ROEHM v. ORANGE COUNTY et al.
Plaintiff alleged in his complaint that he was the owner of an on-sale general liquor license issued to him by the State Board of Equalization (hereinafter referred to as the Board), which license permitted him to conduct his business at a specified place in Santa Ana; that in the year 1946 the County Assessor of Orange County assessed the liquor license of plaintiff as taxable property and livied a tax on it in the sum of $432.62; that on July 24, 1946, plaintiff paid said tax involuntarily and under written protest. Plaintiff then alleged that the on-sale license was not personal property and was not taxable under any provision of the State Constitution or Revenue and Taxation Code of this state; that the assessment and levy was illegal. He prayed for a recovery of the tax paid. A general demurrer to the complaint was sustained without leave to amend. Plaintiff appealed from the adverse judgment.
The issue here squarely presented is whether such a license issued by the Board is property subject to taxation under section 1, Article XIII of the State Constitution, which provides in part: ‘All property in the State except as otherwise in this Constitution provided, * * * shall be taxed in proportion to its value, * * *. The word ‘property’ as used in this article and section, is hereby declared to include moneys, * * * franchises, and all other matters and things, real, personal, and mixed, capable of private ownership; * * *.', and section 103 of the Revenue and Taxation Code contains a similar definition of property.
Article XX, section 22 of the Constitution of California, as adopted by the people in 1932, gave the State ‘exclusive right and power to control, licenses and regulate the manufacture, sale * * * and disposition of intoxicating liquor within the State.’ By an amendment, similarly adopted in 1934, it is provided that the Board shall have the ‘exclusive power to license the manufacture, importation and sale of intoxicating liquors in this State, and to collect license fees or occupation taxes on account thereof.’ In this same section it is further provided that ‘the privilege of * * * selling * * * intoxicating liquors * * * and the privilege of keeping * * * selling * * * and otherwise disposing of beers on any premises open to the general public shall be licensed and regulated under the applicable provisions of the so-called State Liquor Control Act’ and the ‘license fee to be charged * * * for the privilege of * * * selling * * * intoxicating liquors * * * shall be $250.00 per year, or $62.50 per quarterannum for seasonal businesses, subject to the power of the State Board of Equalization to change such fees.’ It then recites that the legislature shall provide for the apportionment of such ‘license fees or occupational taxes' between the State and the cities and counties as it may deem proper.
At the time of the levying of the tax here involved, the cities received one-half of such fees. Alcoholic Beverage Control Act, sec. 37, Deering's Gen. Laws 1944, Act 3796, Vol. 2 p. 1392, hereinafter referred to as the Act. The last legislature provided that such cities or counties shall receive the entire sum thus collected. Stats. 1947, chap. 712. Therefore, respondents have received 50 per cent of the moneys collected by the Board as an occupational tax or license fee for the issuance of the same license which it now claims is made the subject of a property tax by defendants.
In this connection it is argued by plaintiff's counsel that the license to sell intoxicating liquor is only a privilege, as thus described in the Act itself, and is not property subject to taxation under the Constitution and Revenue and Taxation Code, that the Constitution does not authorize or require, but forbids the double taxation of property. People ex rel. Burke v. Badlam, 57 Cal. 594; Flynn v. San Francisco, 18 Cal.2d 210, 115 P.2d 3; that the so-called property tax here levied on the liquor license of plaintiff is in fact and effect but another ‘occupational tax levied on account of a license to sell intoxicating liquors'; that such right is ‘within the exclusive power of the Board of Equalization under Article XX, section 22 of the Constitution’; and that this provision has deprived the county assessor of the ‘authority to impose a tax on the privilege of selling intoxicating liquors', citing such cases as L. A. Brewing Co. v. Los Angeles, 8 Cal.App.2d 391, 396, 48 P.2d 71; City of Los Angeles v. Los Angeles, etc., Co., 152 Cal. 765, 93 P. 1006; Pacific Gas & Electric Co. v. Roberts, 168 Cal. 420, 143 P. 700; Flynn v. San Francisco, supra; Brunton v. Superior Court, 20 Cal.2d 202, 124 P.2d 831; People v. Schmitz, 7 Cal.App. 330, 366, 94 P. 407, 419, 15 L.R.A.,N.S., 717; and Hevren v. Reed, 126 Cal. 219, 222, 58 P. 536.
In Hevren v. Reed, supra, it was held that a liquor license, whether revocable in terms or not, is neither a contract nor property in any constitutional sense, but is subject at all times to the police power of the State government. In this connection, it should be noted that our State Constitution, Article XX, section 22, gives to the State the ‘exclusive right and power to license and regulate’ the sale of liquor in the State which right, under the decisions, includes the power to tax for such licensing purpose. Therefore, the right and power to license and regulate the sale of liquor to the State is a matter of State concern and is not entrusted to cities and counties for the purpose of regulation and control. It was said in Re Porterfield, 28 Cal.2d 91, 168 P.2d 706, 722, 167 A.L.R. 675: ‘The power to tax the exercise of a privilege is the power to control or suppress its enjoyment.’ It was likewise held in that case that if a city may tax the privilege (or right) for revenue purposes, it may fix the rate of tax and thus control at will an activity in a field over which the legislature has assumed state-wide control. See also, Horwith v. City of Fresno, 74 Cal.App.2d 443, 168 P.2d 767. This same reasoning could be applied in reference to taxation of liquor licenses by cities and counties.
If the character and nature of the tax here imposed is similar to the license fee or occupational tax imposed by the State and is, in legal effect, but another and similar license fee or occupational tax imposed upon plaintiff by the City of Santa Ana and County of Orange, then such tax is invalid under the holding in L. A. Brewing Co. v. Los Angeles, supra. That case involved an ordinance passed by the City of Los Angeles imposing a license tax on the business of selling alcoholic liquor for revenue purposes, and requiring that a license fee or tax be paid, based upon the gross receipts of such business. It was there held that the provisions of section 22, Article XX of the State Constitution, giving the State the ‘exclusive right and power to control, license and regulate the manufacture, sale * * * and disposition of intoxicating liquor within the State’ took away from the political subdivisions of the State the right to impose a license tax for the purpose of revenue upon any such business; that while the licensing of a liquor business was a municipal affair prior to the operative date of that section, the adoption of said amendment to the Constitution changed the power to impose a license tax for revenue upon those engaged in the liquor business from a municipal affair to one of general state-wide concern and, therefore, removed such power from the protection of section 6, Article XI of the Constitution. It was likewise there held, in reference to the State's powers, that the phrase ‘exclusive right and power to control, license and regulate’ included the power of the State to impose and collect a license tax for revenue.
The care of Three-G Distillery Corporation v. County of Los Angeles, 46 Cal.App.2d 498, 116 P.2d 143, hearing denied by the Supreme Court, is not opposed to this holding. This court merely held that Article XX, section 22 of the Constitution, reserving to the State the ‘exclusive power’ to license and regulate the sale of intoxicating liquor, did not deprive the local taxing agencies of the right to levy personal property taxes on a distillery and warehouse containing a large amount of liquors owned by the licensee and located in the district where the levy was made.
The legislature, in section 5 of the Act, has described the types of licenses to be issued and has fixed the license fees to be charged therefor. Section 6 of the Act describes the ‘privileges granted’ by the license which authorized the ‘person to whom issued to exercise the * * * rights and privileges (therein described) and no others at the premises' specified ‘during the year for which issued’. These retailers' on-sale licenses are issued on a calendar year basis and are renewable unless such licenses have been revoked.
In State Board of Equalization v. Superior Court, 5 Cal.App.2d 374, 42 P.2d 1076, hearing denied by the Supreme Court, the nature and character of the license here involved is described. The court said, at page 377, of 5 Cal.App.2d, at page 1077 of 42 P.2d, that: ‘Unlike the rule with respect to the right to deal in ordinary commodities considered in the numerous cases cited and relied upon by respondent, there is no inherent right in a citizen to sell intoxicants * * * and a license to do so is not a proprietary right within the meaning of the due process clause of the Constitution; * * * it is but a permit to do what would otherwise be unlawful, and consequently a statute authorizing its revocation does not violate the due process clause * * *.’
In Irvine v. State Board of Equalization, 40 Cal.App.2d 280, 104 P.2d 847, the statement as to the nature and character of the license described in State Board of Equalization v. Superior Court, supra, was recognized.
In People v. Schmitz, supra, 7 Cal.App. at page 366, 94 P. at page 418, 15 L.R.A.,N.S., 717, the court said: ‘A license to sell liquors is not property in the ordinary sense of the word, but a mere permission, and the license is but the evidence that the permission has been given by the proper authorities * * *.’ Citing cases. However, this declaration was followed by the statement that it was unnecessary to decide that question in that case for the reason that the indictment was otherwise insufficient. See, also, Collins v. Yosemite Park & Curry Co., 304 U.S. 518, 58 S.Ct. 1009, 82 L.Ed. 1502.
It has been said in some cases, in referring to rights acquired under a license, such as a right to practice medicine, optometry and law, that such right was a vested property right. Hewitt v. State Board of Medical Examiners, 148 Cal. 590, 84 P. 39, 3 L.R.A.,N.S., 896, 113 Am.St.Rep. 315, 7 Ann.Cas. 750; Laisne v. California State Board of Optometry, 19 Cal.2d 831, 123 P.2d 457.
On the other hand, a number of decisions of this state declare that vocational and professional privileges, while valuable, are not in the nature of property that can be sold or disposed of by act of the licensee or acquired by operation of law, such as attachment or sale under execution, but are a ‘statutory privilege’. See Cohen v. Wright, 22 Cal. 293; In re Investigation of Conduct of Examination for Admission to Practice Law, 1 Cal.2d 61, 33 P.2d 829; Rosenblatt v. Cal. State Board of Pharmacy, 69 Cal.App.2d 69, 74, 158 P.2d 199; State Board of Equalization v. Superior Court, 5 Cal.App.2d 374, 377, 42 P.2d 1076; Irvine v. State Board of Equalization, supra; Paladini v. Superior Court, 178 Cal. 369, 173 P. 588.
We are convinced, from the authorities cited in this state, and from a consideration of the entire constitutional provision and the legislative acts here involved, regardless of holdings in other states that may appear contrary to this conclusion, that the nature of the license to carry on the business of selling intoxicating liquors in this state, particularly as between the State and the licensee, is but a privilege and that the fee exacted therefor by the State is a form of tax provided for and based upon that privilege or right.
As we analyze the contention of defendant and that of amici curiae in support of defendant's claim it is this: that even though the license, as issued, is and has always been considered by the taxing authorities up to the present time to be but a privilege given to the licensee to carry on the occupation or business of selling intoxicating liquor, it now has, in the minds of the taxing authorities, changed its form and character from that of a privilege to that of ‘property taxable under Article XIII, section 1, of the Constitution’, because it is transferable by the act of the licensee and by operation of law, and since a limitation has been placed on the number of licenses that may be issued, it now has a market value greatly in excess of the amount paid as a fee or tax for such license or privilege, citing the general rule stated in 51 American Jurisprudence, p. 444, sec. 424, reading: ‘The taxation of franchises, licenses, and priviileges usually is by means of an excise tax rather than by a property tax, although a franchise, license, or privilege which may be made the subject of sale or mortgage, which may be sold on execution, and which passes as an asset to the owner's trustee in bankruptcy or to his executor or administrator is generally considered property for the purposes of taxation, even if it cannot be transferred without the consent of the legislature or of some other governmental body.’
However, under this same general rule, cited by defendants, we find this language: ‘Since, however, a license to sell intoxicating liquor is not generally regarded as property or a vested right, a license to sell intoxicating liquor has been held not taxable as property, although there is authority otherwise.’ Rowe v. Colpoys, 78 U.S.App.D.C. 75, 137 F.2d 249, 148 A.L.R. 488, writ of certiorari denied in 320 U.S. 783, 64 S.Ct. 190, 88 L.Ed. 470, is cited in support of this general rule relied upon by defendants. It was there held that under the laws of the District of Columbia, a liquor license is considered property because it could be sold under a levy of execution. On the other hand, 30 American Jurisprudence, p. 326, sec. 134, recites: ‘Generally—A license to engage in the liquor traffic is not a grant, and confers no vested rights upon the licensee. It does not do so any more than the charter of a social club creates rights beyond revocation for violation of the liquor laws. Nor can any vested rights be created under a license by the acquisition and use of the instrumentalities necessary to the business.’ Sec. 135: ‘A liquor license is not a contract between the government and the licensee, within the protection of the constitutional guarantees, but is a privilege which may be revoked by the repeal of the law authorizing issuance of the license.’ Section 136: ‘Generally, it is held that a license to sell intoxicating liquor is not property, or a vested right. It is not property in any legal or constitutional sense or within the meaning of the tax laws * * *.’ Citing cases.
Some jurisdictions have held that where the legislature has made licenses assignable or transferable, and the transfer can be effected with the consent of the authorities, a liquor license has been regarded as property, and that in such case it is an asset of the estate of the licensee which passes to the trustee in bankruptcy, a receiver, or in case of the licensee's death, his personal representative. 30 American Jurisprudence p. 327, sec. 136. Other jurisdictions have held that the license, although assignable, is not property subject to levy and sale on execution. Deggender v. Seattle Brewing & Malting Co., 41 Wash. 385, 83 P. 898, 4 L.R.A.,N.S., 626.
It is the general rule that a liquor license is not transferable by operation of law and it is generally held that the death of a licensee terminates the license; that therefore it does not become an asset of the estate or give the personal representative of the licensee any right to conduct the business or to make sales under the license, nor can he exercise the statutory privilege of obtaining a renewal which could have been invoked by his decedent had he lived. This rule is generally recognized. A distinction is made in some jurisdictions holding that as between the licensing power and the licensee only, a personal privilege is created, but where the statute recognizes the right of transfer from one to another, and where the right is a valuable right, capable of being surrendered and reduced to money, as between the licensee and third parties, a different rule prevails and such license or right to do business becomes a valuable property right subject to barter and sale and is property with value and quality for the purpose of determining whether such license was an asset of an estate for the benefit of creditors. Deggender v. Seattle Brewing & Malting Co., 41 Wesh. 385, 83 P. 898, 4 L.R.A.,N.S., 626. See, also, 30 American Jurisprudence p. 329, sec. 141; Ann.Cas.1915B, 526.
In Fischer v. Cushman, 1 Cir., 103 F. 860, 864, 51 L.R.A. 292, such a tranferable license was held to be property under the Bankruptcy Act, 11 U.S.C.A. § 1 et seq. In Jaffe v. Pacific Brewing & Malting Co., 69 Wash. 308, 124 P. 1122, the Washington Supreme Court held such licenses to be the subject of an action in trover, although as between the licensing agency and the licensee the license created no vested property rights. But see, Voight v. Board of Excise Commissioners of Newark, 59 N.J.L. 358, 36 A. 686, 687, 37 L.R.A. 292, which was an application for a writ of certiorari to review the action of the Excise Commissioners of the City of Newark in revoking a liquor license. The Supreme Court denied the application and said: ‘A license is in no sense property. It is a mere temporary permit to do what otherwise would be illegal, issued in the exercise of the police power. (Citing cases.) Counsel does not deny that this is the general rule, but argues that since the passage of the act of April 1, 1887, which authorizes boards of excise commissioners in their discretion, to transfer any license granted by them * * * license to sell liquor is property. But why the fact that a license may now be transferred, in this state, converts it from a mere privilege into a property right he does not tell us, nor have I been able to perceive, and I have therefore concluded that the contention has nothing to rest upon.’
The common law saw liquor licenses only as a mere personal privilege and accordingly did not regard them as a subject of levy or sale. Rowe v. Colpoys, 78 U.S.App.D.C. 75, 137 F.2d 249, 148 A.L.R. 488, 489.
Our research has not disclosed, nor has our attention been called to any case in California, in the exhaustive briefs submitted by able counsel for the parties, or of amici curiae, where our courts of last resort have ever held that a general on-sale liquor license issued under our Act has ever been held subject to taxation by any taxing authority of this state under the Constitution or Revenue and Taxation Code. Nor has it been shown that such a license has ever been held subject to attachment, levy on execution, subject to sale in satisfaction of creditors' claims in a bankruptcy proceeding or for nonpayment of a delinquent property tax levied thereon. Opinions of the Attorney General, beginning in 1938 to June 9, 1947, have consistently held that such licenses as are here under consideration in this State, are not subject to garnishment or execution, are not property subject to inheritance, assignment, sale, mortgage, devolution through bankruptcy, or succession through community, joint tenancy or partnership ownership. Attorney General's Opinions, New Series, 1275, 1621, 2122, 3183, 3364 and Vol. 9, 47–103.
While the interpretation placed upon the character of these licenses generally may not be binding on this court, it clearly indicates that any other interpretation would be contrary to the long and uniform administrative interpretation of the constitutional provision, the Act, and other licensing statutes of the State, as interpreted by the licensing agencies and the Attorney General's office.
In the case of Lowenberg v. Greenebaum, 99 Cal. 162, 33 P. 794, 21 L.R.A. 399, 37 Am.St.Rep. 42, the Supreme Court of this state said that a ‘broker's seat’ in the San Francisco stock and exchange board was not subject to levy and sale under execution because it could be voluntarily transferred only to a person the association might choose to elect as a member. This same conclusion was reached in a later case. San Francisco v. Anderson, 103 Cal. 69, 36 P. 1034, 42 Am.St.Rep. 98. The only question there presented was whether a ‘seat’ on the same board was ‘taxable property’ within the meaning of our statutes. Such right or privilege too, no doubt, was a valuable right. It was there stated: ‘It is a mere right to belong to a certain association with the latter's consent, and to enjoy certain personal privileges and advantages which flow from membership of such association. Those privileges and advantages cannot be transferred without the consent of the association, and a forced sale of them would give to the purchaser the right to occupy said ‘seat’. It is too impalpable to go into any category of taxable property.'
It is true that in many states such a ‘seat’ on an exchange board has been held, under the laws of that particular state, to be taxable property. Many of these cases were cited in San Francisco v. Anderson, supra, but our Supreme Court refused to follow the rule laid down by those jurisdictions.
In Lowenberg v. Greenebaum, supra, Pacific Bank v. Robinson, 57 Cal. 520, 523, 40 Am.Rep. 120, is cited, where the Supreme Court of this state expressly held that a patent right was not tangible property subject to seizure and sale on execution, and in commenting on that holding stated that [99 Cal. 162, 33 P. 796] ‘a seat on the stock board is certainly not more tangible than a patent right, for the latter can at least be sold and transferred by its owner at his own will, while the former cannot.’
The Supreme Court of the United States in Citizens' National Bank of Cincinnati v. Durr, 257 U.S. 99, 42 S.Ct. 15, 66 L.Ed. 149, held that the determination whether such a ‘seat’ or membership was property taxable under the law of any particular state, was a question of state law and that the United States Supreme Court was controlled by the determination of the court of last resort of that state on the subject. See also, 61 Corpus Juris 203, sec. 179. In all of the United States Supreme Court cases cited upholding such a tax, the state courts had previously held that such a membership was taxable property under the law of that particular state.
In Harding v. Board of Equalization, 90 Neb. 232, 133 N.W. 191, 37 L.R.A., N.S., 455, in holding that the privilege granted a licensee to sell intoxicating liquors is not subject to assessment for taxation, the court said: ‘Such licenses are but mere temporary permits to the licensee to do that which without it would be unlawful. The licensee does not thereby become vested with any property right, within the meaning of section 3, art. 1, of the Constitution, which provides: ‘No person shall be deprived of life, liberty or property without due process of law.’ (Citing cases.) The privilege is purely personal; it may not be transferred by the act of the licensee or by operation of law; it may be canceled by a repeal of the statute authorizing the granting of licenses, or by an amendment thereto, requiring the payment of a greater sum than formerly; and it may be summarily revoked for any cause provided by statute, or by the ordinance under which it was issued.' (Italics ours.)
The case of San Francisco v. Anderson, supra, involving the right to a ‘seat’ in a stock exchange, was there cited as authority for this conclusion.
Under the Act here involved, an application for the transfer must be made by the transferor to the board. The transferee must then make ‘an original application to the Board for a license of the same character and the applicant then proceeds' as upon an original application. In actual practice it is conceded, the former license is surrendered and a new license, containing a new serial number, is issued to the new applicant, if, in the discretion of the Board, all necessary prerequisites are met as to nationality, character and fitness, location of premises and many other specified qualifications. The Act does not provide that such licenses shall inure to the benefit of the heirs or estate of any deceased licenses, his guardian, partner, wife, or bankrupt estate. It merely provides that such administrator, executor, guardian, partner, trustee, or wife, as the case may be, may execute a transfer application the same as though made by the licensee.
In this connection, let us assume for the purpose of argument only, that such a license is property taxable under the Constitution and that the licensee is unable to pay the tax levied thereon. The only method prescribed by the Act providing for a transfer of the license is upon application of the licensee or in the case of his death or disability by the surviving partner, executor, administrator, guardian of the estate of the licensee, surviving spouse under certain conditions, a trustee in bankruptcy, or an assignee for the benefit of creditors of a licensee with the consent of the assignor. No provision is there made for an application to be made for such a transfer by a city or county tax collector or a purchaser under a tax or execution sale. Sec. 7 of the Act. Sec. 7.2 provides that no such license shall be subject to transfer unless at least seven days before the filing of the transfer application with the Board, the licensee or intended transferee records a notice of the intended transfer, setting forth certain specified requirements, and the licensee and intended transferee must establish an escrow, accompanied by a written agreement between them, and the full amount of the purchase price must be there deposited, to which creditors of the licensee have recourse. The only exception to these requirements is that the provisions of this last section (7.2) are not applicable to transfers, sought by an executor, administrator, guardian, trustee, receiver, or other person acting in the legal or proper discharge of an official duty or in the discharge of any trust imposed upon him by law, nor to any transfer or assignment, statutory or otherwise, made for the benefit of creditors.
There is no inherent right in the transferee to sell intoxicants, and a license to do so is not a proprietary right. It is but a permit to do what would otherwise be unlawful. In determining whether a new license should issue to the transferee, discretion rests in the Board. Tokaji v. State Board of Equalization, 20 Cal.App.2d 612, 67 P.2d 1082; Moore v. State Board, 76 Cal.App.2d 758, 764, 174 P.2d 323. The Constitution clearly authorizes the Board, and gives it ‘discretionary’ power, to revoke or suspend any such license issued, and it has been held that such revocation does not violate the due process clause of the Constitution. State Board of Equalization v. Superior Court, supra; Moore v. State Board, supra; Reynolds v. State Board of Equalization, 29 Cal.2d 137, 174 P.2d 4.
It therefore appears that the licensee may not transfer, by his own act, his license which is issued to him each year, to any person of his own choosing. Any such contemplated transfer is wholly conditional and a matter of discretion, and the issuance of a new one to a new applicant is a matter of discretion with the Board. How, then, might it be said that an attaching creditor, an executor or administrator, tax collector or purchaser under tax or execution sale, etc., could acquire any enforceable right to have such license transferred to him, either by his own act or by operation of law. The license is, at all times, subject to revocation or cancellation by a repeal of the law authorizing the granting of licenses (Paladini v. Superior Court, supra), or the statute may be amended requiring the payment of a greater sum than was formerly required as a license tax. It appears to us that under these circumstances the facts come well within the holding announced in Harding v. Board of Equalization, supra, and the license is not transferable by the act of the licensee or by operation of law.
As the elements and characteristics of the privilege of a ‘seat’ upon a stock exchange board are so similar to the elements and characteristics of a license to conduct a liquor business in this state, we are unable to specifically differentiate the reasoning and holding in the Anderson case from the facts and legal principles involved in the instant case.
Until our court of last resort holds otherwise, we are compelled to follow the precendent heretofore established in this state.
In Hill v. City of Eureka, 35 Cal.App.2d 154, 94 P.2d 1025, 1027, this quotation is found: ‘Since tax proceedings are in invitum, tax laws are strictly construed and a statute will not be held to have imposed a tax unless clear and explicit. Courts will not extend by construction a tax law to include those not described in the statute. 24 Cal.Jur. p. 26 et seq.’
We therefore must conclude that such State occupational license privileges given by the State are not property subject to taxation by the cities and counties under the Constitution or Revenue and Taxation Code.
BARNARD, P. J., and MARKS, J. concur.