPERATIVE, Plaintiff and Respondent, v. COUNTY OF YOLO, Defendant and Appellant.

Civ. 32540.

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

Dec. 23, 1974.

Rehearing Denied Jan. 22, 1975.

For Opinion on Hearing see, 122 Cal.Rptr. 65, 536 P.2d 465.

Charles R. Mack, County Counsel, Walter I. Colby, Chief Deputy County Counsel, Robert A. Rundstrom, Deputy County Counsel, County of Yolo, for defendant and appellant.

Raymond W. Schneider, Eureka, County Counsel, County of Humboldt, as Amicus Curiae on behalf of defendant and appellant.

Robert G. Berrey, County Counsel, Jack Limber, Deputy County Counsel, County of San Diego, San Diego, in informal support of defendant and appellant.

Marshall E. Leahy, John F. O'Dea, San Francisco, for respondent.

ELKINGTON, Associate Justice.

The appeal before us concerns the export-import clause of article I, section 10, clause 2, of the United States Constitution which, as relevant here, provides:

'No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, . . .'

The action below was tried on stipulated facts which for our purposes may reasonably be condensed to the following. Plaintiff Farmers' Rice Cooperative (hereafter 'Cooperative') is a nonprofit cooperative marketing association. It mills and markets rice grown by its members of northern and central California. The Sactamento-Yolo Port District maintains dockside elevator facilities in Yolo County in which rice may be accumulated and then conveniently loaded in bulk aboard ocean going vessels. In February 1967, Cooperative had contracted for the sale and delivery of more than 11,000,000 pounds of rice to buyers in Okinawa and Puerto Rico. On March 6, 1967 (the county personal property tax assessment date), 8,502,000 pounds of this rice had been delivered by Cooperative to the dockside facilities toward fulfillment of the orders. All of it had been grown and milled in California and no contention is made that it had ever entered the stream of interstate commerce. An agreement with the port district provided that 'ultimate disposition of the rice is governed by [Cooperative's] instructions.' The balance of the rice necessary to complete the transactions was delivered after March 6, and all in due course was shiploaded and delivered abroad to its purchasers.

The Yolo County Assessor assessed, as personal property of Cooperative, the 8,502,000 pounds of rice which was resting in the port district's elevators on March 6, 1967. The resulting tax was paid under protest by Cooperative, and the instant action was commenced against Yolo County for its recovery.

Judgment was entered for Cooperative by the superior court. Yolo County's appeal is from that judgment.

The question presented is whether goods originating in California which, while under control of their owner, are accumulated for export under existing contracts of sale in dockside facilities of a public authority, have entered upon the 'process of exportation.'

At the threshold of our inquiry it seems proper to briefly consider the historical background and purpose of the export-import clause.

A principal purpose of the clause was long ago stated by the United States Supreme Court in Woodruff v. Parham (1868) 8 Wall. 123, 135, 75 U.S. 123, 135, 19 L.Ed. 382 in this manner:

"Some States export the produce of other States. Virginia exports the produce of North Carolina; Pennsylvania those of New Jersey and Delaware; and Rhode Island, those of Connecticut and Massachusetts. The exporting States wished to retain the power of laying duties on exports to enable them to pay expenses incurred. The States whose produce was exported by other States, were extremely jealous lest a contribution should be raised of them by the exporting States, by laying heavy duties on their own commodities. If this clause be fully considered it will be found to be more consistent with justice and equity then any other practicable mode; for, if the States had the exclusive imposition of duties on exports, they might raise a heavy contribution of the other States for their own exclusive emoluments."

Cook v. Pennsylvania (1878) 97 U.S. 566, 574, 24 L.Ed. 1015 expressed the same thought as follows:

'If certain States . . . could tax . . . every person who sought the seaboard through the railroads within their jurisdiction, the Constitution would have failed to effect one of the most important purposes for which it was adopted.'

Similar expressions are to be found in Youngstown Co. v. Bowers (1958) 358 U.S. 534, 545, 79 S.Ct. 389, 3 L.Ed.2d 490 and Brown v. Maryland (1827) 12 Wheat. 419, 25 U.S. 419, 439, 6 L.Ed. 678.

But there was an equally strong and sometimes competing constitutional consideration. As stated in Richfield Oil Corp. v. State Board (1946) 329 U.S. 69, 75, 67 S.Ct. 156, 160, 91 L.Ed. 80 it was of constitutional importance that:

"[T]he power to lay taxes for the support of state government shall not be unduly curtailed." The court in Diamond Match Co. v. Ontonagon (1902) 188 U.S. 82, 95, 23 S.Ct. 266, 271, 47 L.Ed. 394 quoting earlier authority, elaborated on the evil of such curtailment of state sources of taxation. It stated: "If such were the rule in many states there would be nothing but the lands and real estate to bear the taxes. Some of the western states produce very little except wheat and corn, most of which is intended for export; and so of cotton in the southern states. Certainly, as long as these products are on the lands which produce them, they are part of the general property of the state. And so we think they continue to be until they have entered upon their final journey for leaving the state . . .." (Emphasis added.)

"The true construction of the constitutional provision is that no burden by way of tax or duty can be cast upon the exportation of articles, and does not mean that articles exported are relieved from the prior ordinary burdens of taxation which rest upon all property similarly situated. The exemption attaches to the export and not to the article before its exportation." (Emphasis added; Peck & Co. v. Lowe (1917) 247 U.S. 165, 174, 38 S.Ct. 432, 433, 62 L.Ed. 1049; Cornell v. Coyne (1903) 192 U.S. 418, 427, 24 S.Ct. 383, 48 L.Ed. 504.) A broadening of such an interpretation 'would be to depart from both the spirit and letter' of the export-import clause. (Peck & Co. v. Lowe, supra, p. 174, 38 S.Ct. p. 434.)

This principle was most recently reiterated in Kosydar v. National Cash Register Co. (1974) 417 U.S. 62, 70, 94 S.Ct. 2108, 2113, where, quoting earlier authority, the court said: "The Export-Import Clause was meant to confer immunity from local taxation upon property being exported, not to relieve property eventually to be exported from its share of the cost of local services."

It will be seen that a dominant constitutional concern is that no tidewater state shall disadvantage the state of production or manufacture of goods destined for export, by a charge of 'imposts or duties' not also levied upon such goods of the tidewater state. But where goods originating in the tidewater state and destined for exportation therefrom, are taxed in the same manner as all other similarly situated property of that state, that constitutional concern is greatly quieted. Once goods are actually in the process of exportation their immunity from state taxation is absolute. But in determining whether such goods are in the process of exportation, courts will pay proper respect to the competing constitutional demand that a state's right to tax goods produced within its borders, and benefited by its tax supported services, shall not be unduly curtailed.

On the issue at hand we are offered a mass of seemingly relevant authority by the parties, much of which appears mutually inconsistent. But on closer examination must of the contradiction disappears. The subject cases are often based upon different factual contexts to which different constitutional principles apply. For a better understanding, we shall endeavor to place this divergent authority in its appropriate and logical categories.

The first category consists of cases where the movement of goods, conceded or found to have been in the stream of interstate commerce, had ended. They embrace situations where there had been, for one cause or another, a temporary cessation of such travel, or where the goods had reached their ultimate destination. The issue is whether the goods were still in the stream of interstate commerce, and therefore exempt from state taxation under the commerce clause, article I, section 8, paragraph 3, of the Constitution. These cases, arising under factual contexts wholly dissimilar to that of the case at bench, and under inapposite constitutional edicts and principles, are found to be of little value to our inquiry whether the rice at hand had entered upon the process of exportation. ¹ The second grouping of cases found to be of scant relevance to our problem concerns goods produced in one state, from which state they have commenced their export journey toward another state's deep water harbor for shipment abroad. Here it is the tidewater state that seeks to tax goods already in the process of exportation, the state of affairs feared by the Constitution's framers, and decried in Woodruff v. Parham, supra, 8 Wall. 123, 135, 75 U.S. 123, 125, 19 L.Ed. 382, and Cook v. Pennsylvania, supra, 97 U.S. 566, 574, 24 L.Ed. 1015. The tax is usually sought when the subject goods lie on the dock, or in dockside tanks, awaiting shiploading and transportation abroad. At that point, taxation of the goods already in the process of exportation would obviously do violence to the export-import clause and it is uniformly so held. It is notable in such cases that the goods, merely passing through the state from which they will be shipped abroad, have benefited little from that state's...