Opinion
4-11-1958
The FLYING TIGER LINE, Inc., a Delaware corporation, Plaintiff and Respondent, v. The COUNTY OF LOS ANGELES and The City of Burbank, Defendants and Appellants. * Civ. 22415.
Harold W. Kennedy, County Counsel, Gordon Boller, Asst. County Counsel, Los Angeles, and Alfred Charles De Flon, Deputy County Counsel, Hollywood, for appellants. Hill, Farrer & Burrill, by Carl A. Stutsman, Jr., Leon S. Angvire, Los Angeles, for respondent.
The FLYING TIGER LINE, Inc., a Delaware corporation, Plaintiff and Respondent,
v.
The COUNTY OF LOS ANGELES and The City of Burbank, Defendants and Appellants. *
Harold W. Kennedy, County Counsel, Gordon Boller, Asst. County Counsel, Los Angeles, and Alfred Charles De Flon, Deputy County Counsel, Hollywood, for appellants.
Hill, Farrer & Burrill, by Carl A. Stutsman, Jr., Leon S. Angvire, Los Angeles, for respondent.
SHINN, Presiding Justice.
The present action is against the County of Los Angeles and the City of Burbank to recover 1953 personal property taxes paid under protest. The interests of Burbank are the same as those of the county, since the county assesses property in Burbank and collects taxes on behalf of the city. Trial was to the court, which made findings and awarded plaintiff a refund of $38,642.70. Defendants appeal from the judgment.
Plaintiff is a commercial airline chartered by the State of Delaware. Its principal place of business is in Los Angeles County, the home port of its planes and its repair terminal being located at the Lockheed Air Terminal in Burbank. During the assessment year commencing in March 1953, plaintiff operated twenty-seven C-46 aircraft in interstate commerce under a certificate issued by the Civil Aeronautics Board and according to a flight schedule approved by said board. Plaintiff also operated eleven DC-4 aircraft. Six of the latter planes were owned by the United States of America and the planes, themselves, were not taxed; the other five were owned by the airline.
The five DC-4s were primarily engaged in the transportation of passengers and freight from Travis Air Force Base, California, to Haneda Air Force Base, Tokyo, Japan, as part of the Pacific Airlift, which was instituted after the out-break of the Korean war in 1950. Stops were made enroute at Honolulu and Wake Island, where plaintiff maintained ground facilities for servicing the planes. This operation of the Flying Tiger Line was under a contract with the United States Government and the flight schedule for the DC-4s was made up a month in advance by the Military Air Transport Service. From November 1, 1952 to May 14, 1953, the planes were present in Los Angeles County only 36.37% of the time. In addition to the airlift, the DC-4s were engaged in other foreign and domestic commerce; the foreign operations, distinct from the airlift, were undertaken after permission or exemption had been obtained from the Civil Aeronautics Board.
On the first Monday in March 1953, the Los Angeles County Assessor determined the value of plaintiff's aircraft, engines and flight equipment for the purpose of an ad valorem personal property tax; the amount of the assessment was $1,291,090. Approximately one-quarter of the total figure represented the C-46s and plaintiff's leasehold interest in the six DC-4s which were owned by the government. These were assessed on an apportioned basis, viz., at a percentage of their value equivalent to the percentage of time the planes were present in the county during the first week in March. The validity of this part of the assessment is not in dispute. The remainder of the assessment represented the five DC-4s owned by the airline. These were assessed at $985,290, their full cash value, the assessor's reason being that their operation was not scheduled by the Civil Aeronautics Board.
Plaintiff thereupon filed a petition for redetermination of the assessment with the County Board of Supervisors, sitting as a board of equalization. Rev. & Tax.Code § 1601 et seq. The airline sought a reduction of $816,190 in the assessment. Its petition alleged that the five DC-4s were improperly assessed at their full value and were taxable on the same apportioned basis as the other planes. The board considered the application at two equalization sessions held on July 13th and 21st, 1953. After hearing testimony and argument by representatives of the airline and several assessor's deputies, the board made certain immaterial adjustments in the assessment and denied the application for relief. A tax of $79,578.91 was imposed. Plaintiff paid the tax under protest and commenced the present action.
The matter was tried on a second amended complaint and the answer thereto. Plaintiff alleged in its complaint that the assessor erroneously and illegally attributed the full value of the five DC-4s to Los Angeles County for the reason that they were not being used in operations scheduled by the Civil Aeronautics Board, notwithstanding the fact that the planes were operating in interstate and foreign commerce and were present in the county only 21.5% of the time during the preceding tax year. It was also alleged that uncontradicted testimony before the Board of Supervisors showed that the planes were not permanently located in the county, that jurisdictions other than Los Angeles County had subjected them to personal property taxation, and that none of plaintiff's aircraft had previously been taxed by the county at their full value. Plaintiff alleged, further, that the assessment and the equalization of the assessment were made arbitrarily and capriciously and without regard to the constitutional principle of apportionment; that the order denying the application for relief 'was not an order made by the Board in pursuance of its fact finding duty to equalize said assessment but was made pursuant to representations of the County Counsel and County Assessor that the principle of apportionment applied only to aircraft operation in interstate commerce within the United States and scheduled by C. A. B. and did not apply where the aircraft were engaged in foreign commerce under contract with and scheduled by the Air Force and in which the Civil Aeronautics Board did not have jurisdiction.' There followed an allegation that 'said proceeding of the Board was a pretended and not an actual equalization and the Plaintiff's assessment has never been equalized in the manner provided by law * * *, and Plaintiff has been denied its right to such qualization and has no remedy or recourse except that which may be afforded by the Courts.' The answer denied the invalidity of the assessment and denied any irregularity in the equalization proceedings.
The evidence at the trial consisted of a transcript of the proceedings before the board, a stipulation of the facts heretofore stated and the further fact that between November 1, 1952 and May 14, 1953, the planes were present in Los Angeles County only 36.37% of the time. The following facts were presented to the board by representatives of the airline. In previous years, all the planes owned and operated by the airline had been assessed on an apportioned basis in Los Angeles County. The airline maintained repair facilities in various airports 'from Newark to Tokyo,' but major overhauls on the DC-4s were performed at the Lockheed Air Terminal in Burbank. The planes were being taxed on an apportioned basis in the States of Nebraska and Wisconsin, as well as in San Mateo County, California. According to a statistical summary prepared by the airline the planes flew, in July 1952, 39.7% of their total mileage in the Pacific Airlift, 55.5% in other foreign commerce, and 4.8% in interstate commerce. During March 1953, the mileage percentages were as follows: 94.4% in the Pacific Airlift; 2.4% in other foreign commerce and 3.2% in interstate commerce.
The court found that the five planes were present in Los Angeles County only 36.37% of the time between November 1, 1952 and May 14, 1953; the board declined and refused to consider that fact; they were being taxed at a proportion of their value by other states; they could lawfully be assessed by Los Angeles County at only 36.37% of their value; it was beyond the county's jurisdiction to assess them at their full value; the facts justifying relief from the invalid portion of the assessment were presented to the Board of Supervisors; the board denied relief in reliance upon the assessor's representations that the principle of tax apportionment did not apply to aircraft engaged in interstate and foreign commerce whose flights were not scheduled by the Civil Aeronautics Board; plaintiff was entitled to a refund representing the amount of the tax in excess of a tax on 36.37% of the value of its planes.
The first question to be considered is whether plaintiff obtained a fair hearing before the Board of Supervisors. This is the crucial question in the case, for the county board of equalization is the factfinding body designated by law to remedy an excessive assessment and, as a general rule, its findings are final and conclusive upon the facts involved in a disputed assessment, and are not subject to review by the courts. Cal.Const. Art. XIII, § 9; Los Angeles Gas & Electric Co. v. County of L. A., 162 Cal. 164, 169-170, 121 P. 384, 9 A.L.R. 1277. However, the taxpayer must be accorded the substance as well as the form of a hearing. Where the procedure adopted by the board constitutes a denial of due process of law, the taxpayer is not limited to his administrative remedy; he may seek judicial relief. Universal Consol. Oil Co. v. Byram, 25 Cal.2d 353, 360-362, 153 P.2d 746, and cases cited.
As we have said, the court found that the supervisors did not make a determination as to the facts in issue, but decided the matter upon the assessor's representations that the doctrine of tax apportionment is inapplicable to aircraft engaging in unscheduled flights in interstate and foreign commerce.
It appears from the transcript of the equalization proceedings that none of the facts adduced on behalf of the airline was controverted by the deputies of the County Counsel and those of the County Assessor who were present at the hearings. Deputy Assessor Watson stated the position of the taxing authorities as follows: 'We have assessed this company for five airplanes which they own because there is no consistency to the pattern; they are not on a scheduled basis.' Deputy Assessor West said: 'We believe that our assessment, made in the manner in which we have made it, is legal, and that the valuation is equalized with the assessments that we have made to other owners and operators of planes being used on a contract for nonscheduled flight basis.' Supervisor Jessup then asked: 'I'd like to ask the County Counsel here, now, is this the legal point of the argument * * *.' Mr. West answered: 'The issue involved, as I understand, Mr. Jessup, is whether or not these five planes have the status for taxation in Los Angeles County. * * * They are a distinct and separate operation from that scheduled airlines part of the business.' Supervisor Hahn asked: 'There's no quarrel with the facts, but a legal question?' Mr. Anson, the deputy county counsel, replied: 'Primarily a legal question * * *.' Supervisor Ford asked: 'Isn't it a matter that better go to the courts?' Anson replied: 'While it may be a matter to go to the courts, unfortunately it is also a matter that this Board has to decide in the first instance. It is a very difficult question. It will be a difficult question for the courts to decide ultimately * * *.' At the close of the second hearing, Supervisor Jessup asked: 'Are you going to ask that he [the representative of the airline] be heard again'? County Assessor Quinn replied: 'No, he's going to court from here.'
The conclusion is inescapable that the board denied plaintiff a reduction of its assessment upon the ground that the only question involved in the proceedings was one of law, and that the law was as the taxing authorities had stated it to be. It is obvious that the supervisors disregarded the testimony of the airline's representatives and deemed it of no moment in view of the question they thought they had to decide. As we have said, a county board of equalization is a fact-finding body. Plaintiff was entitled to an adjudication of the merits of its case, which, manifestly, it did not receive. We think the court was warranted in determining that the airline was deprived of a fair hearing by the board.
However, the court erred in undertaking to equalize the disputed assessment. That, as we have stated, was the function of the board. Having found the supervisors' ruling to be a nullity, the court should have remanded the proceedings to the board for a determination upon the basis of evidence submitted to it. Bila v. Young, 20 Cal.2d 865, 869-870, 129 P.2d 364; Universal Consol. Oil Co. v. Byram, supra, 25 Cal.2d 353, 362-363, 153 P.2d 746; Steen v. County of Los Angeles, 31 Cal.2d 542, 546, 190 P.2d 937. Accordingly, the judgment cannot be allowed to stand and the matter must be referred back to the board for further action in accordance with due process of law.
Upon the remand, the board will have to determine whether the full value of the planes is attributable to Los Angeles County or whether they may be assessed by the county at only a proportion of their value.
In this connection, the applicable principles of law are stated in four decisions of the United States Supreme Court. These are: Northwest Airlines v. Minnesota, 322 U.S. 292, 64 S.Ct. 950, 88 L.Ed. 1283, decided in 1944; Ott v. Mississippi Barge Line Co., 336 U.S. 169, 69 S.Ct. 432, 93 L.Ed. 585, decided in 1949; Standard Oil Co. v. Peck, 342 U.S. 382, 72 S.Ct. 309, 96 L.Ed. 427, a 1952 case; and Braniff Airways, Inc., v. Nebraska State Board, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967, decided in 1954.
The law as applicable to our case is admirably stated in the county's brief as follows: 'The state of the home port of roaming, migratory property and the state of the commercial domicile of the owner thereof has power to tax such property on the basis of its full value unless another jurisdiction or jurisdictions have acquired power to tax. When jurisdictions other than the home port and commercial domicile have acquired power to tax on an apportioned basis, the full power of the home base to tax is diminished to the extent, but only to the extent that such other jurisdictions have by regular, recurring physical contacts acquired the power to tax. For example, if a plane having its home port in Los Angeles County were continually to circle the globe and never to land anywhere but in Los Angeles County for cargo, fuel, repairs, overhauls, etc., beyond doubt such plane would be subject to ad valorem property tax by Los Angeles County as its full value. If the plane, instead of landing only in Los Angeles County, also made landings in New York State and in so doing spent 10% of the year there, New York would have the power to tax on 10% of its value, and Los Angeles County as the home port and commercial domicile, would have the power to tax on the basis of the remaining 90% of the value. This method of apportionment would not offend the Due Process or Commerce Clauses of the Constitution. Thereunder, roaming, migratory property such as these planes would never be taxed in excess of their value; nor, thereunder, on the other hand, would they escape taxation up to their full value.'
The factual question to be decided by the board was whether, in their interstate and foreign operations, the planes maintained sufficiently regular business contact with other states or foreign countries to subject them to an apportioned tax therein. See Braniff Airways, Inc., v. Nebraska State Board, supra, 347 U.S. 590, 600-601, 74 S.Ct. 757, 98 L.Ed. 967, 977.
If from the evidence before the board it is determined that the planes were subject to taxation in one or more other jurisdictions, the board should make its own determination with respect to the proper basis of apportionment of value as between Los Angeles County and such other jurisdiction or jurisdictions.
The judgment is reversed with directions to the trial court to remand the matter to the Los Angeles County Board of Equalization for further consideration and action in accordance with due process of law and with the views herein expressed.
PARKER WOOD and VALLEE, JJ., concur. --------------- * Opinion vacated 333 P.2d 323.