Simon v. Los Angeles County

• Decision Date: 24 April 1956
• Citation: 296 P.2d 381,141 Cal.App.2d 74
• Court: California Court of Appeals Court of Appeals
• Parties: Samuel L. SIMON, Ralph Simon, Willard M. Marks and Edward M. Marks, co-partners, doing business as Commercial Steel Co., a copartnership, Plaintiffs and Respondents, v. COUNTY OF LOS ANGELES and City of Los Angeles, Defendants. County of Los Angeles, Appellant. Civ. 21252, 21253.

Page 381

296 P.2d 381

141 Cal.App.2d 74

Samuel L. SIMON, Ralph Simon, Willard M. Marks and Edward M. Marks, co-partners, doing business as Commercial Steel Co., a copartnership, Plaintiffs and Respondents, v. COUNTY OF LOS ANGELES and City of Los Angeles, Defendants.

County of Los Angeles, Appellant.

Civ. 21252, 21253.

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

April 24, 1956.

Harold W. Kennedy, County Counsel, Gordon Boller, Asst. County Counsel, Los Angeles, for appellant.

George I. Devor, Paul P. Selvin, Los Angeles, for respondents.

ASHBURN, Justice.

Plaintiffs, a partnership known as Commercial Steel Co., brought two actions (consolidated for purposes of appeal) to recover taxes paid under protest to defendant County of Los Angeles for the years 1952 and 1953, respectively. The taxes were levied upon imported articles. The question is whether Article I, § 10, clause 2 of the United States Constitution was violated. ¹ That section applies to foreign commerce, while interstate transactions fall within Article I, § 8, clause 3. ² Plaintiffs prevailed in both actions and the county appeals.

A determination of what constitutes, within the doctrine of Brown v. State of Maryland, 12 Wheat. 419, at page 441, 6 L.Ed. 678, 'the original form or package in which * * * imported', must control the ruling herein.

The trial court held to be taxable by the county all articles whose containers had been opened for any reason and ruled that those goods whose containers or fasteners had not been opened or remover were still in the status of imports and not locally taxable. Our discussion is therefore confined to the latter type of merchandise.

Plaintiffs are in the business of importing from Europe building materials and supplies, mostly nails, and selling them locally at wholesale or retail. About 90 per cent of the property which the county attempted to tax consisted of nails imported from England in kegs and gunny sacks, each having net weight of 100 pounds. Such sacks or bags contained cement-coated nails and are the 'customary package in Europe. They ship nails all over the world in bags.' Other items subjected to the tax came as follows: Hardware cloth in rolls; foundation bolts and washers in sacks; chain in barrels; harrow disks in crates; reinforcing rods in long-ton bundles tied securely; bale ties in bundles tied with wire and wrapped with burlap; barbed wire in rolls or coils; miscellaneous hardware in wooden boxes. On arrival the shipment containing all or any or these commodities was classified at the dock and then transported by public carrier to plaintiffs' werehouse. The kegs and bags of nails were placed on wooden pallets (about 20 to a pallet), thus lifted onto and off the truck and into the warehouse where they were piled, pallet on pallet, from floor to ceiling or a lesser height. The rolls of hardware cloth were stacked on end in the truck and in the warehouse. All of the above articles were stored as convenience dictated in the warehouse and none of the kegs, bags, sacks, barrels, bundles, rolls, crates or boxes had been opened prior to the assessment date. Plaintiffs would receive one to three shipments a month, containing from 500 to 2000 bags and kegs of nails. No effort was made to segregate one shipment from another, and plaintiffs could not tell in any way the particular cargo from which any given keg, box or other container had come; the new goods would be placed on top or in front of the old; a new load might be put on top of half of an earlier one; sales were made as items were needed and without reference to separate shipments; thus the articles received in an earlier cargo might be on hand for months before that particular shipment would be exhausted. While batches of goods were not separately identifiable, each container such as keg or bag would carry the order number, size of nail, name of shipper and of buyer; also 'made in England' or other country of origin.

Respondents argue and the trial judge ruled that each unopened container, such as a keg or bag or box or roll or bundle, was an original package and not locally taxable. Appellant argues that each shipment in the aggregate was the package, or its legal equivalent, relying upon E. J. Stanton & Sons v. County of Los Angeles, 78 Cal.App.2d 181, 177 P.2d 804.

The original package doctrine was announced by Chief Justice John Marshall, in Brown v. State of Maryland, supra, 12 Wheat. 419, at page 441, 6 L.Ed. 678, in these words: 'It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the state; but while remaining the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports to excape the prohibition in the constitution.' The proliferation of that concept has yielded many complexities such as the problem presented in the Stanton case, namely, what constitutes original package in a case where the goods are not susceptible of packaging.

The exact phrase used by Chief Justice Marshall is: 'the original form or package in which it was imported.' ³ In West Virginia & Maryland Gas Co. v. Towers, 134 Md. 137, 106 A. 265, at page 268, the court had the task of applying the rule to the transportation of natural gas and said: 'The term 'original package,' when used in these cases, means the form or physical condition of the article of commerce in which it is transported in its interstate movement.

'In Brown v. [State of] Maryland, 12 Wheat. 419, 6 L.Ed. 678, Chief Justice Marshall uses the expression 'original form or package' in referring to the article in that case. In using the word 'package' he was no doubt influenced by the nature of the article therein referred to, which was a package of dry goods. By the decision in that case, as well as the many other cases that have followed, it was not intended that by the use of such word that principle enunciated in relation to the time at which an article of commerce ceases to be a thing of interstate commerce should be limited to those articles that are capable of being put in the form of a package in the generally accepted meaning of that word, but it was likewise to apply to other articles incapable of assuming the form of a package, literally speaking, by reason of their physical properties, and to which the expression is less appropriate, such as the article in the case before us.'

Mr. Justice Cardozo, also dealing with distribution of natural gas, made the following observations in In re Pennsylvania Gas Co., 225 N.Y. 397, 122 N.E. 260, at page 261: 'But the rule of the 'original package' is not an ultimate principle. It is an illustration of a principle. It assumes transmission in packages, and then supplies a test of the unity of the transaction. If other forms of transmission are employed, there is need of other tests. * * * The essential unity of the transaction remains the final test.' Again, in Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511, 55 S.Ct. 497, 502, 79 L.Ed. 1032, 1040, the distinguished Justice said: 'In brief, the test of the original package is not an ultimate principle. It is an illustration of a principle. Pennsylvania Gas Co. v. Public Service Commission, 225 N.Y. 397, 403, 122 N.E. 260. It marks a convenient boundary and one sufficiently precise save in exceptional conditions. What is ultimate is the principle that one state in its dealings with another may not place itself in a position of economic isolation. Formulas and catchwords are subordinate to this overmastering requirement.

When the penumbral case of E. J. Stanton & Sons v. County of Los Angeles, supra, 78 Cal.App.2d 181, 177 P.2d 804 arose, it became necessary for this court to apply the Brown v. State of Maryland rule to an import that essentially was not capable of packaging in any sense. That case dealt with importions of lumber which were not fastened together in any way. The pieces were stacked in the importer's yard and the lumber contained in each shipment was kept separate from other cargoes. Only the broken lots remaining after sales had been made from a given shipment was taxed. The court recognized, with Mr. Chief Justice Stone, that 'the reconciliation of the competing demands of the constitutional immunity and of the state's power to tax, is an extremely practical matter.' Hooven & Allison Co. v. Evatt, 324 U.S. 652, 65 S.Ct. 870, 878, 89 L.Ed. 1252, 1265. The problem was stated thus at page 184 of 78 Cal.App.2d, at page 805 of 177 P.2d: 'The controversy revolves about the question whether upon the sale of a portion of a shipment the remainder becomes subject to taxation. Respondent contends that so ling as any parcel of the entire lot remains in the possession of the importer it is not subject to state taxation prior to sale; that each parcel or board is marked so as to distinguish it from all others and is therefore in itself an original package. Appellants argue that by the sorting, segregating and tallying of the timbers, and by virtue of sales from the cargoes received, the remainder being offered for sale becomes a part of the mass of property in the county and subject to taxation.' And the court...