Parrott & Co. v. City and County of San Francisco

• Decision Date: 08 March 1955
• Citation: 280 P.2d 881,131 Cal.App.2d 332
• Court: California Court of Appeals Court of Appeals
• Parties: PARROTT & CO., Renfield Importers, Ltd., and Esquin Imports, Plaintiffs and Respondents, v. CITY AND COUNTY OF SAN FRANCISCO., a municipal corporation, Defendant and Appellant. BELLOWS & COMPANY, Inc., a corporation, Plaintiff and Respondent, v. CITY AND COUNTY OF SAN FRANCISCO., a municipal corporation, Defendant and Appellant. JAS. BARCLAY & CO., Limited, W. A. Taylor & Company, Hiram Walker & Sons, Inc., and Gooderham & Worts, Limited, Plaintiffs and Respondents, v. CITY AND COUNTY OF SAN FRANCISCO., a municipal corporation, Defendant and Appellant. Civ. 16106, 16112, 16113.

Page 881

280 P.2d 881

131 Cal.App.2d 332

PARROTT & CO., Renfield Importers, Ltd., and Esquin Imports, Plaintiffs and Respondents, v. CITY AND COUNTY OF SAN FRANCISCO., a municipal corporation, Defendant and Appellant.

BELLOWS & COMPANY, Inc., a corporation, Plaintiff and Respondent, v. CITY AND COUNTY OF SAN FRANCISCO., a municipal corporation, Defendant and Appellant.

JAS. BARCLAY & CO., Limited, W. A. Taylor & Company, Hiram Walker & Sons, Inc., and Gooderham & Worts, Limited, Plaintiffs and Respondents, v. CITY AND COUNTY OF SAN FRANCISCO., a municipal corporation, Defendant and Appellant.

Civ. 16106, 16112, 16113.

District Court of Appeal, First District, Division 1, California.

March 8, 1955.

Rehearing Denied April 7, 1955.

Hearing Denied May 4, 1955.

Dion R. Holm, City Atty., City and County of San Francisco, Lawrence S. Mana, Deputy City Atty., San Francisco, for appellant.

J. Albert Hutchinson, San Francisco, for respondents Parrott & Co., Renfield Importers, Ltd., and Esquin Importers.

Theodore R. Meyer, Hart H. Spiegel and Brobeck, Phleger & Harrison, San Francisco, for respondent Bellows & Co., Inc.

Edward W. Rosston and Heller, Ehrman, White & McAuliffe, San Francisco, for respondents Jas. Barclay & Co., Limited, W. A. Taylor & Company, Hiram Walker & Sons, Inc., and Gooderham & Worts, Limited.

PERTERS, Presiding Justice.

These are consolidated appeals by the City and County of San Francisco from judgments in three separate actions ordering the City to refund certain personal property taxes imposed by it on certain imported liquors.

The factual backgrounds of and the law applicable to the three consolidated cases are similar. Respondents are importers from foreign countries of intoxicating liquors. On the first Monday of March, 1952, each respondent owned and possessed in warehouses in San Francisco a designated quantity of liquor, that it had imported from abroad. Admittedly, the liquor was still in the original unbroken packages in which it had been imported. Admittedly, this liquor was held by respondents in identifiable and segregated lots separate from their other merchandise stored in the warehouses. Admittedly, on the first Monday of March, 1952, the liquor had not been disposed of by respondents by consignment or sale. At that time it was impossible to determine the ultimate disposition of any of the imports, that is, there was no way to know whether the liquor was ultimately to be sold for delivery and use in California or would be delivered or used outside of California.

The City, purporting to act pursuant to Article XIII of the Constitution and sections 201 and 202 of the Revenue and Taxation Code, levied and collected an ad valorem personal property tax on the liquor in question. The levy was made after the City had demanded that the respondents list all personal property owned or controlled by them or in their possession on the tax date. The imported liquor was separately listed, and taxed separately from the other personal property of the taxpayers. These respondents paid that portion of the tax assessed against the imported liquor under protest, and then instituted these actions to recover that tax, claiming that the liquor was exempt from state taxation.

The trial court judge, the Honorable Albert Wollenberg, held in favor of the taxpayers and ordered the taxes refunded. He set forth the grounds of his decision in a memorandum opinion in which he stated, in part: 'The question for decision is whether or not the defendant City and County of San Francisco has the power to impose an ad valorem property tax on intoxicating liquors in the hands of the original importers and in the original package. An affirmative answer to this question can only be grunded on the premise that the Twenty-first Amendment to the Constitution of the United States repeals pro tanto, by implication, Article I, Section 10, Paragraph 2, of said Constitution [import-export clause], insofar as intoxicating liquors are concerned. The validity of this premise the Court is not willing to concede.'

After discussing several of the problems involved the court concluded: 'The Federal Government has sole, exclusive and plenary taxing power over imports and exports, with but one exception--that of reasonable inspection. * * * The Federal power to tax imports is plenary and exclusive. This has been expressed in an unbroken line of decisions over one hundred and twenty-five years * * *

'It is the decision of this Court that no state, nor any political subdivision thereof, can assess an ad valorem property tax on imports in the hands of the original importer and in the original package, and that the Twenty-first Amendment to the Constitution of the United States does not exclude intoxicating liquors from this prohibition.'

We agree with these conclusions.

The problem revolves around the proper interpretation of two sections of the Constitution of the United States.

Article One, Section 10, of that Constitution contains an enumeration of those powers that are prohibited to the states. Paragraph 2 of the section reads as follows:

'No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress.'

The Twenty-first Amendment to the United States Constitution repealed the Eighteenth Amendment ¹ and also provided in section 2: 'The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.'

The California Constitution, Article XIII, Section one, permits ad valorem taxation of 'All property in the State * * * not exempt under the laws of the United States'. (See also §§ 201 and 202, Rev. & Tax. Code.)

The question presented is whether intoxicating liquor, imported into the United States from a foreign country, while still in the hands of the importer, and while such liquor is still in its original packages, unconsigned and unsold, is property 'exempt' from taxation 'under the laws of the United States'? It is the theory of appellant that, although such liquors are imports to which the import-export clause would normally be applicable so as to prevent state taxation, such taxation is permitted because the Twenty-first Amendment removed intoxicating liquor from the constitutional protection of the import-export clause. In other words, it is urged that, under that amendment, intoxicating liquor has been made a special article of commerce, removed from the protection of the import-export clause, and that its control, including the power to tax it, has been granted exclusively to the states.

The answer to the main question must be that foreign imported intoxicating liquor, while still in the hands of the importer and in its original packages, is an import which under the import-export clause, has been made immune to state taxation. In other words, the Twenty-first Amendment did not repeal the import-export clause insofar as intoxicating liquors are concerned.

Before directly dealing with the proper interpretation of the Twenty-first Amendment some mention should be made of the general law interpreting the breadth and scope of the import-export clause. As early as 1827 Chief Justice Marshall, speaking for the United States Supreme Court in the case of Brown v. State of Maryland, 12 Wheat. 419, 6 L.Ed. 678, enunciated the so-called 'original package' doctrine. Under that doctrine foreign imports, while still in their original packages and in the hands of the original importers, were held immune from state taxation. In 1871, in the case of Law v. Austin, 13 Wall. 29, 20 L.Ed. 517, the United States Supreme Court, in a case similar to those here under consideration, held that the 'original package' doctrine applied to foreign imported liquor so as to render such liquor free from state taxation. The 'original package' doctrine, as far as foreign imports are concerned, has been followed by the United States Supreme Court in a long line of cases. One of the most recent is Hooven & Allison Co. v. Evatt, 324 U.S. 652, 65 S.Ct. 870, 89 L.Ed. 1252, decided in 1945, and written by Chief Justice Stone. In that case the state attempted to levy an ad valorem tax on certain hemp imported by an Ohio manufacturer and held by him in the original packages preparatory for use in his Ohio factory. It was held that the import-export clause barred such taxation. After quoting the import-export clause the court stated, 324 U.S. at page 656, 65 S.Ct. at page 873:

'These provisions were intended to confer on the national government the exclusive power to tax importations of goods into the United States. That the constitutional prohibition necessarily extends to state taxation of things imported, after their arrival here and so long as they remain imports, sufficiently appears from the language of the constitutional provision itself and its exposition by Chief Justice Marshall in Brown v. Maryland, supra. We do not understand anyone to challenge that rule in this case.

'It is obvious that if the states were left free to tax things imported after they are introduced into the country and before they are devoted to the use for which they are imported, the purpose of the constitutional prohibition would be defeated. The fears of the framer, that importation could be subjected to the burden of unequal local taxation by the seaboard, at the expense of the interior states, would be realized, as effectively as though the states had been authorized to lay import duties. ² '

After discussing and quoting from Brown v. State of Maryland, supra, the court continued, 324...