Simms v. Los Angeles County

• Decision Date: 02 May 1950
• Docket Number: SECURITY-FIRST
• Citation: 217 P.2d 936,35 Cal.2d 303
• Parties: SIMMS et al. v. LOS ANGELES COUNTY et al. GRIBBLE v. LOS ANGELES COUNTY et al. MERCHANTS NAT. REALTY CORPORATION v. LOS ANGELES COUNTY et al.NAT. BANK v. LOS ANGELES COUNTY et al. L. A. 20964-20986.
• Court: California Supreme Court

Page 936

217 P.2d 936

35 Cal.2d 303

SIMMS et al. v. LOS ANGELES COUNTY et al.

GRIBBLE v. LOS ANGELES COUNTY et al.

MERCHANTS NAT. REALTY CORPORATION v. LOS ANGELES COUNTY et al.

SECURITY-FIRST NAT. BANK v. LOS ANGELES COUNTY et al.

L. A. 20964-20986.

Supreme Court of California, in Bank.

May 2, 1950.

Rehearing Denied June 1, 1950.

Harold W. Kennedy, County Counsel, Gordon Boller, Deputy County Counsel, A. Curtis Smith, Asst. County Counsel, Los Angeles, for appellants.

Ray L. Chesebro, City Atty., Leon Thomas David, Asst. City Atty., Louis A. Babior and H. H. MacDonald, Deputy City Attys., Los Angeles, amici curiae on behalf of appellants.

Holbrook & Tarr, W. Sumner Holbrook, Jr., Freda B. Walbrecht and Francis H. O'Neill, Los Angeles, for respondent.

GIBSON, Chief Justice.

These are appeals from judgments for plaintiffs in twenty-three actions brought to recover taxes paid under protest on certain buildings. In five cases, the building involved was owned and occupied by a national bank which sought recovery for each of the tax years 1942 through 1946. In the remaining cases, the buildings were leased to and occupied by national banks but were owned by different landlords who sued separately for return of sums paid during the period 1941-1946, inclusive.

After receiving notice of assessments, plaintiffs applied to the county board of equalization for reductions in the assessed valuations of their improvements in amounts equal to the value of bank vault doors and counterlines ¹ installed in their buildings and included in the assessments. The applications were made upon the theory that substantially all property similar to bank vault doors and counterlines had been assessed as personal property, and that the assessment of bank vault doors and counterlines as improvements to realty was therefore discriminatory. The requested relief being denied by the board, plaintiffs paid the taxes under protest and instituted actions for recovery.

The record on these appeals consists of thirty-eight volums of the reporter's transcript, totaling over 8,500 pages, fourteen books of exhibits comprising approximately 3,000 pages, and the clerk's transcripts of about 5,000 pages. Careful examination of this voluminous record, however, reveals that the essential facts are not in dispute, and they may be summarized briefly as follows:

For several years prior to 1940 the Los Angeles County Assessor, in preparing the assessment roll of the county, followed the general practice of classifying bank vault doors and counterlines as personal property. No ad valorem taxes were paid thereon since the personal property of national banks is exempt from local taxation. Following the decision of this court in San Diego Trust p Savings Bank v. County of San Diego, 16 Cal.2d 142, 105 P.2d 94, 133 A.L.R. 416, in 1940, however, the assessor reclassified and assessed vault doors and counterlines installed in buildings used for banking purposes as part of the building improvements or real estate, a practice which was again approved in 1946 by Trabue Pittman Corp. v. County of Los Angeles, 29 Cal.2d 385, 175 P.2d 512.

In each of the tax years involved in the present appeals, bank vault doors counterlines installed in plaintiffs' buildings were classified as real property and, without being separately valued, were included with the buildings in assessments of improvements. During that period, however, as to property other than that occupied by banks, it was the assessor's general practice to classify and assess as personal property certain articles, machinery and equipment installed in buildings for purposes of trade, commercial or industrial uses. Typical of this practice was the treatment accorded to more than sixty items of property, including, among others, vault doors and counterlines of jewelers and furriers, refrigerators and counters in public markets, restaurant counters and booths, office partitions, printing presses of metropolitan newspapers, and a variety of heavy industrial machinery such as boilers, ovens and generators. The record contains photographs of all of these items showing their nature and the manner in which they were affixed to the realty. The vault doors and counterlines of jewelers and furriers were installed in the same manner and in a few instances in the same buildings as bank vault doors and counterlines. Other sizable articles were installed in buildings specially designed therefor, and still others were attached in a manner which either made their removal impossible without great damage to the building or otherwise suggested permanence. The specific items of property were classified as personalty, however, without regard to the manner of their attachment. Their classification as personalty was representative of the assessor's practice in connection with property of that kind and nature although in some years vault doors in jewelry and fur stores were apparently classified as improvements.

The trial court found and concluded that in classifying and assessing banking fixtures as improvements, the assessor had intentionally, deliberately and without justification deviated from his general practice with regard to the classification and assessment of fixtures and that such differences in treatment of similar property constituted discrimination against plaintiffs prohibited by various provisions of the federal and state constitutions and by section 5219 of the Revised Statutes of the United States, 12 U.S.C.A. § 548. It also determined that since bank vault doors and counterlines were included with each building in a single assessment of improvements, the invalid and otherwise valid portions of each assessment were indivisible and consequently all taxes levied thereon were void. Judgments were accordingly entered for plaintiffs, and these appeals followed.

Sufficiency of Protests

At the outset, defendants contend that recovery in these cases is barred by Revenue & Taxation Code, section 5139, which provides that actions to recover taxes paid under protest may be brought only on the grounds specified in the protests. We are satisfied, however, that plaintiffs' complaint of an arbitrary difference in treatment of like property similarly situated, which is the basis of the present actions, is adequately set forth in the protests.

Misclassification of Fixtures

It is settled that three tests must be applied 'in determining whether or not an article is a fixture namely: (1) the manner of its annexation; (2) its adaptability to the use and purpose for which the realty is used; and (3) the intention of the party making the annexation.' San Diego Trust & Savings Bank v. County of San Diego, 16 Cal.2d 142, 149, 105 P.2d 94, 97, 133 A.L.R. 416. It is also settled that for tax purposes the 'intention' must be determined by the physical facts or reasonably manifested outward appearances without regard to the annexor's status as landlord or tenant. Trabue Pittman Corp. v. County of Los Angeles, 29 Cal.2d 385, 175 P.2d 512; cr. San Diego Trust & Savings Bank v. San Diego, 16 Cal.2d 142, 105 P.2d 94, 133 A.L.R. 416; Southern Cal. Tel. Co. v. State Board of Equalization, 12 Cal.2d 127, 82 P.2d 422. Under these tests, articles which were comparable to bank vault doors and counterlines and which were installed in buildings for purposes of trade or industry constituted fixtures and were misclassified as personal property pursuant to the assessor's general practice.

Defendants argue, however, that a distinction may be made between articles which are 'integral parts' of a building or a 'unit for use' therewith on the one hand and trade fixtures generally on the other, and that only property in the former category need by classified as improvements for tax purposes. The nature or basis of the asserted distinction is not clearly indicated, but we infer from the briefs that the argument has reference to articles installed in buildings of special design and construction or attached in a manner rendering their severance impossible without injury as contrasted with articles attached in a manner from which the conclusion of permanence is ordinarily not so compelling. Cf. Civ.Code, § 1019. It is also urged that a reasonable classification of fixtures may be made as a matter of law on the basis of the nature of the business involved, the argument in this regard being that stability and permanence of location is present to a greater extent in the banking business than in manufacturing and industry generally.

In Trabue Pittman Corp. v. County of Los Angeles, 29 Cal.2d 385, 175 P.2d 512, 518, the fact that the bank vault doors and counterlines were found to be fixtures or trade fixtures obviated the necessity for this court to discuss at length the criteria to be considered in determining whether an article is a fixture. The problem there presented concerned the classification to be accorded 'trade fixtures' for taxation purposes, and we held that such property was to be classified and assessed as realty. The opinion points out that the Revenue and Taxation Code declares real estate shall include 'improvements' and defines improvements as including 'fixtures,' and that 'No exception is made in the case of trade fixtures.' It follows that the applicable statutes do not permit of the division of trade fixtures into classes or of the distinctions contended for by defendants, and on the contrary require all fixtures or trade fixtures to be taxed as improvements. moreover, even if we were to assume that fixtures could be differentiated in the suggested manner, it is apparent that the considerations urged as the basis therefor do not account for the differences in the treatment of banking fixtures and other trade fixtures during the period here involved.

It is not necessary for plaintiffs to show actual fraud in actions of this nature. Assessments will be invalidated by the courts if the taxing authorities 'resort to arbitrary methods...