Palm Springs Spa, Inc. v. County of Riverside

Decision Date23 June 1971
Citation95 Cal.Rptr. 879,18 Cal.App.3d 372
CourtCalifornia Court of Appeals Court of Appeals
PartiesPALM SPRINGS SPA, INC., Plaintiff and Appellant, v. COUNTY OF RIVERSIDE et al., Defendants and Respondents. Civ. 10493.

GARDNER, Presiding Justice.

On March 6, 1968, plaintiff filed a complaint to recover taxes against the defendant County. The complaint alleged the following: Since July 1, 1963, plaintiff was the owner of a leasehold interest in certain specified land in the City of Palm Springs held in trust by the United States for the benefit of the Agua Caliente Band of Mission Indians. In consequence of applicable Federal law, the interest of the Indians in this land had been granted tax exempt status. Nevertheless, since July 1, 1963, the defendant County had annually assessed a tax against plaintiff's leasehold possessory interest in the tax exempt property. Plaintiff has paid these assessments under protest, and has applied to the County Board of Supervisors for a refund which request has been denied.

The action of the Board of Supervisors in assessing this possessory interest tax upon plaintiff's leasehold was asserted to be violative of the Constitutions of the United States and the State of California. The complaint prayed for the refund of some $264,000.00 in assessed possessory interest taxes paid to defendant subsequent to July 1, 1963. The complaint was subsequently amended to name the City of Palm Springs as a codefendant.

On March 27, 1969, the defendants filed a demurrer to plaintiff's complaint on the ground that it failed to state a cause of action. The points and authorities filed in support of the demurrer do not allege a procedural defect in the form of plaintiff's complaint; rather, they assert that as a matter of substantive law, the defendants were entitled to levy taxes against plaintiff's leasehold interest. The demurrer prayed, Inter alia, that plaintiff take nothing by its complaint.

The court below sustained defendants' demurrer without leave to amend on January 13, 1970. A motion to reconsider this order was thereafter granted, but on March 6, 1970, the court reentered its order sustaining defendants' demurrer without leave to amend on the ground that the complaint failed to state a cause of action. Judgment in favor of defendants was thereafter entered. This appeal is taken from that judgment.

Initially, we note that while the judgment is one made after the sustaining of a demurrer without leave to amend, the defendants' attack in the court below went not to the formal sufficiency of the complaint but rather to the merits of plaintiff's claim for relief. Thus, defendants' motion was in the nature of one for a judgment on the pleadings. As such, it was proper for the court to sustain defendants' demurrer without leave to amend.

Plaintiff does not question the power of defendants to levy a property tax on the possessory interest of leaseholds on tax exempt fees in general. (Calif.Const., art. 13, sec. 1; Government Code, § 29100, §§ 43000 et seq.; Rev. & Tax Code, § 107.) Defendants concede that they have no power to levy property taxes on the underlying fee interest held in trust by the United States for the benefit of the Agua Caliente Band of Mission Indians. (U.S.Const., art. 1, sec. 8, clause 3; M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579; Oklahoma Tax Commission v. Texas Co., 336 U.S. 342, 69 S.Ct. 561, 93 L.Ed. 721.) The precise question raised by this appeal is whether the state possessory interest tax imposed on the leasehold interest carved from the tax exempt federally owned fee is sufficiently indirect and remote as to be permissible under the doctrine of the M'Culloch and Oklahoma Tax Commission cases.

Initially, we note that the possessory interest tax plaintiff here challenges is imposed not on the fee interest held by plaintiff. (Rev. & Tax Code, § 107.) The enforcement of the possessory interest tax is limited to seizure and sale of the possessory interest itself, (Rev. & Tax Code, §§ 2914, 2919) a suit for collection of the assessment against the leaseholder only (Rev. & Tax Code, § 3003) or statutory summary judgment, again against the lessee only (Rev. & Tax Code, §§ 3101--3107). The tax is entered on the unsecured roll and cannot form an encumbrance on the underlying fee interest of the United States. Thus, the only effect the imposition of the possessory interest tax has on the interest held by the United States stems from the fact that the tax lowers the rental fee the owner can charge on a leasehold.

Plaintiff's first contention is that the land here in question, owned by the United States in trust for the Agua Caliente Band of Mission Indians, does not form part of the State of California. Therefore, it is asserted, any attempt by the state or its political subdivisions to tax activities on the Federal land is in excess of the jurisdiction of the state's authority.

Plaintiff asserts that the property here in question was at one time the public land of Mexico, and that title was ceded to the United States under the terms of the Treaty of Guadalupe Hidalgo. Both parties concede that the land here in question has been continuously owned by the United States since the admission of California to the Union. The Act of Congress admitting California to the Union provides in pertinent part:

'Sec. 3. And be it further enacted, That the said State of California is admitted into the Union upon the express condition that the people of said State, through their legislature or otherwise, shall never interfere with the primary disposal of the public lands within its limits, and shall pass no law and do no act whereby the title of the United States to, and right to dispose of, the same shall be impaired or questioned; and that they shall never lay any tax or assessment of any description whatsoever upon the public domain of the United States * * *.' (West's Annotated Codes; Calif. Constitution, vol. 3, p. 745.)

Indian reservations are geographically, politically and governmentally within the boundaries of the state wherein they are located, unless Congress, upon admission of the state into the Union, or otherwise, has by express words excepted such areas from that jurisdiction. (United States v. McBratney, 104 U.S. 621, 26 L.Ed. 869; see also People of State of New York ex rel. Ray v. Martin, 326 U.S. 496, 66 S.Ct. 307 90 L.Ed. 261; Thomas v. Gay, 169 U.S. 264, 18 S.Ct. 340, 42 L.Ed. 740; Draper v. United States, 164 U.S. 240, 17 S.Ct. 107, 41 L.Ed. 419.) Apparently there are no such expressed words of exception in the Act granting California statehood.

On the contrary, it has been held that since the admission of California to the Union, the public lands of the United States (except such as have been reserved for forts, navy yards, public buildings, etc.) are held as are the lands of private persons, except that they cannot be taxed by the state, nor can the primary disposition of them be interfered with. (Lux v. Haggin, 69 Cal. 255, 335--336, 4 P. 919, 10 P. 674; Acosta v. County of San Diego, 126 Cal.App.2d 455, 272 P.2d 92; see also People v. Shearer, 30 Cal. 645.) By mutual consent of the governments of the United States and the State of California, state jurisdiction over certain parcels of Federal land has been foresworn. However, the land involved in the instant litigation is not such a parcel. (Gov.Code, § 111.)

Moreover, Congress has enacted 28 U.S.C.A. § 1360, which states, in pertinent part:

'(a) Each of the States or Territories listed in the following table shall have jurisdiction over civil causes of action between Indians or to which Indians are parties which arise in the areas of Indian country listed opposite the name of the State or Territory to the same extent that such State or Territory has jurisdiction over other civil causes of action, and those civil laws of such State or Territory that are of general application to private persons or private property shall have the same force and effect within such Indian country as they have elsewhere within the State or Territory:

'* * *ce

'California . . . All Indian country within the State * * *.'

Humble Pipe Line Co. v. Waggonner, 376 U.S. 369, 84 S.Ct. 857, 11 L.Ed.2d 782, cited by plaintiff, is not in point. In that case, the State of Louisiana foreswore, and the United States Government accepted, exclusive jurisdiction over the land forming an Air Force installation save in matters of criminal law. Thereafter, the state attempted to levy a personal property tax on the possessions of individuals located on the base. The Supreme Court disallowed this tax. In the instant case, as we have noted, the United States Government has neither asserted nor the state government conceded exclusive Federal jurisdiction over the subject property.

Similarly with the case of Your Food Stores, Inc. (NSL) v. Village of Espanola, 68 N.M. 327, 361 P.2d 950. As a condition of its admission to the Union, New Mexico was compelled to cede all jurisdiction over Indian land. Such condition was not imposed on...

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  • Herpel v. Cnty. of Riverside
    • United States
    • California Court of Appeals Court of Appeals
    • 10 de fevereiro de 2020
    ...In 1971, this court held that it may, holding in part that federal law did not preempt the tax. ( Palm Springs Spa, Inc. v. County of Riverside (1971) 18 Cal.App.3d 372, 95 Cal.Rptr. 879.) The tax was also upheld that year by the Ninth Circuit. ( Agua Caliente Band of Mission Indians v. Cou......
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    ...under a lease conducted on the leased premises." 25 C.F.R. §§ 162.017(a)–(b).4 Defendants cite to Palm Springs Spa, Inc. v. County of Riverside , 18 Cal.App.3d 372, 95 Cal.Rptr. 879 (1971), which also held that a possessory interest tax on a leasehold was not preempted by federal law. (MJP ......
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    ...who fall within the meaning of the Gross Receipts Tax Act. 'We find no federal preemption.' Palm Springs Spa, Inc. v. County of Riverside, 18 Cal.App.3d 372, 95 Cal.Rptr. 879, 883 (1971). Taxpayer stated at the hearing that it reviewed the bid items of the Bureau of Reclamation. It conclude......
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