Web Service Co. v. Spencer

• Decision Date: 25 July 1967
• Citation: 252 Cal.App.2d 827,61 Cal.Rptr. 493
• Court: California Court of Appeals Court of Appeals
• Parties: WEB SERVICE COMPANY, Inc., Plaintiff and Respondent, v. Maybelle E. SPENCER et al., Defendants and Appellants. Civ. 8526.

Page 493

61 Cal.Rptr. 493

252 Cal.App.2d 827

WEB SERVICE COMPANY, Inc., Plaintiff and Respondent, v. Maybelle E. SPENCER et al., Defendants and Appellants.

Civ. 8526.

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

July 25, 1967.

Rehearing Denied Aug. 8, 1967.

Hearing Denied Sept. 21, 1967.

Joseph B. Geisler, City Atty., Furman B. Roberts, Deputy City Atty., Anaheim, for appellants.

Baker, Ancel & Redmond, Mark G. Ancel, Los Angeles, for respondent.

COUGHLIN, Associate Justice.

This is an appeal from a judgment in a mandamus proceeding decreeing issuance of a writ of mandate directing Maybelle E. Spencer, as treasurer and license collector of the City of Anaheim, a respondent in the proceeding, to issue a business license to Web Service Company, Inc., the petitioner in the proceeding. ¹

The issues on appeal concern the applicability and constitutionality of the provisions of the Anaheim Municipal Code imposing a license tax on the 'business of leasing, letting the use of, renting or maintaining any machine or device which * * * upon the insertion of any coin * * * performs any services.' Section 3.36.020 of the code which was adopted in 1963, fixes the tax, for the purpose at hand, at $1.00 per machine per year; provides that the person carrying on such business 'may elect to pay a license tax under Classification 'C' of section 3.08.010, measured by gross receipts from business done within the City of Anaheim'; and also provides 'that such gross receipts payment shall be subject to the provisions of Section 3.04.090'. Sections 3.08.010 and 3.04.090 had been adopted in 1958; the former provided a method for determining the amount of a license tax payable by persons conducting business under a classification designated 'C' based on a percentage of gross receipts, in accordance with a prescribed graduated scale, with a minimum tax of $25.00 per year; and the latter provided that a 'separate license must be obtained for each branch establishment or location of the business transacted and carried on.'

Web Service Company, Inc., petitioner, is engaged in the business of furnishing and maintaining coin-operated laundry machines, i.e., washers and driers; locates these machines in wash rooms at apartment houses, motels and trailer courts; has its principal place of business in Los Angeles, where its administrative affairs are conducted; and employs route men whose duties are to maintain and collect the proceeds from the machines. The person operating this type of business is known as a 'route operator.' On December 31, 1963 petitioner owned and maintained 693 machines in the City of Anaheim, consisting of 347 washers and 346 driers, at 261 locations. Its gross income from this business for 1963 was $100,652.75. In 1964 petitioner owned and maintained 700 machines in the City of Anaheim at 260 locations. Its gross income therefrom for that year was $111,802.35. The tax computed under the gross receipts provisions of the ordinance is based on the gross receipts for the preceding calendar year; the tax computed under the per machine provision is based on the number of machines in operation during the fiscal year commencing July 1st. In 1965 petitioner tendered the city treasurer an amount computed under the gross receipts provisions of the ordinance on the basis it was required to obtain only one license; contended the provisions of the ordinance requiring a separate license for each 'branch establishment or location' did not apply to route operators; and demanded issuance of a license. The City Treasurer acknowledged receipt of the amount tendered; indicated willingness to apply this amount to the tax payable under the per-machine provision of the statute; contended petitioner was operating at 261 locations which would require a minimum payment of $25.00 for each location; and refused to issue a license covering its total operation. Thereupon petitioner instituted the proceeding resulting in the judgment which is the subject of this appeal.

At the trial petitioner presented evidence showing the coin operated laundry machine business is conducted in two ways; one being a route operation, such as that conducted by petitioner where 2 to 4 machines are located in wash rooms and the other being a 'laundromat' operation where 30 to 32 machines are located in a store room; the route operator's business is confined to occupants of an apartment house, motel or trailer court where the operation is conducted; the 'laundromat' is patronized by the general public; during the year 1963 each of six 'laundromat' operators paid a license tax in the maximum amount of $25.33 and the minimum amount of $25.00, computed under the gross receipts provisions of the ordinance upon a gross receipts maximum of $25,824.00 ² The route operator pays the owner of the apartment house, motel or trailer court where his machines are located between 20% And 25% Of the receipts; the 'laundromat' operator pays a rental approximating 25% Of receipts. Petitioner, as a route operator, grossed approximately $12 per month per machine; the 'laundromat' operators grossed between $900 and $2000 a month per location, with an average of $1500 a month, or, on the basis of 30 machines, at the rate $50 a month per machine; the route operator and the 'laundromat' operator are in competition with each other; on occasions some 'laundromat' operators have offered the use of driers free, and in competing wash room locations petitioner has met the effect of this offer on its business by also giving free drier service; and another route operator in the City of Anaheim paid a tax in the amount of $143 based on the per-machine provisions of the ordinance.

The court found, among other things, that 'on the basis of $25.00 per washroom, the approximate tax sought of Petitioner by Respondent would be $6,500.00 per year'; that 'calculated on the basis of classification C of Section 3.08.010 * * *. Petitioner would be required to do a gross volume of $60,000,000.00 per year within the City of Anaheim in order to arrive at a tax of such magnitude'; that 'the washrooms in the various apartments, motels and trailer parks, wherein Petitioner maintains its machines, do not constitute branch establishments or locations within the meaning of Section 3.04.090'; that 'to hold that each washroom requires a payment * * * of a minimum of $25.00, has no reasonable relationship to the difference if any, in the amount of business done by Petitioner by reason of any difference in the method of its operation, if such difference does exist'; that 'Petitioner's expense of operation is virtually identical to that of 'laundromats"; and that 'the mode and method of Petitioner's operation is that which is the attempted basis of the imposition of the $25.00 per washroom tax under Section 3.04;090, as interpreted by the Respondent.'

The court concluded that when seeking to apply Section 3.04.090 to petitioner to compel it to pay a tax of $25.00 per washroom, respondent applied the ordinance in an unconstitutional manner in that 'such tax asserted to be due by the Respondent bears no relation to the amount of business done in the City of Anaheim on the part of Petitioner, and has no reasonable connection with the taxable even occurring in the City, namely, the quantum of business carried on by Petitioner in the City'; that the effect of respondent's interpretation of the ordinance 'is to remove from the Petitioner the option to pay $1.00 per machine tax on its machines, or to pay a license tax based upon the basis of gross receipts from all business done in the City'; that, therefore, 'Petitioner is discriminated against and the Respondent, by her action in seeking to deny to the Petitioner its option to pay the tax on a per machine basis or on the basis of gross receipts, has violated the provisions of the 14th Amendment of the United States Constitution respecting equal protection of the laws and the provisions of the California Constitution'; that, therefore, 'Section 3.04.090, as applied by the Respondent to Petitioner, is discriminatory and void'; respondent is under a duty to issue a business license to petitioner for the year 1965; and that respondent be ordered to issue such a license.

In reality, petitioner claims the route operator and the 'laundromat' operator are engaged in the same business; the tax ordinance, as enforced by the City, in practical effect, applies one measure of tax to the 'laundromat' operator and another measure to the route operator resulting in the imposition of a higher tax upon the latter; and in this manner, as a route operator, it is denied equal protection of the law.

Although not clearly stated by petitioner or the court, it would appear the position of the former and the decision of the latter are premised upon the concept the ordinance is unconstitutional if it requires a separate license for each operating location maintained by petitioner and, for this reason, the section of the ordinance requiring a separate license either should be held invalid, leaving in force the balance of the ordinance, or should be interpreted as inapplicable to petitioner's type of operation.

There is no rational basis for concluding the provision requiring a separate license for each branch establishment or location of a business subject to a license tax, i.e., Section 3.04.090, does not apply to petitioner's method of doing business. Section 3.36.020, which imposes a license tax on persons engaged in the business of furnishing and maintaining coin-operated machines based on the number of machines in operation in the city and affords the taxpayer an option of computing the tax on a gross receipts basis, with a $25.00 minimum, specifically provides that payment of the tax based on the gross receipts shall be subject to the provisions of Section 3.04.090, which requires a separate license for each business location. The optional method of computation applies...