National Schools v. City of Los Angeles

• Decision Date: 06 September 1955
• Docket Number: RADIO-TELEVISION
• Citation: 135 Cal.App.2d 311,287 P.2d 151
• Court: California Court of Appeals Court of Appeals
• Parties: NATIONAL SCHOOLS, Plaintiff and Appellant, v. CITY OF LOS ANGELES, a Municipal Corporation, et al., Defendants and Respondents.TRAINING SCHOOL, Inc., Plaintiff and Appellant, v. CITY OF LOS ANGELES, a Municipal Corporation, et al., Defendants and Respondents. Civ. 20713, 20712.

Page 151

287 P.2d 151

135 Cal.App.2d 311

NATIONAL SCHOOLS, Plaintiff and Appellant, v. CITY OF LOS ANGELES, a Municipal Corporation, et al., Defendants and Respondents.

RADIO-TELEVISION TRAINING SCHOOL, Inc., Plaintiff and Appellant, v. CITY OF LOS ANGELES, a Municipal Corporation, et al., Defendants and Respondents.

Civ. 20713, 20712.

District Court of Appeal, Second District, Division 3, California.

Sept. 6, 1955.

Rehearing Denied Sept. 26, 1955.

Hearing Denied Nov. 3, 1955.

Thompson & Royston, Los Angeles, for appellants.

Roger Arnebergh, City Atty., Bourke Jones, Asst. City Atty., and James A. Doherty, Asst. City Atty., Los Angeles, for respondents.

ASHBURN, Justice pro tem.

These actions for declaratory relief were tried together and involve the same legal problems, which are presented in a single set of briefs on appeal. Each plaintiff conducts a correspondence trade school with headquarters in Los Angeles, and the greater portion of its business is interstate commerce. The respective complaints attack the application to plaintiff's business of the Los Angeles License Ordinance No. 77000, especially section 21.149 thereof, which at the time of commencement of the action imposed a licensing fee upon trade schools of $4.50 per quarter for the first $4,500, or less, of gross annual receipts, plus $1 per quarter for each additional $1,000 of such gross annual receipts, or fractional part thereof. The text is as follows: 'For every person conducting a trade school, trade college, business school, business college, beauty school or beauty college, where instruction is given in any trade or occupation and a fee is charged for such instruction or compensation is received by such school or college by the sale of any goods, wares, merchandise or services, the sum of $4.50 per quarter for the first $4,500 or less of gross annual receipts, plus $1 per quarter for each additional $1,000 of such gross annual receipts or fractional part thereof. The provisions of this section shall not apply to a dramatic school.'

Payment of the tax is a condition precedent to the doing of business within the city. Section 21.10 says: 'No person shall engage in any business, profession, trade or occupation, or perform any act, required to be licensed under the provisions of this Article until such license is first obtained. * * *'

During the pendency of the actions and before trial, the section was amended, effective on January 1, 1952, to reduce the fee to $12 per year, or fraction thereof, for the first $12,000, or less, of gross receipts and in addition thereto, the sum of $1.00 per year for each additional $1,000 of gross receipts in excess of $12,000. Otherwise the text of the section was not changed. Primarily plaintiffs sought adjudication that the application of the ordinance to their businesses would constitute an unlawful burden upon interstate commerce,--this because of the peculiar nature of the business of each. The cause was submitted upon a written stipulation of facts, no oral evidence was taken, and no findings made. The trial judge ruled in favor of defendant city, and hence these appeals.

Each plaintiff is a California corporation, with its executive office and its place or places of business located within the City of Los Angeles; National Schools is hereinafter designated as National and Radio-Television Training School, Inc. is called Radio. Radio is engaged exclusively in the business of conducting a correspondence school, teaching by means of home study a course in radio, television and allied electronics. National's operations are divided into three departments, a residence school, a home study division, and a students' store. In its residence school National conducts within the city an ordinary technical and trade school. Its student store is a retail store which is open to resident students and to the public. The company has in the past reported its income from the residence school and paid tax thereon pursuant to section 21.149 of the ordinance; it has also reported its receipts from the store and paid thereon as required by section 21.167 (to which further reference will be made). National's home study division corresponds closely to Radio's activity. It is a correspondence school, instructing in radio, television and allied electronics and diesel, automotive and allied mechanics. Neither plaintiff has reported its gross income from or paid any tax to the city upon the conduct of the correspondence courses. For the present the discussion of National activities will be confined to the home study division, its correspondence school.

Radio's entire gross receipts consist of tuition payments. It has some 4,200 students, 82 per cent of whom reside outside of California. National has some 17,500 correspondence students, 90 per cent of who reside outside the state. About 45 per cent of its gross receipts comes from tuition fees. It thus appears that each plaintiff conducts a correspondence school business within California--18 and 10 per cent of students, respectively--and an interstate school from which Radio gets 82 per cent of its business and National 90 per cent.

The business of each company is nation-wide, supported and promoted by generous advertising through magazines or the mails or both. When a prospect becomes a student he signs a contract which is forwarded to the home office in Los Angeles and there accepted. Radio has fifteen field representatives who promote and service the business for it. National has no field representatives. Neither company has any office or place of business outside Los Angeles. The general procedure of each is substantially as follows. At the Los Angeles headquarters are prepared written lessons and materials for conducting experiments or constructing things like radio and television sets; these lessons and equipment are mailed to the students in installments from time to time; the student at his home base studies the lessons and performs the experiments and other work; he must fill out and return an examination paper on each lesson; also a report on each experiment or other job done; he is graded at the home office on each and comments are forwarded to him; these things go on, through the mails, for a period of 18 months for completion of the course; 139 completed lessons and examinations occur during the National curriculum and 112 in Radio's course of instruction. And final examinations must be passed. The instructors and graders remain in Los Angeles and the students in their respective homes.

It is agreed by counsel that this is interstate commerce so far as it embraces nonresident students. And it was so ruled, upon substantially the same facts, in International Text-Book Co. v. Pigg, 217 U.S. 91, 30 S.Ct. 481, 54 L.Ed. 678. The stipulation of facts shows in each instance that the city proposes and intends to assess the said license tax to each plaintiff and 'to include in the measure of said tax the plaintiff's gross receipts as hereinabove alleged from its correspondence students both within and without the State of California' and at the appropriate rates before and after amendment of section 21.149. The trial court ruled that 'Gross receipts attributable to fees collected from home study students, whether located within or beyond the limits of the State of California, are properly and validly included in the measure of the tax imposed by the said Section 21.149.'

We here enter upon the recurrent and delicate task of accommodating the ever-increasing demands for more taxes on the part of the federal and state governments and their subordinate taxing agencies, one whose history 'is spread over hundreds of volumes of our Reports'. Freeman v. Hewit, 329 U.S. 249, 252, 67 S.Ct. 274, 276, 91 L.Ed. 265. And the problem must be attacked with a realization of this truth: 'To attempt to harmonize all that has been said in the past would neither clarify what has gone before nor guide the future. Suffice it to say that especially in this field opinions must be read in the setting of the particular cases and as the product of pre-occupation with their special facts.' Freeman v. Hewit, supra, 329 U.S. at page 252, 67 S.Ct. at page 276.

It plainly appears here that the correspondence business of each plaintiff is readily severable into interstate and intrastate schools, 90 per cent and 82 per cent interstate, and balance intrastate. The word school has varying connotations. 78 C.J.S., Schools and School Districts, § 1, p. 605; Board of Supervisors of Merced County v. Cothran, 84 Cal.App.2d 679, 682, 191 P.2d 506; Weisse v. Board of Education, 178 Misc. 118, 32 N.Y.S.2d 258, 261; Walkenhorst v. Kesler, 92 Utah 312, 67 P.2d 654, 658; Bastendorf v. Arndt, 290 Mich. 423, 287 N.W. 579, 580, 124 A.L.R. 445. It may mean, among other things, the building in which instruction is given, or the assemblage within a building set aside for purpose of instruction, or the combination of teachers and pupils for the purpose of giving and receiving instruction; it may be on the mountaintop, or in a school yard, or may be held together by communication through the mails, or the radio or television. Correspondence schools fall in the last mentioned category. It is said in International Text-Book Co. v. Mueller, 149 Ill.App. 509, 512, that '* * * a school cannot exist without pupils, and necessarily where the pupils and instructors are located in different states, the school cannot properly be said to have an exclusive situs in one state.' The tax in question is 'in addition to and not in lieu of ad valorem taxes ¹ or any other taxes imposed by the City of Los Angeles upon the plaintiff.' And its incidence is upon 'conducting a trade school,' not some minor phase of same supposed to have detached tax relevance, such as preparing lessons and grading examination papers, or assembling materials for experiments preparatory to transmission to students. The tax is imposed upon the...