PEOPLE v. GLENDALE RY CO

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District Court of Appeal, Third District, California.

PEOPLE v. GLENDALE & M. RY. CO. et al.*

Civ. 5396.

Decided: August 08, 1935

O'Melveny, Tuller & Myers, William W. Clary, and James M. Irvine, Jr., all of Los Angeles, for appellant. U. S. Webb, Atty. Gen., and R. L. Chamberlain, Deputy Atty. Gen., for the People.

The defendant Glendale & Montrose Railway Company has appealed from a judgment in favor of the state of California for the payment of taxes on its railroad property for the year 1931 calculated on the basis of 4 1/414 per cent. of the gross receipts from the business of the company during the previous year, imposed under the provisions of article 13, § 14, of the Constitution of California. It is contended by the appellant that this levy of taxes is erroneous and void as to the bulk thereof for the reason that the railroad company had previously abandoned its railroad business and the largest proportion of its property was nonoperative in character. The cause was tried upon stipulated facts.

Prior to the year 1931 the Glendale & Montrose Railway Company owned and operated an intrastate railroad business with its principal place of business at Los Angeles. It was then a regular common carrier of freight and passengers. Its property then consisted of railroad tracks, rights of way, trolley wire system, rolling stock, including locomotives, passenger and freight cars, railroad buildings, and the ordinary equipment included in a regular railroad enterprise. In 1930 the gross receipts from its railroad business amounted to $64,267.59. Upon application duly made, the Railroad Commission of the state of California authorized the defendant railroad company to abandon the use of its railroad property by an order which was made November 13, 1930. Thereafter the company ceased to use its railroad property for railroad or other purposes, which property thereby became nonoperative in character, with the exception of two locomotives, one work car, substation equipment, and certain supplies of the agreed value of $12,750. The defendant's tracks were taken up, trolley wires removed, its railroad buildings were dismantled, and it ceased to conduct its railroad business, including the carrying of all freight and passengers. The only property which was thereafter used were the two locomotives and the work car and apparatus last mentioned of the value of $12,750. This property was used in the year 1931 only upon contract for the purpose of rendering a freight switching service for the Los Angeles & Salt Lake Railroad Company at Los Angeles.

The county assessor of the county of Los Angeles was promptly notified of the abandonment of the defendant's railroad business and the nonoperative character of the bulk of its property. In March, 1931, the state board of equalization was notified by the county assessor in the manner provided by law of the cessation of defendant's business and the nonoperative character of its property, with the exception of the locomotives and property which were being used for switching purposes as above stated. In spite of the defendant's abandonment of its railroad business and its notice of the nonoperative character of the bulk of its property, the state board of equalization proceeded to levy an ad valorem tax upon all of the railroad property owned by the defendant on the basis of 4 1/414 per cent. of the gross receipts of its business for the year 1930 under the provisions of article 13, § 14, of the Constitution, and the provisions of the Political Code which were enacted pursuant thereto. This levy of taxes for the year 1931 amounted to the sum of $2,731.38, against which levy the defendant protested and thereafter tendered in payment of its taxes for the year 1931 the sum of $464.39, being 4 1/414 per cent. estimated on the agreed value of its operative property which was used in that year as above stated.

The cause was tried by the court sitting without a jury. Judgment was rendered for the plaintiff in the sum of $2,731.38 and penalties for nonpayment thereof, aggregating the sum of $3,072.79 and costs of suit. From this judgment the defendant Glendale & Montrose Railway Company has appealed.

We are of the opinion the court erred in rendering judgment for taxes for the year 1931 upon the nonoperative property of the defendant based upon its gross earnings in the previous year of 1930 for the reason that the company had abandoned its railroad business and the use of the bulk of its property which was of a nonoperative character. Article 13, § 14, of the Constitution, authorizes the levying of taxes against all railroad companies and their properties, “or any part thereof used exclusively in the operation of their business in this State” computed, during the time involved in this litigation, on the basis of 4 1/414 per cent. of “the gross receipts and gross premiums herein mentioned shall be computed for the year ending the thirty-first day of December prior to the levy of such taxes and the value of any property mentioned herein shall be fixed as of the first Monday in March.”

Section 3664a of the Political Code, enacted pursuant to the constitutional provision heretofore mentioned, authorizes the levying of an ad valorem tax on all railroad companies and their properties “used exclusively in the operation of their business in this state.” Section 3665c of the Political Code requires the officers of such railroad companies to report in writing to the county assessor of the county wherein the property is located and to the state board of equalization “within ten days after the first Monday in March of each year” the operative or nonoperative character of their property. Section 3666 of the same Code provides that either the assessor or the board of equalization may protest by petition the character of the property as alleged by the company within thirty days after the notice thereof. The last-mentioned section then provides that “if such petition is not filed within the time herein stated the property covered in said assessor's protest shall be conclusively deemed nonoperative property and shall be placed upon the tax roll by the proper official as nonoperative property.” “Operative property” is defined in section 3665b as the property of a railroad company which is “used exclusively in the operation of the railroad business, depot grounds and buildings. * * *” It appears to be the settled law of this state that the ad valorem tax which is imposed upon a railroad company by article 13, § 14, of the Constitution, and section 3664a of the Political Code is a tax on the property of the company which is operative in its nature on the first Monday in March of the year during which the tax is levied. Feather River Power Co. v. State Board of Equalization, 206 Cal. 486, 274 P. 962; Hobart Estate Co. v. Waters, 220 Cal. 669, 32 P.(2d) 613. We are of the opinion such taxes may not be deemed to be specific in their nature merely because the amount thereof is estimated upon the gross receipts of the company of the preceding year as provided by law. This is a mere method of estimating the amount of taxes which are levied upon the property owned by a railroad company, adopted on account of the rapidly changing character of its rolling stock and equipment and the consequent difficulty of determining the fluctuating values thereof. The law contemplates the levying of taxes against railroad companies based upon their gross receipts for the preceding year only upon such property as is “used exclusively in the operation of their business” during the year for which the taxes are imposed.

In the present case the trial court rendered judgment in favor of the state of California contrary to the explicit provisions of the Constitution and the Political Code above mentioned for taxes upon nonoperative property based upon the gross receipts of the previous year. Such nonoperative property is taxable only by the county wherein it is located. It is argued that this is the only method of ascertaining the amount of taxes to be levied which is provided by the law, and that it would be impossible to segregate the amount of taxes levied upon operative property from that which is imposed upon nonoperative property. But this furnishes no reason for levying what amounts to double taxation. There appears to be no difficulty in solving this problem under the circumstances of the present case. It is stipulated that the gross receipts of the company for the year 1930 were $64,267.59; the value of the operative property which the company continued to use in 1931 for switching purposes is $12,750; the value of the nonoperative property as reported by the defendant is assessable by the county of Los Angeles and may readily be ascertained. In compliance with the provisions of the Constitution and the Political Code, the proportion which the operative property bears to the nonoperative property would readily determine the proportion of the gross receipts of the previous year which would become a valid tax against the company. At least neither the Constitution nor the statutory provisions of the Political Code authorize the levying of a tax against a railroad company except upon such property as is “used exclusively in the operation of their business.”

It follows that the state board of equalization was without authority to levy a tax upon the nonoperative property of the defendant which was not used for railroad purposes, or at all, during the year of 1931, in which year the levy was made.

Moreover, the tax which was imposed in the present case in favor of the state of California amounts to double taxation upon the nonoperative portion of the defendant's property for the reason that under the circumstances of this case it becomes the duty of the assessor of Los Angeles county to tax such nonoperative property pursuant to law in favor of Los Angeles county. It is an established maxim of law that the same property shall not be subject to a double tax payable by the same party, either directly or indirectly. 1 Cooley on Taxation (3d Ed.) 398. Both the Constitution of California and our statutes prohibit the imposition of a double tax upon the same property in this state. Article 13, § 14, Const.; section 3607, Pol. Code. In authorizing the imposition of taxes upon the property of all railroad companies in this state, the constitutional provision last cited provides that “such taxes shall be in lieu of all other taxes and licenses, State, county and municipal.”

For the reason that the nonoperative property of the appellant railroad company was illegally taxed contrary to the inhibition of the Constitution, the levy is void.

The judgment is reversed.

Mr. Justice THOMPSON delivered the opinion of the court.

We concur: PULLEN, P. J.; PLUMMER, J.

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