Kennedy Wholesale, Inc. v. State Bd. of Equalization

• Decision Date: 01 April 1991
• Docket Number: No. S013840,S013840
• Citation: 279 Cal.Rptr. 325,806 P.2d 1360,53 Cal.3d 245
• Court: California Supreme Court
• Parties: , 806 P.2d 1360 KENNEDY WHOLESALE, INC., Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION, Defendant and Respondent.

Page 325

279 Cal.Rptr. 325

53 Cal.3d 245, 806 P.2d 1360

KENNEDY WHOLESALE, INC., Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION, Defendant and Respondent.

No. S013840.

Supreme Court of California In Bank.

April 1, 1991.

Munger, Tolles & Olson, Ronald L. Olson, Allen M. Katz, Carolyn B. Kuhl, Mark B. Helm, Lester J. Levy, Los Angeles, Ball, Hunt, Hart, Brown & Baerwitz, Long Beach, John R. McDonough, Los Angeles, Allan E. Tebbetts, Judith F. Burkey and Agnes H. Mulhearn, Long Beach, for plaintiff and appellant.

Daniel G. Nauman, Sacramento, as amicus curiae on behalf of plaintiff and appellant.

John K. Van de Kamp, Daniel E. Lungren, Attys. Gen., N. Eugene Hill, Asst. Atty. Gen., Richard M. Frank, Robert D. Milam and Floyd D. Shimomura, Deputy Attys. Gen., for defendant and respondent.

Olson, Connelly, Hagel & Fong, Lance H. Olson, Leroy Y. Fong and George Waters, Sacramento, as amici curiae on behalf of defendant and respondent.

PANELLI, Associate Justice.

We granted review in this case to consider plaintiff's constitutional challenges to Proposition 99, the Tobacco Tax and Health Protection Act of 1988 (codified at Rev. & Tax.Code, § 30121 et seq.). Proposition 99, which the voters approved on November 8, 1988, increases the tax on cigarettes and other tobacco products and allocates the resulting revenue to various tobacco-related problems. The superior court and the Court of Appeal rejected plaintiff's challenges. We affirm.

FACTS

In 1988 plaintiff Kennedy Wholesale, Inc., a distributor of tobacco products, paid an increased tax of $50,510.49 in compliance with Proposition 99. Having paid under protest, plaintiff applied to the State Board of Equalization (Board) for a refund. When the Board denied the claim, plaintiff filed this action. The superior court granted the Board's motion for judgment on the pleadings, and the Court of Appeal affirmed.

DISCUSSION

A. Article XIII A, Section 3

Plaintiff first contends that Proposition 99 violates article XIII A, section 3, of the California Constitution (hereafter section 3). Under section 3, "any changes in State taxes enacted for the purpose of increasing revenues ... must be imposed by an Act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature...." Section 3 was added to the Constitution on June 6, 1978, by Proposition 13, the Jarvis-Gann initiative. (See generally Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281 [upholding Prop. 13] (Amador Valley ).)

Plaintiff reads section 3 to mean that only the Legislature can raise taxes. The section, if interpreted in this way, would implicitly limit the expressly reserved power of initiative. ¹ Respondent, in contrast, interprets section 3 to impose a supermajority voting requirement on the Legislature while leaving the people's power of initiative unchanged.

Section 3, considered apart from its context and history, is susceptible of the interpretation that plaintiff has proposed. This is because the section literally provides that "any changes in State taxes ... must be imposed by an Act passed by not less than two-thirds of ... the Legislature...." (Italics added.) The words "any changes in State taxes" could, of course, be read to include changes by statutory initiative.

Plaintiff claims that we must enforce section 3 according to its "plain meaning" without considering the section's history or other indications of the voters' intent. (See, e.g., Mutual Life Ins. Co. v. City of Los Angeles (1990) 50 Cal.3d 402, 407, 267 Cal.Rptr. 589, 787 P.2d 996.) Section 3, however, is ambiguous when read in the context of the whole Constitution. In article IV, section 1, the people expressly "reserve to themselves the powers of initiative and referendum." To interpret section 3 as giving the Legislature exclusive power to raise taxes would implicitly repeal article IV, section 1, pro tanto. Section 3, however, does not even mention the initiative power, let alone purport to restrict it.

Section 3's silence regarding its effect on the reserved power of initiative presents a latent ambiguity. This is because "the law shuns repeals by implication...." (Board of Supervisors v. Lonergan (1980) 27 Cal.3d 855, 868, 167 Cal.Rptr. 820, 616 P.2d 802.) Indeed, "[s]o strong is the presumption against implied repeals that when a new enactment conflicts with an existing provision, '[i]n order for the second law to repeal or supersede the first, the former must constitute a revision of the entire subject, so that the court may say that it was intended to be a substitute for the first.' " (Ibid., quoting Penziner v. West American Finance Co. (1937) 10 Cal.2d 160, 176, 74 P.2d 252.) Thus, to avoid repeals by implication "we are bound to harmonize ... constitutional provisions" that are claimed to stand in conflict. (Board of Supervisors v. Lonergan, supra, 27 Cal.3d at pp. 868-869, 167 Cal.Rptr. 820, 616 P.2d 802.) In addition, because plaintiff is arguing for a limitation on the initiative power, we must also bear in mind that the initiative power is " ' "one of the most precious rights of our democratic process" ' " ( Amador Valley, supra, 22 Cal.3d at p. 248, 149 Cal.Rptr. 239, 583 P.2d 1281, quoting from Associated Home Builders etc., Inc. v. City of Livermore (1976) 18 Cal.3d 582, 591, 135 Cal.Rptr. 41, 557 P.2d 473) and that we must "resolve any reasonable doubts in favor of the exercise of this precious right." (Brosnahan v. Brown (1982) 32 Cal.3d 236, 241, 186 Cal.Rptr. 30, 651 P.2d 274.)

Because section 3 is ambiguous in context, it is appropriate to consider indicia of the voters' intent other than the language of the provision itself. ( Mutual Life Ins. Co. v. City of Los Angeles, supra, 50 Cal.3d at p. 407, 267 Cal.Rptr. 589, 787 P.2d 996.) Nothing in the official ballot pamphlet supports the inference that the voters intended to limit their own power to raise taxes in the future by statutory initiative. To the contrary, the arguments in favor of Proposition 13 adopt a populist theme that cannot easily be reconciled with plaintiff's interpretation of the measure. Proponents of Proposition 13 described the measure as directed against "spendthrift politicians" and as "[r]estor[ing] government of, for and by the people." (Ballot Pamp., Proposed Amends. to Cal. Const. with arguments to voters, Primary Elec. (June 6, 1978) p. 59.) If, as the proponents' argument suggests, a preference for direct democracy over the legislative process played a role in motivating the passage of Proposition 13, the conclusion that the voters intended to limit their own power would be difficult to justify. ²

For the voters to have limited their power in the manner that plaintiff suggests would also have made no sense. Assuming for the sake of argument that section 3 were to prohibit tax increases by statutory initiative, it would still be possible for a simple majority of voters to raise taxes by amending section 3. Initiatives, whether constitutional or statutory, require only a simple majority for passage. ³ (Cal. Const., art. II, § 10, subd. (a).) This fact also answers plaintiff's contention that Proposition 13 was intended to ensure that no new tax would be enacted unless it "command[ed] a broad public consensus." A tax increase by statutory initiative, which passes by a simple majority, commands the same broad public consensus as a constitutional initiative.

For these reasons, we reject plaintiff's argument that section 3 implicitly repeals the voters' power to raise taxes by statutory initiative.

Plaintiff argues in the alternative that we should interpret section 3's requirement of a two-thirds vote to apply, implicitly, to the electorate. This interpretation, however, would bring section 3 into conflict with article II, section 10, which expressly provides that an initiative statute takes effect if "approved by a majority." (Italics added.) Plaintiff does not address the conflict. Instead, citing Legislature v. Deukmejian (1983) 34 Cal.3d 658, 194 Cal.Rptr. 781, 669 P.2d 17, plaintiff reasons that the voters' power is presumed to be coextensive with the Legislature's. That opinion, however, does not hold that legislative procedures, such as voting requirements, apply to the electorate.

In Legislature v. Deukmejian, supra, we reaffirmed the "long-established rule that redistricting may occur only once within the 10-year period following a federal census." (34 Cal.3d at p. 663, 194 Cal.Rptr. 781, 669 P.2d 17.) Although the relevant constitutional provision expressly referred only to the Legislature, ⁴ we held that the "once-a-decade" rule amounted to a limitation on the state's lawmaking power, regardless of whether that power is exercised by the Legislature or by the voters. Explaining this conclusion, we stated that "the reserved power to enact statutes by initiative is a legislative power, one that would otherwise reside in the Legislature. It has heretofore been considered to be no greater with respect to the nature and attributes of the statutes that may be enacted than that of the Legislature." (Legislature v. Deukmejian, supra, 34 Cal.3d at p. 673, 194 Cal.Rptr. 781, 669 P.2d 17.)

It is this language from the opinion that plaintiff reads as establishing a "presumption" that the voters' lawmaking power is coextensive with the Legislature's. However, we stated only that the initiative process was "no greater with respect to the nature and attributes of the statutes that may be enacted than that of the Legislature." (Legislature v. Deukmejian, supra, 34 Cal.3d at p. 673, 194 Cal.Rptr. 781, 669 P.2d 17, italics added.) In other words, neither the Legislature nor the voters may enact a law of a nature that exceeds a limitation on the state's lawmaking power, such as the right of free speech (Cal. Const., art. I, § 2, subd. (a)) or the "once-a-decade" limitation on reapportionment (i...