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



Civ. 14074.

Decided: November 08, 1943

Robert W. Kenny, H. H. Linney, and Adrian Kragen, all of San Francisco, for appellants. Schauer, Ryon & McMahon, of Santa Barbara, for respondent.

This matter involves five cases that were by stipulation of the parties consolidated for trial and appeal. They arose out of assessments by the State Board of Equalization against respondent, Puritan Ice Company, totaling approximately $33,000, together with interest charges thereon, with respect to allegedly delinquent taxes arising under the California Retail Sales Tax Act of 1933, St.1933, p. 2599, as amended.

After the assessments were levied, and after petitions for reassessment were denied, respondent paid approximately $17,000 of the amount levied under protest. The amount so paid by respondent is the subject of four suits for refund of the sum. In the fifth suit, the Board of Equalization sued respondent for an unpaid balance of $16,000.00 together with interest and penalties.

All five suits were decided in favor of respondent (Puritan Ice Company) and against appellant (People of the State of California and Charles G. Johnson, Treasurer of the State of California).

The evidence being viewed in the light most favorable to respondent, the essential facts are:

Respondent operates in Santa Barbara County an ice manufacturing plant. From August 1, 1933, to September 30, 1938, it manufactured and sold approximately $1,019,000.00 worth of ice to packers of fresh vegetables and to the Pacific Fruit Express Company. Seventy–five per cent of the foregoing sum was sold to vegetable packers and twenty–five per cent of it to Pacific Fruit Express. Of the twenty–five per cent of its products sold to Pacific Fruit Express, ninety to ninety–five per cent was specifically rebilled at a fixed price per ton to the ultimate buyer of the vegetable car involved, and five to ten per cent was represented by a standard refrigeration charge, billed to the ultimate buyer of the car, which included in the elements under which it was computed for the tariff the price of the ice per ton.

The remaining seventy–five per cent of the ice was sold to vegetable packers in Santa Barbara County, who packed cauli–flower, lettuce, carrots, celery and other green vegetables. Respondent took from all of these packers resale certificates certifying to the fact that the ice so sold was purchased by the independent packers for resale in the form of tangible personal property.

The procedure employed by the packers and sellers of a car of lettuce, with minor variations, was typical of the method used by the other packers of vegetables in Santa Barbara County during the period here involved. This practice was as follows:

The lettuce was harvested in the field, taken to the packing shed, graded, sorted, and placed in a crate composed of shook and nails. Heavy parchment paper was placed in the crate, then a layer of lettuce, a layer of crushed ice, and so on, until the crate was full, when a shovel–full of crushed ice was placed on the top of it. The paper was then folded over the top in such a way as to make a complete envelope and the lid then applied with the proper amount of bulge being allowed for the ice and the contents. The crate was then taken to a car waiting on a siding. This, according to the custom and usage of the vegetable business in Santa Barbara County, was the “packaged unit” consisting of the crate, paper lining, the vegetable commodity, the label and the ice. The car was loaded with these crate units, room being allowed at the top and at the doors. Whole blocks of ice were placed at the doors. Blocks of ice were then crushed to a fine snow (known as “top ice”) and blown into the car in the space above the crates. The amount of ice placed in the doorway and blown in as “top ice” during the later movement of the car solidified into a solid mass and constituted what was known to the trade as the “iceberg pack.” After the “top ice” and the “door ice” were in place, the car was sealed.

When the car arrived at the terminal market it was opened by the buyer and some seventy to seventy–five per cent of the “top” and “door ice” placed in the car would be intact. After the car was opened the crates were dug from the ice, which was now a solid mass, and inspected by the owner and loaded on trucks for delivery to the retailer. A portion of the ice was usually shovelled on the loaded truck. If the buyer of the car had resold to a small retailer a number of crates would be delivered to his store. He would open one or two crates at a time, take the ice, a considerable amount of which was still intact, throw away the deteriorated paper on the bulged crate, and throw the ice on the remaining crates, discard it or place it on his sales counter along with the lettuce. This was the first time there was any breakdown of the crate and its contents as a unit.

These carloads were in every case in question sold as a unit, as a car containing the entire contents ice, shook, or crate, wrapping paper and vegetables, by the vegetable packer to the buyer. The ice comprising a portion of this car unit was itemized separately as a part of the whole, varying between thirty dollars and sixty dollars per car in accordance with the tonnage used. The ice was billed by the vegetable packer to the buyer of the car unit at a profit.

Seventy–five per cent of the vegetable car units made up as aforesaid, during the period in question, were sold f. o. b. Santa Barbara County, transfer of title taking place immediately to the buyer of the car unit and he being liable for any risk or loss in transit. If the car had been “initially iced”––that is, ice put in the bunkers by the Pacific Fruit Express Company––the charge for this ice followed the billing of the car and was paid for by the buyer at $3.50 per ton.

The remaining twenty–five per cent of the vegetable car units that were not sold f. o. b. Santa Barbara County were started by the vegetable packers on their way to market and were known as “rollers.” They were either sold by the vegetable packer to the ultimate car buyer in transit, delivered into the major terminal markets in the East and sold by the car to Eastern receivers, or in rare cases, consigned to a brokerage house in the terminal to be sold.

Respondent received from all of its packer customers “resale certificates” by the terms of which the packers certified that they resold all ice which they purchased from respondent in the form of tangible personal property.

The Board of Equalization did not offer any evidence excepting formal certificates of sales tax delinquency.

There are two questions presented for our determination which will be stated and answered hereunder seriatim.

First: Was there substantial evidence to sustain the trial court's findings that respondent made all sales of ice involved in the present action to persons, firms, and corporations who purchased the same for the purpose of resale, in the regular course of business, in the form of tangible personal property and that such ice was in fact resold in the regular course of business in the form of tangible personal property?

This question must be answered in the affirmative and is governed by the following pertinent rules of law:

(1) When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact. (In re Estate of Winzeler, 42 Cal.App.2d 246, 248, 108 P.2d 720; 2 McK.Dig. (1930) page 701, Appeal and Error, sec. 1235.)

(2) It is the general rule that on appeal an appellate court will (a) view the evidence in the light most favorable to the respondent (b) not weigh the evidence (c) indulge all intendments which favor sustaining the finding of the trier of fact, and (d) not disturb the finding of the trier of fact if there is substantial evidence in the record in support thereof. (California Emp. Comm. v. Bethesda Foundation, 54 Cal.App.2d 348, 350, 128 P.2d 874; People v. Dukes, 90 Cal.App. 657, 659, 266 P. 558.)

(3) If the maker or vendor of personal property takes from the vendee a resale certificate which provides that the acquired property is purchased for resale, the burden of proving that such property was not in fact purchased for resale rests with the Board of Equalization in a suit to recover a tax alleged to be due under the terms of the Retail Sales Tax Act of 1933 and amendments thereto. (Act 8493, sec. 17, Deering (1939) Supplement to the Codes, General Laws and Constitution of California, page 1582.)

Applying the foregoing rules to the facts set forth above, which are supported by substantial evidence in the record, the trial court reasonably inferred that all the ice, involved in the present action, manufactured and sold by respondent was sold to persons, firms or corporations who purchased the same for the purpose of resale and that in fact the vendees sold the same as tangible personal property.

People v. Monterey Ice & Dev. Co., 29 Cal.App.2d 421, 84 P.2d 1069, and National Ice, etc., Co. v. Pacific Fruit Express Co., 11 Cal.2d 283, 79 P.2d 380, are factually distinguishable from the instant case, for the reason that in each of the cited cases the trial court found upon conflicting evidence that the manufacturer and vendor of the ice involved in each case was a retailer of its ice, and that the ice which it sold was not sold for resale purposes. On appeal, the reviewing court simply applied rules (1) and (2), supra, and affirmed the judgment of the lower court.

Second: Did the trial court err in awarding costs in favor of respondent and against appellants, the State of California and an officer of said state?

This question must also be answered in the affirmative and is governed by the established rule in California, that in the absence of a statute authorizing the same costs may not be allowed against (a) the State of California, or (b) officers of the state acting in their representative capacity. (Innes v. McColgan, 52 Cal.App.2d 698, 700, 126 P.2d 930; Connecticut Gen. Life Ins. Co. v. State, 47 Cal.App.2d 88, 89, 117 P.2d 377; People v. One 1937 Plymouth 6, 40 Cal.App.2d 38, 39, 104 P.2d 372; People v. One Plymouth Sedan, 21 Cal.App.2d 715, 717, 69 P.2d 1011.)

There is no merit in respondent's contention that Section 1032 of the Code of Civil Procedure authorizes the allowance of costs against the state and its representatives in the present action. (See People v. 1937 Plymouth 6, supra, 40 Cal.App.2d page 39 et seq., 104 P.2d 372.)

In view of our conclusions, it is unnecessary to consider other points discussed by counsel.

For the foregoing reasons, the provisions in the judgments for costs are and each is stricken; as thus modified the judgments are and each is affirmed.

McCOMB, Justice.

We concur: MOORE, J.; W. J. WOOD, J.

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