Farmers' Rice Cooperative v. County of Yolo

• Citation: 122 Cal.Rptr. 65,536 P.2d 465,14 Cal.3d 616
• Decision Date: 23 June 1975
• Docket Number: S.F. 23254
• Court: United States State Supreme Court (California)
• Parties: , 536 P.2d 465 FARMERS' RICE COOPERATIVE, Plaintiff and Respondent, v. COUNTY OF YOLO, Defendant and Appellant.

Page 65

122 Cal.Rptr. 65

14 Cal.3d 616, 536 P.2d 465

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

S.F. 23254.

Supreme Court of California In Bank.

June 23, 1975.

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

Raymond W. Schneider, County Counsel, Los Angeles, as amicus curiae on behalf of defendant and appellant. Marshall E. Leahy and John F. O'Dea, San Francisco, for plaintiff and respondent.

BY THE COURT.

In this action for recover of personal property taxes paid under protest, defendant County of Yolo appeals from a judgment entered after a nonjury trial in favor of plaintiff and against defendant for the recovery of said taxes in the sum of $16,128.29 together with interest and costs. After decision by the Court of Appeal, First Appellate District, Division One, reversing the judgment, we granted a hearing in this court for the purpose of giving further consideration to the issues raised and of eliminating any conflict among decisions of the Courts of Appeal. Having made a thorough examination of the cause, we have concluded that the opinion of the Court of Appeal prepared by Justice Elkington and concurred in by Presiding Justice Molinari and Justice Sims correctly treats and disposes of the issues involved and we adopt such opinion as and for the opinion of this court. Such opinion (with appropriate additions and deletions) is as follows: ^*

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 Sacramento-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.'

The export-import clause imposes on all states an absolute prohibition against taxing exports without the consent of Congress. One of the main purposes of the clause was to eliminate any advantage the seaboard states might have in laying duties on goods and produce sent there from other states for export. 'It was important not to allow these States to take advantage of their favorable geographical position in order to exact a price for the use of their ports from the consumers dwelling in less advantageously situated parts of the country. This fear of the use of geographical position to exact a form of tribute found an especially forceful expression in the absolute prohibition against duties on exports by either Nation or States.' (Youngstown Co. v. Bowers (1958) 358 U.S. 534, 556--557, 79 S.Ct. 383, 395, 3 L.Ed.2d 490, Frankfurter, J. dissenting; Cook v. Pennsylvania (1878) 97 U.S. 566, 574, 24 L.Ed. 1015; Woodruff v. Parham (1868) 75 U.S. 123, 135, 8 Wall, 123, 19 L.Ed. 382.) Thus once goods are actually in the process of exportation, that is have become 'exports,' their immunity from state taxation is absolute.

However, although goods which are the products of a state may be intended for exportation, until they become 'exports' within the meaning of the constitutional provision, such goods do not cease to be part of the general mass of property in the state and as such within its jurisdiction and subject to taxation in the usual way. (Cornell v. Coyne (1903) 192 U.S. 418, 427--428, 24 S.Ct. 383, 48 L.Ed. 504; Coe v. Errol (1885) 116 U.S. 517, 527--528, 6 S.Ct. 475, 29 L.Ed. 715.) '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.' (Joy Oil Co. v. State Tax Comm'n (1948) 337 U.S. 286, 288, 69 S.Ct. 1075, 1077, 93 L.Ed. 1366; Kosydar v. National Cash Register Co. (1974) 417 U.S. 62, 70, 94 S.Ct. 2108, 40 L.Ed.2d 660.) Therefore) 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. (Otherwise, seaboard states would be unfairly disadvantaged themselves. 'It seems to us untenable to hold that a crop or a herd is exempt from taxation merely because it is, by its owner, intended for exportation. If such were the rule, in many states there would be nothing but the lands and real estate to bear the taxes.' (Coe v. Errol, Supra, 116 U.S. 517, 527--528, 6 S.Ct. 475, 478, 29 L.Ed.2d 715.))

On the issue at hand we are offered a mass of seemingly relevant authority by the parties, such of which appears mutually inconsistent. But on closer examination much 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, clause 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, 75 U.S. 123, 135, 8 Wall. 123, 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 tax supported services and facilities. ²

It is only the third category of such cases that we find to be of substantial aid to us. Some of these relate to the commerce clause and concern the question whether goods and Entered the stream of interstate commerce, and were therefore nontaxable by a state. The remainder concern the export-import clause; the issue there is whether goods were in the Process of exportation and accordingly beyond reach of a state's tax process. The tests as to each of these classifications are identical. (See Kosydar v. National Cash Register Co., Supra, 417 U.S. 62, 67, 94 S.Ct. 2108, 40 L.Ed.2d 660; Empresa Siderurgica v. Merced County (1948) 337 U.S. 154, 156, 69 S.Ct. 995, 93 L.Ed. 1276; Richfield Oil Corp. v. State Board (1945) 329 U.S. 69, 79, 67 S.Ct. 156, 91 L.Ed. 80; Shell Oil Co. v. State Bd. of Equal. (1966) 64 Cal.2d 713, 721, 51 Cal.Rptr. 524, 414 P.2d 820; Sumitomo Forest. Co., Ltd. of Japan v. Thurston Cty., Wash. (9th Cir. 1974) 504 F.2d 604, 606.)

The uniform test whether goods have entered the 'stream of interstate commerce' or the 'process of exportation' was early stated by the United States Supreme Court in Coe v. Errol, Supra, 116 U.S. 517, 527, 6 S.Ct. 475, 478, 29 L.Ed. 715, as follows: '(G)oods do not cease to be part of the...