Michael Todd Co. v. Los Angeles County

Decision Date17 May 1962
Citation21 Cal.Rptr. 604,57 Cal.2d 684,371 P.2d 340
CourtCalifornia Supreme Court
Parties, 371 P.2d 340, 134 U.S.P.Q. 47 The MICHAEL TODD COMPANY, Inc., Plaintiff and Appellant, v. The COUNTY OF LOS ANGELES et al., Defendants and Respondents. L. A. 25987.

Shearer & Fields, Jacob Shearer, Bertram Fields and Bernard Shearer, Beverly Hills, for plaintiff and appellant.

Loeb & Loeb, Mitchell, Silberberg & Knupp, Los Angeles, and Hilbert P. Zarky, Washington, D. C., amici curiae on behalf of plaintiff and appellant.

Harold W. Kennedy, County Counsel, and Alfred Charles De Flon, Deputy County Counsel, for defendants and respondents.

Stanley Mosk, Atty. Gen., Dan Kaufmann, Asst. Atty. Gen., and Walter J. Wiesner, Deputy Atty. Gen., amici curiae on behalf of defendants and respondents.

SCHAUER, Justice.

Plaintiff appeals from a judgment for defendants in an action to recover ad valorem personal property taxes for the year 1957, levied upon an assessment of certain film negatives of the copyrighted motion picture entitled 'Around The World In Eighty Days.'

This case appears to be the first in which any taxpayer has questioned the validity of the Los Angeles County Assessor's method of assessing motion picture negatives a method which, the parties agree, has been in use by the assessor for many years. Plaintiff advances a variety of arguments on the theme that the assessment is void because it assertedly includes the value of plaintiff's copyright in the subject negatives. The Association of Motion Picture Producers, as amicus curiae, echoes plaintiff's contentions and extends the attack to the assessor's established method of valuing motion pictures which are in the course of production on the tax lien date. We have concluded that although plaintiff's statement of relevant principles of copyright law is correct the implications which plaintiff seeks to draw from such principles in the case at bench are unsound as a matter of tax law, and hence that the judgment should be affirmed.

Plaintiff is a Delaware corporation engaged in the business of making motion pictures in this state. On the first Monday in March, 1957, the following film negatives of the motion picture 'Around The World In Eighty Days' were owned by plaintiff in Los Angeles County: the original negative, a duplicate or protective master thereof, and the then unassembled components of a second 'original' negative and a duplicate or protective master of that negative. Plaintiff was also the holder of the copyright in the motion picture and the negatives. 1

During the regular assessment period for 1957 the County Assessor assessed the subject negatives as taxable personal property of plaintiff of a cash value of $1,526,900, and ad valorem taxes were levied thereon in the amount of $105,064.46. Plaintiff's application to the Board of Supervisors of Los Angeles County (sitting as a county board of equalization) for cancellation or reduction of the assessment was denied after hearing. Plaintiff thereupon paid the disputed taxes under protest, and instituted the present proceeding to recover the amounts thus paid. 2

The trial court found that the assessed value was 'fair, equitable and nondiscriminatory as compared to assessments by said Assessor of all other motion picture negatives and of motion picture prints'; that this valuation 'did not exceed the full cash value' of the negatives; and that the action of the board of supervisors in denying plaintiff's application for relief 'was based upon substantial evidence' and 'did not constitute fraud upon plaintiff, actual or constructive.'

Counsel for defendants stipulated at the trial that '(plaintiff's) interest in the property by reason of having the copyright was considered in determining the value of the property that was assessed'; and that if plaintiff had had no copyright the negatives would have had a 'salvage value' of $1,000. In accordance with this stipulation the court further found that 'Said assessment did not include as such any of the intangible copyright interests which plaintiff had with respect to said motion picture, although the possession by plaintiff of its intangible property interests with respect to the subject motion picture which were created by copyright did cause plaintiff's interests in said negatives and their duplicates to be more valuable than if plaintiff did not own and possess said intangible copyright interests.'

Judgment for defendants was entered, and plaintiff appealed.

Plaintiff's copyright in the motion picture and the negatives is not the so called 'common law copyright' (see Civ. Code, §§ 980-985; Desny v. Wilder (1956) 46 Cal.2d 715, 740(37)-741(38), 299 P.2d 257; Amdur, Copyright Law and Practice (1936), ch. II; Ball, The Law of Copyright and Literary Property (1944), §§ 4, 15), but the statutory copyright which exists solely by virtue of federal law (U.S.Const. art. 1, § 8; U.S.C., tit. 17; Bobbs-Merrill Co. v. Straus (1908) 210 U.S. 339, 346, 28 S.Ct. 722, 52 L.Ed. 1086; Wheaton v. Peters (1834) 33 U.S. (8 Pet.) 591, 661, 8 L.Ed. 1055). Yet like the common law right, plaintiff's copyright is intangible property wholly distinct from any property interest that plaintiff may have in the material object copyrighted. (17 U.S.C. § 27; Stevens v. Gladding (1854) 58 U.S. (17 How.) 447, 452-453, 15 L.Ed. 155; Stephens v. Cady (1852) 55 U.S. (14 How.) 528, 530-531, 14 L.Ed. 528; Werckmeister v. Springer Lithographing Co. (1894, C.C.N.Y.) 63 F. 808, 810-812; Capitol Records v. Mercury Record Corp. (1952, S.D.N.Y.) 109 F.Supp. 330, 338-339(5, 6); Remick Music Corp. v. Interstate Hotel Co. of Nebraska (1944, D.C.Neb.) 58 F.Supp. 523, 535(11, 12); National Geographic Soc. v. Classified Geographic (1939, D.C.Mass.) 27 F.Supp. 655, 660(5); Davenport Quigley Expedition v. Century Productions (1937, S.D.N.Y.) 18 F.Supp. 974, 977(4, 5); cf. Italiani v. Metro-Goldwyn-Mayer Corp. (1941) 45 Cal.App.2d 464, 467(1), 114 P.2d 370.)

The nature and extent of plaintiff's interests created by copyright, and the manner in which those interests may be transferred, are determined by federal law. (Cf. Loew's Incorporated v. Superior Court (1941) 18 Cal.2d 419, 424- 425(3), 115 P.2d 983). But there is nothing in the federal statute or in federal constitutional principles which renders such property interests immune from state taxation. (Fox Film Corp. v. Doyal (1932) 286 U.S. 123, 52 S.Ct. 546, 76 L.Ed. 1010; accord, Stone v. Stapling Machines Co. (1954) 220 Miss. 470, 73 So.2d 123, 125-127(1).) It follows that we must look to the law of California to determine the validity of the assessment here challenged.

Article XIII, section 1, of our Constitution lays down the general mandate that 'All property in the State except as otherwise in this Constitution provided, not exempt under the laws of the United States, shall be taxed in proportion to its value, * * *.' Section 14 of the same article provides in relevant part that 'The Legislature shall have the power to provide for the assessment, levy and collection of taxes upon all forms of tangible personal property, all notes, debentures, shares of capital stock, bonds, solvent credits, deeds of trust, mortgages, and any legal or equitable interest therein, not exempt from taxation under the provisions of this Constitution, * * *.' Section 111 of the Revenue and Taxation Code states that "Intangibles' means intangible personal property of a type not exempt from taxation and any interest therein. 'Intangible personal property' means only notes, debentures, shares of capital stock, bonds, solvent credits, deeds of trust, and mortgages.' And section 212 of that code provides that 'Notes, debentures, shares of capital stock, bonds, deeds of trust, mortgages, and any interest in such property are exempt from taxation.'

In Roehm v. County of Orange (1948) 32 Cal.2d 280, 284(1)-290(5), 196 P.2d 550, we considered at some length the just quoted constitutional and statutory provisions. With respect to section 111 of the Revenue and Taxation Code we held (id. at p. 285, 196 P.2d 550(2)) that 'Emanating from a Legislature vested (by Const. art. XIII, § 14) with the power to exempt from taxation all kinds of personal property, it (Rev. & Tax.Code, § 111) makes immune from taxation all intangibles not included in the statutory definition.' After reviewing the purposes underlying the 1933 amendments to section 14, article XIII (quoted herein above) we concluded (id. at p. 289(4)) that 'The only intangibles (except franchises, which are in a class by themselves) subject to taxation under the present system of property taxation in this state are solvent credits, * * *. All other types of intangible assets specified in section 14 of article XIII of the Constitution, as amended, and section 111 of the Revenue and Taxation Code are exempted from taxation by section 212 of that code and are therefore not part of the taxable personal property in this state.'

It is manifest that none of the intangible property interests created by copyright is a solvent credit. Accordingly, plaintiff's copyright in the motion picture and the negatives may not be subjected to ad valorem property taxation under the present constitutional and statutory law of this state. Indeed, copyrights are among the intangible rights and privileges which, as we observed in Roehm (p. 283 of 32 Cal.2d p. 552 of 196 P.2d), 'have never been taxed as property in this state during its entire existence * * *.'

The foregoing proposition, however, is not of itself dispositive of the case at bench. First, while conceding that plaintiff's copyright as such may not be taxed, defendants take the position that the interest of plaintiff here assessed is simply its 'right to use the negatives' to make distribution prints of the motion picture. Defendants reason that this right is a 'right to use a physical, tangible object' of personalty; that such a right is itself 'a species of...

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