Flying Tiger Line, Inc. v. Los Angeles County

• Decision Date: 16 December 1958
• Citation: 51 Cal.2d 314,333 P.2d 323
• Court: California Supreme Court
• Parties: The FLYING TIGER LINE, Inc. (a Corporation), Plaintiff and Respondent, v. The COUNTY OF LOS ANGELES and The City of Burbank, Defendants and Appellants. L. A. 24532

Page 323

333 P.2d 323

51 Cal.2d 314

The FLYING TIGER LINE, Inc. (a Corporation), Plaintiff and Respondent, v. The COUNTY OF LOS ANGELES and The City of Burbank, Defendants and Appellants.

L. A. 24532.

Supreme Court of California,

Dec. 16, 1958.

Rehearing Denied Jan. 14, 1959.

Harold W. Kennedy, County Counsel, Gordon Boller, Asst. County Counsel, Los Angeles, and Alfred Charles DeFlon, Deputy County Counsel, Hollywood, for appellants.

Hill, Farrer & Burrill, Carl A. Stutsman, Jr., and Leon S. Angviro, Los Angeles, for respondent.

McCOMB, Justice.

Defendants appeal from a judgment in favor of plaintiff in an action to recover 1953 taxes paid under protest to the Tax Collector of Los Angeles County upon the assessment of five airplanes.

Facts: Plaintiff is a Delaware corporation, with its principal place of business in the county of Los Angeles. It is engaged in business as a common carrier of freight by air, operating in interstate and foreign commerce under a certificate issued by the Civil Aeronautics Board.

On the assessment date in 1953, the first Monday in March, plaintiff owned and operated 37 aircraft of two different types. It had 27 C-46 planes, which were used only in its domestic commercial service. These planes did not have a sufficient range for overseas flying. They were assessed at a portion of their book value determined by computing the percentage of the total time, during a test period selected by the county assessor, that the planes were physically present in the county of Los Angeles. The tax on these planes is not disputed.

Plaintiff also operated 10 DC-4 planes in flying the Pacific airlift under control of the military authorities and in support of the war in Korea. The route of this lift was from the United States to Tokyo, Japan. Five of these planes were leased by plaintiff and five were owned by it. Plaintiff's interest in the leased planes was assessed on the same formula applied to the C-46 planes. This tax is undisputed.

The other five DC-4 planes that were operated on the Pacific airlift were removed from the remainder of plaintiff's fleet of 37 planes by the county assessor and were assessed at 100% of their value without regard to the tiem they were physically present in the county. The difference between the amount of the tax paid on the full assessment of these five planes and the amount which would have been taxed if the assessor had assessed them on the same basis as all the other planes is the amount sought to be recovered.

Plaintiff filed a petition for redetermination of the assessment before the Los Angeles County Board of Supervisors, sitting as a board of equalization, for the year 1953-54. After two hearings before the board, the application for relief was denied. The tax was subsequently paid under protest. Thereafter plaintiff filed this suit for recovery against the county of Los Angeles and the city of Burbank. The city was made a defendant as required by section 5138 of the Revenue and Taxation Code. ¹

Questions: First. Does defendant county have the power to assess an ad valorem property tax upon the full value of aircraft which are regularly flown in interstate and foreign commerce and physically present in the county only a part of the time during the period for which the tax is collected?

No. The five planes involved were used chiefly in the performance of the Pacific airlift instituted in 1950 as a result of the Korean war, and operations during the period in question were scheduled by the military authorities and not by the Civil Aeronautics Board.

A proper decision of this case rests upon the application of four United States Supreme Court decisions. In 1944 the Supreme Court of the United States decided, in Northwest Airlines v. Minnesota, 322 U.S. 292, 64 S.Ct. 950, 88 L.Ed. 1283, that Minnesota, the home port state of the airline, could levy a property tax on the entire value of a fleet of planes in spite of the fact that the same planes were admittedly taxed on a portion of their value by six of the seven other states through which they operated.

In 1949 the Supreme Court, in Ott v. Mississippi Barge Line, 336 U.S. 169, 69 S.Ct. 432, 93 L.Ed. 585, modified the rule previously laid down in Northwest Airlines v. Minnesota, supra. The Ott case involved barges and tugs operated up and down the Mississippi River and owned by a corporation domiciled in Ohio. These tugs and barges were taxed on an apportioned basis by the State of Louisiana, where they made certain irregular stops. The court held that Louisiana could tax the vessels on a portion of their value. With reference to the question of the due process aspect of a tax of this type, the court stated, 336 U.S. at page 174, 69 S.Ct. at page 434: 'So far as due process is concerned the only question is whether the tax in practical operation has relation to opportunities, benefits, or protection conferred or afforded by the taxing State. (Citation.) Those requirements are satisfied if the tax is fairly apportioned to the commerce carried on within the State.'

In 1952 the Supreme Court, in Standard Oil Co. v. Peck, 342 U.S. 382, 72 S.Ct. 309, 96 L.Ed. 427, involving vessels travelling on the Mississippi River, adopted the rule that a domiciliary state could not tax the full value of property located only part of the time within a state without constituting an unreasonable burden upon interstate commerce and thus violating the due process clause of the United States Constitution. The court said in 342 U.S. at page 384, 72 S.Ct. at page 310: 'No one vessel may have been continuously in another state during the taxable year. But we do know that most, if not all, of them were operating in other waters and therefore under Ott v. Mississippi Barge Line Co., supra, could be taxed by the several states on an apportionment basis. The rule which permits taxation by two or more states on an apportionment basis precludes taxation of all of the property by the state of the domicile. (Citation.) Otherwise there would be multiple taxation of interstate operations and the tax would have no relation to the opportunities, benefits, or protection which the taxing state gives those operations.'

In 1954 the Supreme Court, in Braniff Airways v. Nebraska Board, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967, applied the rule previously laid down in Standard Oil Co. v. Peck, supra, to aircraft flying in interstate commerce. This case involved a fleet of planes which had its home port in the State of Minnesota, but which was used in and out of the taxing state, Nebraska. Nebraska imposed an apportioned ad valorem tax on the equipment, based upon the percentage of time in and out of the state. The court said, 347 U.S. at page 600, 74 S.Ct. at page 763: 'We perceive no logical basis for distinguishing the constitutional power to impose a tax on such aircraft from the power to impose taxes on river boats.'

It thus appears that the United States Supreme Court has now held that the rule which permits taxation by two or more states on an apportioned basis precludes taxation on all the property by the state of domicile.

In Standard Oil Co. v. Peck, supra, 342 U.S. at page 384, 72 S.Ct. at page 310, the court said: 'Those cases, though exceptional on their facts, illustrate the reach of the taxing power of the state of the domicile as contrasted to that of the other states. But they have no application here since most, if not all, of the barges and boats which Ohio has taxed were almost continuously outside Ohio during the taxable year. * * * The rule which permits taxation by two or more states on an apportionment basis precludes taxation of all of the property by the state of the domicile. (Citation.) Otherwise there would be multiple taxation of interstate operations and the tax would have no relation to the opportunities, benefits, or protection which the taxing state gives those operations.'

A taxpayer resisting an ad valorem tax on personal property based on an unapportioned assessment does not have the burden of showing that other states have actually imposed a tax on such property. He is entitled to an assessment on an apportionment basis if the record shows that he was, during a tax year, receiving substantial benefits and protection in more than one state.

In the present case, there was no apportionment with respect to the assessment of the five planes. Therefore, as a matter of law, the tax was not levied upon a proper basis.

The holding in Slick Airways v. County of Los Angeles, 140 Cal.App.2d 311, 295 P.2d 46, is in accord with the foregoing views. In that case, a fairly apportioned assessment on planes of this type was determined by the Los Angeles County Assessor. The company had its principal place of business in California in 1952 and 1953. The court, 140 Cal.App. at page 312, 295 P.2d at page 46, had this to say with reference to the normal assessment procedure in Los Angeles County: 'Plaintiff is engaged in flying a fleet of airplanes in interstate and foreign commerce. Such airplanes, under the practice of the county assessor of Los Angeles County, are assessed on the basis of a fair allocation of time, to wit, the ratio of the time spent in Los Angeles County as compared to total time.'

Thereafter, the court properly recognized that under the circumstances present, which were similar to those in the instant case, the county of Los Angeles had authority to tax only a portion of the value of the planes. In referring to the decision of the United States Supreme Court in Braniff Airways v. Nebraska Board, supra, the court, 140 Cal.App.2d at page 314, 295 P.2d at page 46, said: 'The Supreme Court, in upholding the validity of the tax, said, 347 U.S. at page 600, 74 S.Ct. 757: 'The limitation imposed by the Due Process Clause upon state power to impose taxes upon such instrumentalities was succinctly stated in the Ott Case: 'So far as due process is concerned the only question is whether the tax...