Wilson v. Franchise Tax Bd.

• Decision Date: 13 December 1993
• Docket Number: No. B073188,B073188
• Citation: 25 Cal.Rptr.2d 282,20 Cal.App.4th 1441
• Court: California Court of Appeals Court of Appeals
• Parties: Marc D. WILSON, et al., Plaintiffs and Respondents, v. FRANCHISE TAX BOARD, Defendant and Appellant.

Page 282

25 Cal.Rptr.2d 282

20 Cal.App.4th 1441

Marc D. WILSON, et al., Plaintiffs and Respondents, v. FRANCHISE TAX BOARD, Defendant and Appellant.

No. B073188.

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

Dec. 13, 1993.

Review Denied March 3, 1994.

Daniel E. Lungren, Atty. Gen., Edmond B. Mamer and Jack T. Kerry, Deputy Attys. Gen., for defendant and appellant.

Staker & Gose and Gose, Panitz & Lechman and Philip Garrett Panitz, Camarillo, for plaintiffs and respondents.

ORTEGA, Associate Justice.

During 1984-1986, plaintiff Marc D. Wilson played quarterback for the Los Angeles Raiders. In the off-season during those years, Wilson lived in Washington state and thus was not a California resident for California income tax purposes. However, because Wilson's income from his Raiders contract derived from a California source, he paid California income tax on a portion of his income for those years. Wilson's income tax was based on a ratio, set out in defendant California Franchise Tax Board's administrative regulation (Audit Ruling § 125.1) governing the percentage of a nonresident athlete's California source income subject to state tax, of the number of days he worked in California (the ratio's numerator) compared to the total number of days he actually worked or had to be available for work (its denominator). Wilson claimed his contract required him to be available for work every day each year, resulting in 41-45 percent of his income being taxable.

The Board assessed additional taxes for 1984-1986, arguing that under Wilson's Raiders contract, he only worked or had to be available for work during the football season. The Board's calculation subjected 88-91 percent of Wilson's income to state tax. Wilson paid the additional taxes under protest and filed this case, seeking a refund. The trial court agreed with and entered judgment for Wilson. The Board appeals.

We agree with the Board's interpretation of Wilson's contract and reverse the judgment. ¹

FACTS

In 1980, the Raiders drafted Wilson, who played college football at Brigham Young University, and loaned him $125,000. Pursuant to a promissory note signed July 24, 1980, Wilson agreed to repay the loan plus interest on August 23, 1985. Wilson played quarterback for the Raiders until 1988. This case involves Wilson's 1984 through 1986 Raiders income.

On October 21, 1983, Wilson and the Raiders signed a series of three identical National Football League (NFL) one-year contracts, under which the Raiders paid Wilson, respectively, $700,000, $800,000, and $900,000 in 1984-1986, not counting performance bonuses. According to paragraph 1, titled "TERM," each contract covered "one football season, and ... beg[a]n on the date of execution or February 1, ... whichever [was] later, and end[ed] on [the following] February 1...."

Paragraph 2, titled "EMPLOYMENT AND SERVICES," stated that the Raiders employed Wilson "as a skilled football player. [Wilson] accepts such employment. He agrees to give his best efforts and loyalty to the [Raiders], and to conduct himself on and off the field with appropriate recognition of the fact that the success of professional football depends largely on public respect for and approval of those associated with the game. [Wilson] will report promptly for and participate fully in [the Raiders'] official pre-season training camp, all [Raiders] meetings and practice sessions, and all pre-season, regular-season and post-season football games scheduled for or by [the Raiders]. If invited, [Wilson] will practice for and play in any all-star football game sponsored by the [NFL]. [Wilson] will not participate in any football game not sponsored by the [NFL] unless the game is first approved by the [NFL]."

Paragraph 3, titled "OTHER ACTIVITIES," stated: "Without prior written consent of [the Raiders], [Wilson] will not play football or engage in activities related to football otherwise than for [the Raiders] or engage in any activity other than football which may involve a significant risk of personal injury. [Wilson] represents that he has special, exceptional and unique knowledge, skill, ability, and experience as a football player, the loss of which cannot be estimated with any certainty and cannot be fairly or adequately compensated by damages. [Wilson] therefore agrees that [the Raiders] will have the right ... to enjoin [Wilson] ... from playing football or engaging in football-related activities other than for [the Raiders] or from engaging in any activity other than football which may involve a significant risk of personal injury."

Paragraph 4, titled "PUBLICITY," stated: "[Wilson] grants to [the Raiders] and [NFL] ... the authority to use his name and picture for publicity and promotional purposes.... [Wilson] will cooperate with the news media, and will participate upon request in reasonable promotional activities of [the Raiders] and the [NFL]."

Paragraph 5, titled "COMPENSATION," stated that, in addition to Wilson's yearly salary and any incentive bonuses, the Raiders would pay Wilson's "necessary traveling expenses from his residence to training camp; ... reasonable board and lodging expenses during pre-season training and in connection with playing pre-season, regular-season, and post-season football games outside [Los Angeles]; ... necessary traveling expenses to and from pre-season, regular-season, and post-season football games outside [Los Angeles]...."

In lieu of the standard payment schedule, set out in paragraph 6, under which Wilson's annual salary would have been paid weekly during the pre and regular season, an addendum provided that Wilson's salary would be paid in 12 equal monthly installments. Wilson could not remember at which party's request this alternative payment schedule was inserted into his contracts. Tom Flores, Raiders head coach throughout the three-year period, testified that the method of payment generally is an option decided by the player.

Paragraph 8, titled "PHYSICAL CONDITION," stated: "[Wilson] represents to [the Raiders] that he is and will maintain himself in excellent physical condition. [Wilson] will undergo a complete physical examination by the [Raiders] physician upon [the Raiders] request, during which physical examination [Wilson] agrees to make full and complete disclosure of any physical or mental condition known to him which might impair his performance under this contract and to respond fully and in good faith when questioned by the [Raiders] physician about such condition. If [Wilson] fails to establish or maintain his excellent physical condition to the satisfaction of the [Raiders] physician, or make the required full and complete disclosure and good faith responses to the [Raiders] physician, then [the Raiders] may terminate this contract."

Paragraph 9, titled "INJURY," stated: "If [Wilson] is injured in the performance of his services under this contract and promptly reports such injury to the [Raiders] physician or trainer, then [Wilson] will receive such medical and hospital care during the term of this contract as the [Raiders] physician may deem necessary, and, in accordance with [the Raiders] practice, will continue to receive his yearly salary for so long, during the season of injury only and for no subsequent period, as [Wilson] is physically unable to perform the services required of him by this contract because of such injury...." An addendum guaranteed Wilson's salary throughout the three-year period if Wilson was unable to play because terminated by the Raiders or due to injury or death.

Paragraph 11, titled "SKILL, PERFORMANCE AND CONDUCT," stated: "[Wilson] understands that he is competing with other players for a position on [the Raider's] roster within the applicable player limits. If at any time, in the sole judgment of [the Raiders], [Wilson's] skill or performance has been unsatisfactory as compared with that of other players competing for positions on [the Paragraph 14, titled "RULES," stated: "[Wilson] will comply with and be bound by all reasonable [Raiders] rules and regulations in effect during the term of this contract which are not inconsistent with the provisions of this contract...."

Raider's] roster, or if [Wilson] has engaged in personal conduct [20 Cal.App.4th 1446] reasonably judged by [the Raiders] to adversely affect or reflect on [the Raiders], then [the Raiders] may terminate this contract."

Paragraph 22, titled "OTHER AGREEMENTS," stated: "This contract, including any attachment to it, sets forth the entire agreement between [Wilson] and [the Raiders] and cannot be modified or supplemented orally. [Wilson] and [the Raiders] represent that no other agreement, oral or written, except as attached to or specifically incorporated in this contract, exists between them. The provisions of this contract will govern the relationship between [Wilson] and [the Raiders]...."

Paragraph 24.2, contained in an addendum and titled "FORGIVENESS OF DEBT," stated: "In consideration for execution of this Agreement, all debt incurred under note of July 24, 1980, between Wilson and [the Raiders] shall, subject to condition stated infra, [ ] be repaid on July 1, 1995 rather than July 23, 1985. Further, if from 1984 through 1987 Wilson retains a residence in the western states of California and/or Oregon and/or Washington during the off-season and thus is accessible to [the Raiders], for [Raiders] activities consistent with standard form contract, [the Raiders] agrees it will forgive all debt due under the note of July 24, 1980." During the three relevant years, the Wilsons lived in Washington state, where Wilson grew up, and where their four parents lived. The Raiders forgave Wilson's debt. Wilson lived in California only during the football season, and was not a California resident for state income tax purposes.

During the off-season in the three relevant years, other than an approximately one month vacation, Wilson engaged in a...