BROCK CO v. BOARD OF SUPERVISORS OF LOS ANGELES COUNTY (1936)

This appeal is from a judgment denying a petition for a writ of mandate to compel the board of supervisors of Los Angeles county to cancel an alleged illegal tax assessment levied on personal property of appellant.

The facts are:

For a number of years prior to the first Monday of March, 1935, the tax date, appellant was engaged in the jewelry business in the county of Los Angeles, state of California. February 22, 1935, appellant shipped to Honolulu, territory of Hawaii, from its stock in Los Angeles county, jewels and jewelry of the value of $143,465. From March 4th to March 14th, the stock was placed on display and offered for sale in a room located in the Hawaiian Trust Company. Thereafter, all of the jewelry, except a ruby bracelet which was left for sale with a Honolulu jeweler, was returned to Los Angeles county.

The Los Angeles county tax assessor assessed this stock as being property of appellant subject to taxation in Los Angeles county on the first Monday of March, 1935.

In denying the petition for a writ of mandate to compel the board of supervisors to cancel the assessment, the trial court found:

“Said jewels and jewelry herein assessed were removed and taken out of the territorial boundaries of * * * the county of Los Angeles, for a pre–determined, pre–arranged and limited short time, and for ten days of said time, to wit, from March 4 to March 14, 1935, were in said vault of said Hawaiian Trust Company * * *; that from said March 4 to March 14 said jewels and jewelry were open to display to and inspection of certain persons in Honolulu pursuant to petitioner's invitation to them in said vault, but on said latter date were withdrawn from further display or inspection, and excepting one article which was left in Honolulu for sale, were shipped back to Los Angeles and arrived there March 22, 1935; * * * said jewels and jewelry were at all times, except for such short period of time, part and parcel and portion of and present with its jewels and jewelry and stock in trade and merchandise for sale at said stores * * *

“That the jewels and jewelry herein assessed were by petitioner removed from * * * the county of Los Angeles, and shipped to Honolulu for the purpose of and with the intention to evade the just and legal taxes due thereon * * * in said county and of defrauding * * * said county thereof and to evade any and all taxation thereon; and for the further purpose of and with the intention to advertise and offer the same for sale, and to advertise and make known petitioner, Brock and Company, as a jewelry seller, having for sale such and like jewels, jewelry and merchandise, and to advertise petitioner's jewels, jewelry and merchandise for sale in its said Beverly Hills and Los Angeles stores.”

The sole questions necessary for us to determine are:

First. Is there substantial evidence to support the findings of fact set forth above?

Second. Is merchandise owned by a resident of the state of California, which is out of the state on the tax day (the first Monday of March), subject to taxation here, when the owner has caused it to be removed for the joint purposes of (1) escaping taxation, and (2) offering it for sale?

As to the first question, we have examined the record and are of the opinion there was substantial evidence considered in connection with such inferences as the trial court may have reasonably drawn therefrom to sustain all of the findings of fact hereinbefore set forth, except that there was no substantial evidence to sustain the finding that appellant removed its merchandise from the state of California for the purpose “of defrauding * * * said county” of taxes. Further discussion of the evidence is unnecessary. Leavens v. Pinkham & McKevitt, 164 Cal. 242, 245, 128 P. 399; Thatch v. Livingston (Cal. App.) 56 P.(2d) 549.

The second question must be answered in the negative. The trial court found that the merchandise in question was in the city of Honolulu, territory of Hawaii, on the tax day (the first Monday of March, 1935); also, that appellant shipped it there for the purposes of (1) offering it for sale, (2) advertising appellant as a jewelry seller, and (3) advertising the merchandise of appellant for sale in its Beverly Hills and Los Angeles stores.

The rule is well settled that merchandise is taxable only in the jurisdiction where it is actually located (General Oil Co. v. Crain, 209 U.S. 211, 212, 230, 28 S. Ct. 475, 52 L.Ed. 754; Section 3628, Pol. Code; 24 Cal.Jur. 112, sec. 97), and its taxability is not dependent upon the domicile of its owner. People v. Niles, 35 Cal. 282. There are certain well–defined exceptions to this rule, which it is unnecessary for us to here consider, as the instant case does not fall within any of them.

The fact that appellant shipped its merchandise to Honolulu for the purpose, among others, and with the intention of evading a tax in California, was immaterial since the trial court found, based on substantial evidence, that the merchandise was also removed for legitimate purposes. A transaction within an exception of the tax law does not become taxable because it was actuated by a desire to avoid or evade taxation. Any taxpayer may so arrange his affairs as to minimize his taxes. It is not even a patriotic duty to follow that course which will result in his paying a maximum tax. Helvering v. Gregory (C.C.A.) 69 F.(2d) 809, 61 Cor.Jur. 207, note 19–b. Mr. Justice Plummer in Boessow v. Johnson (Cal.App.) 52 P.(2d) 505, 508, announces the rule correctly thus: “While the courts hold, and the law seems to be well settled, that there is no moral turpitude in arranging one's business so as to evade taxation, it must be more than a mere colorable transaction.” (Italics ours.)

Judge Hand, speaking for the United States Circuit Court of Appeals, Second Circuit, in Helvering v. Gregory, supra, 69 F.(2d) 809, at page 810 said: “We agree with the Board and the taxpayer that a transaction, otherwise within an exception of the tax law, does not lose its immunity, because it is actuated by a desire to avoid, or, if one choose, to evade, taxation. Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. United States v. Isham, 17 Wall. 496, 506, 21 L.Ed. 728; Bullen v. Wisconsin, 240 U.S. 625, 630, 36 S.Ct. 473, 60 L.Ed. 830.”

Mr. Justice Holmes in Superior Oil Co. v. State of Mississippi, 280 U.S. 390, 395, 50 S.Ct. 169, 170, 74 L.Ed. 504, says: “The only purpose of the vendor here was to escape taxation. * * * The fact that it desired to evade the law, as it is called, is immaterial, because the very meaning of a line in the law is that you intentionally may go as close to it as you can if you do not pass it.”

For the foregoing reasons, the judgment appealed from is reversed, and the trial court is ordered to issue the peremptory writ for which petitioner prayed.

It is so ordered.

McCOMB, Justice pro tem.

We concur: CRAIL, P. J.; WOOD, J.