Rice Growers' Association of California v. County of Yolo

• Decision Date: 28 April 1971
• Citation: 17 Cal.App.3d 227,94 Cal.Rptr. 847
• Court: California Court of Appeals Court of Appeals
• Parties: RICE GROWERS' ASSOCIATION OF CALIFORNIA, a corporation, Plaintiff and Respondent, v. COUNTY OF YOLO, Defendant and Appellant. Civ. 27321.

Page 847

94 Cal.Rptr. 847

17 Cal.App.3d 227

RICE GROWERS' ASSOCIATION OF CALIFORNIA, a corporation, Plaintiff and Respondent, v. COUNTY OF YOLO, Defendant and Appellant.

Civ. 27321.

Court of Appeal, First District, Division 2, California.

April 28, 1971.

Hearing Denied June 23, 1971.

Charles R. Mack, County Counsel County of Yolo, Woodland, for defendant and appellant.

Law Offices of Joseph L. Alioto, Stephen J. Schwartz, Peter J. Donnici, San Francisco, for plaintiff and respondent.

DAVID, ^* Associate Justice.

The county appeals a judgment, whereby plaintiff association was held entitled to recover general taxes, paid under protests, in the aggregate sum of $89,993.96. The sole issue is whether the rice so taxed was or was not an 'export' at the time of taxation. If it was, then the taxation was prohibited by article I, section 10, clause 2, of the United States Constitution. If it was not, the county is entitled to retain the sums collected. Although the trial court purported to make findings of fact, the facts were stipulated and hence none were required. This court is therefore presented with questions of law alone, and makes its own construction of the stipulated facts. (Chase Brass & Copper Co. v. Franchise Tax Bd. (1970) 10 Cal.App.3d 496, 502, 87 Cal.Rptr. 239, hg. den., cert. den. 400 U.S. 961, 91 S.Ct. 365, 27 L.Ed.2d 381; Crawford v. Imperial Irrigation Dist. (1927) 200 Cal. 318, 335, 253 P. 726; Export Leaf Tobacco Co. v. County of L.A. (1949) 89 Cal.App.2d 909, 916, 202 P.2d 622.)

The joint stipulation of facts may be summarized as follows: Respondent is a non-profit corporation existing under the laws of this state engaged exclusively in the operation of a rice mill and related facilities with its principal office located in West Sacramento, Yolo County. On March 7, 1966, appellant assessed certain quantities of rice belonging to respondent and levied taxes against respondent accordingly, which respondent paid under protest. All of the rice was grown and processed within the state and was stored and shipped in bulk.

The following six categories of rice were taxed:

(1) Pearl Milled Rice, sold to a wholly owned subsidiary corporation of respondent located in Puerto Rico pursuant to a contract 'consummated' prior to the tax date. Prior to the tax date, the rice had been milled and processed to the purchaser's exact specifications, transported to the Port of Sacramento and stored in bins belonging to the port authority awaiting ocean transportation in a vessel to be designated by the purchaser. The rice had been milled lighter than Pearl Rice sold by respondent in Hawaii and harder than that sold by respondent in the continental United States. The rice was shipped to Puerto Rico subsequent to the tax date.

(2) Calrose Milled Rice, sold to an Okinawan importer's association pursuant to a contract 'consummated' prior to the tax date. Also prior to said date, the rice had been milled and processed to the exact specifications of the purchaser at respondent's mills located at West Sacramento and Biggs, California, transported to the port and stored in bins owned by the port authority awaiting ocean transportation in a vessel to be designated by the purchaser. The rice had not been shipped upon prior delivery to the port because of ship space limitations. Because of its 'broken content,' the rice could not be sold in the domestic market without being remilled and graded. The rice was shipped to Okinawa subsequent to the tax date.

(3) Calrose Brown Rice, sold to a Japanese importer's association pursuant to a contract 'consummated' prior to the tax date. Also prior to said date, the rice had been milled and processed to the purchaser's exact specifications at respondent's mill at Biggs, transported to the port and stored in bins belonging to the port authority awaiting ocean transportation in a vessel to be designated by the purchaser. The rice was milled only for sale to Japan, and because of its unacceptable edible condition, had no domestic market. The rice was shipped to Japan subsequent to the tax date.

(4) Calrose Brown Rice, sold to the same purchaser and under the same conditions as described in category 3, except that because of insufficient space available at the port, this rice was stored in separate bins in respondent's West Sacramento warehouse (located approximately one mile from the port) awaiting ocean transportation in a vessel to be designated by the purchaser.

(5) Pearl Brown Rice, sold to the same purchaser and under the same conditions as described in category 4, except that a mere generic difference existed between this type of rice and Calrose Brown Rice.

(6) Pearl Paddy Rice, sold to the same purchaser and under the same contract as that in categories 3, 4 and 5; but on the tax date this rice occupied a storage warehouse at respondent's West Sacramento mill and was milled and processed to the purchaser's specifications Subsequent to the tax date. Respondent needed said rice to meet its contractual obligations. The rice was shipped to Japan with the rice described in category 5 subsequent to the tax date.

Negotiable bills of lading were to be issued by the ocean carrier for all of the categories of rice, and payment was to be made by all purchasers upon delivery of such documents. The terms of all sales were f.o.b. Sacramento. The amount of rice included in each category represented varying proportions of the total rice sold under each of the contracts. The contracts with purchasers in Okinawa and Japan provided for variances of 10 percent of the quantities sold in order to permit ship owners to accommodate the shipments to available ship space.

As a result of milling and processing the rice discribed in categories 2, 3, 4 and 5, to the purchasers' specifications, that rice could be marketed domestically only if it were remilled, which was economically unfeasible. Respondent would not mill the rice in such categories without prior order, and, had the rice not been exported, would have breached its sales contracts with the purchasers and its subsidy agreement with the United States Government.

It was indicated upon the argument of this cause, that the milling of rice is designed to remove the outer bran layers surrounding the kernel, successively; the degree to which this is done, depending upon the market. In the milling process, there is breakage of a certain proportion of the rice kernels. For domestic consumption, these commonly are screened out as undesirable. But for Far Eastern markets, where rice has expanded uses, such as for wine making and brewing, broken kernels are acceptable. The various categories are described in the Agricultural Adjustment Act. (7 U.S.C.A. § 1380p, subds. (b) and (c)) and the subsidy which respondent refers to is established by the same act. (7 U.S.C.A. § 1380k.)

The policy effectuated by the import-export clauses of the federal Constitution, and their history, is well known. (Youngstown, etc., Co. v. Bowers (1959) 358 U.S. 534, 545, 79 S.Ct. 383, 3 L.Ed.2d 490; Cook v. Pennsylvania (1878) 97 U.S. 566, 24 L.Ed. 1015; McGoldrick v. Berwind-White Co. (1940) 309 U.S. 33, 60 S.Ct. 388, 84 L.Ed. 565; American Smelting etc. Co. v. County of Contra Costa (1969) 271 Cal.App.2d 437, 455--458, 77 Cal.Rptr. 570, app. dism. 396 U.S. 273, 90 S.Ct. 553, 24 L.Ed.2d 462.) These therefore need not be elaborated upon this appeal.

There is no question that the tremendous expansion in the definition of commerce with foreign nations, among the several states, and with the Indian tribes, has diminished state power as federal controls are established. Therefore, taxation for local purposes upon items and incidents of commerce, once thought completely intrastate, have been imperiled in theory, when not in fact. This has led the United States Supreme Court to a process of careful balancing of federal and state interests in the tax field, where interstate commerce may be 'affected' if not 'burdened.'

The present parlous condition of state and local finances is well known, and appellant properly urges that the definition of 'export' should not be expanded from its past well-established connotation, so as to further impair the finances of maritime states and local government. The local taxpayer is not compelled to subsidize exports as a matter of policy. (American Smelting etc. Co. v. County of Contra Costa, supra, 271 Cal.App.2d at p. 459, 77 Cal.Rptr. 570.) Fortunately, we are not called upon to address ourselves to the problem before us as a matter of policy, since the United States Supreme Court adheres to the long-accepted definition of 'export.'

I

We have concluded that all of the rice in question was properly assessed and taxed: 'It will not suffice that a journey to a foreign land is absolutely certain as of the date the tax is levied. Both certainty and motion--or commitment thereto--are necessary to a finding that goods are exports; further, they must exist concurrently.' (Hugo Neu Corp. v. County of Los Angeles (1970) 7 Cal.App.3d 21, 24, 86 Cal.Rptr. 332, 333, hg. den.) The recent analysis made by the court in the case last cited, and its consideration of the United States and California cases parallels our own conclusions, and to that extent need not be reexamined.

Most of the contentions of the taxpayer are answered by the leading case of Empresa Siderurgica, S.A. v. Merced Co. (1949) 337 U.S. 154, 156, 69 S.Ct. 995, 93 L.Ed. 1276. It held: (1) it is not enough that on the tax date there is a purpose and plan to export the property; (2) it is not sufficient that in due course, the plan was executed; (3) it is not sufficient that on that date, that goods were prepared for export, but had not been delivered to any carrier for export, nor started on its journey out of the country; (4) so long as the owner maintains physical control of the goods, it does not matter that any diversion of them to another market would occasion a breach of...