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BARKER BROS., Inc., v. CITY OF LOS ANGELES.†
Because we are of the opinion that the plaintiff's business was not included within those for which a license tax was required, and that plaintiff's payment of the tax was not voluntary, we have concluded that judgment should have been in its favor for the return of the tax, paid under protest.
Ordinance No. 56,600 of the City of Los Angeles, as amended, is the authority upon which the respondent city relies in support of the judgment denying the plaintiff any relief. Section 1 of the ordinance begins: “It shall be unlawful for any person * * * to commence or carry on any trade, calling, profession or occupation in this ordinance specified, in the City of Los Angeles, without first having procured a license from said city so to do. * * *” Elsewhere a violation of the ordinance is made a misdemeanor and each day's operation without a license is declared to be a separate offense. In section 128–c we find the provisions bringing the plaintiff's business within the scope of the ordinance, if any provision has that effect, in these words: “For every person, firm or corporation conducting, managing or carrying on any store which is commonly known as a department store or any store where a variety of goods, wares and merchandise are arranged in or offered for sale from several departments or sections, $7.50 for the first $15,000.00 or less of gross annual receipts received or derived from the conducting, carrying on or managing of such business and an additional 50 cents for each $1,000.00 or fractional part therof, of annual gross receipts in excess of $15,000.00. * * *”
The primary question presented by this appeal is a composite question of law and fact. The trial court answered it by declaring in its findings of fact “that at all times during the year 1934, the plaintiff was engaged in the business of conducting, managing and carrying on a department store where a large variety of goods, wares and merchandise were sold and delivered for sale from approximately thirty–nine different departments,” and continuing in its conclusions of law “that plaintiff is a department store within the meaning of the provisions of Ordinance No. 56,600. * * *”
The evidence is without substantial conflict. It reveals that over 98 per cent. of the gross receipts upon which the plaintiff's license tax was based came from the furniture and house furnishing departments of plaintiff's store. In addition to its furniture and house furnishing department it had these few departments: Hosiery and lingerie, children's clothing, toys and candy. The annual receipts from all of these departments were less than 2 per cent. of plaintiff's total receipts.
The conclusion we have reached follows ineluctably, in our opinion, from the application of several well–recognized principles. One of these appears in Los Angeles Brewing Co. v. Los Angeles (1935) 8 Cal.App.(2d) 379, 48 P.(2d) 65, 67, where the same license ordinance we are considering was under discussion. The learned justices of the District Court of Appeal, Fourth Appellate District, stated that the rule that “the power to levy a tax must be drawn from express statutory authority, and the statute must be strictly construed in favor of the taxpayer and against the taxing body,” was a rule “too well established in California to need further citation of authority” than the case of RCA Photophone, Inc., v. Huffman (1935) 5 Cal.App.(2d) 401, 42 P.(2d) 1059, where other authorities are referred to. We should be governed, too, by the maxim of jurisprudence, found in section 3541 of the Civil Code, that “an interpretation which gives effect is preferred to one which makes void.”
The Los Angeles city charter places this restriction on the provisions of its licensing ordinances: “No discrimination in the amount of license tax shall be made between persons engaged in the same business, otherwise than by proportioning the tax to the amount of business done.” Charter. art. I, § 3, par. 5. Not only does the charter prohibit the imposition of a tax on one when others doing the same business are exempt, but the State and Federal Constitutions contain provisions prohibiting such discrimination, as well. City of Los Angeles v. Lankershim (1911) 160 Cal. 800, 118 P. 215; Quaker City Cab Co. v. Pennsylvania (1928) 277 U. S. 389, 48 S.Ct. 553, 72 L.Ed. 927.
That the method of carrying on one's business differs from that followed by another in the same business, does not warrant the imposition of a tax on the one if not placed on the other. Ex parte Richardson (1915) 170 Cal. 68, 148 P. 213.
With these principles in mind let us assume, for the moment, that the plaintiff is engaged in no business other than selling household goods and furniture, a business for which there is no license tax provided in the ordinance. The fact that in the conduct of its business it had organized it into departments and sections would not make it a business subject to the license ordinance, which applies, as we have already noted, to “a store commonly known as a department store” or or “any store where a variety of goods * * * are sold * * * arranged in * * * several departments or sections.” That is to say, first of all, the division of a store carrying on a well–recognized business into departments or sections does not constitute a store commonly known as a department store. We have in Los Angeles many stores commonly known as grocery stores which are divided into sections; in one you will find canned soup, in another crackers, and in still other sections soap, pickles, and sugars. The division of the grocery store into sections or departments for the more convenient sale of groceries does not make it a store commonly known as a department store. The ordinance in question prescribes a license tax for grocery stores and as well for other stores where a variety of goods are commonly arranged for sale in orderly fashion, that is, in sections, but where the variety is all within a class which gives the name to the store, and the name is not “department store.”
Secondly, we do not believe that arranging various kinds of furniture into departments or sections converts a furniture store into a department store, within the meaning of the ordinance. To hold that it had that effect would result in furniture stores escaping taxation if they were conducted on the basis of a less orderly arrangement, but taxed if they grouped their wares in sections, a result to be avoided, if possible, because condemned in Ex parte Richardson, supra, 170 Cal. 68, 148 P. 213. This result is not necessary if, as is permissible (46 C.J. 1125), the word “or” is not used to introduce a second class of stores which must pay a license under section 128–c, but is used in the sense of “that is to say” or “to–wit.” So understood, the section covers stores commonly known as department stores, that is to say, stores where a variety of merchandise is for sale in departments or sections. By “variety” is necessarily meant, not a variety in one class of goods, as, for example, in men's clothing, or household goods, but a variety in the classes of goods themselves. A store which handles automobile tires in one department, men's hats in another, books in another, women's dresses in another, and so on, is an example of what is commonly known as a department store and is the store which section 128–c meant to cover. So, far, therefore, as the trial court's conclusion that the plaintiff's store was covered by the ordinance is dependent upon its finding that “a large variety of goods, wares and merchandise were sold and delivered for sale from approximately thirty–nine different departments” in plaintiff's store, the conclusion was based on a misapprehension of the meaning of the ordinance.
Further to test the validity and the meaning of the ordinance, let us assume that it expressly omitted, as it does in fact, all furniture stores, but provided, as it does not openly, that stores selling furniture should pay a tax based upon their gross receipts from all sales if they sold, in addition, any goods whatsoever of a different class. Plainly, such an ordinance would work an unreasonable discrimination against the furniture dealer who added a soft drink counter to his business. The conclusion would be required in this case that plaintiff was being unreasonably discriminated against, if the city's position is upheld, for plaintiff's store is, actually, a furniture and household goods store, selling in addition, a small quantity of other goods.
The conclusion is not necessary, for it is not necessary to call plaintiff's store a department store. The sale of garden seeds in a hardware store does not change the character of the business of the store, although it may add one other business to it. The sale of candy by a furniture store does not destroy its character as a furniture store, although it may subject it to any license tax required for those engaged in selling candy. It is true, the addition of departments to departments eventually results in a store which has lost its character as a store of a type identified by one main class of goods; it becomes what is commonly known as a department store, where many classes of goods are sold in departments. It may be difficult to know when a hat store has become a department store. All that we need to decide in this case is that a store, over 98 per cent. of whose business is the sale of furniture and household goods, and which has only a few minor departments selling other merchandise, is not a department store within the meaning of Ordinance No. 56,600.
As it may develop, should this case be tried anew, that the plaintiff is indebted to the city for a license tax on the business it did other than as a furniture and house furnishing store, we note another ground of attack upon the judgment. The trial court found that in its business the plaintiff “does engage to some extent in interstate and foreign commerce,” although it continued: “but that the amount of gross receipts derived from its sales of goods in interstate or foreign commerce amounts to approximately one thirty–second of plaintiff's receipts from its entire business; that said section 128–c of ordinance No. 56,600 does not constitute a burden on interstate or foreign commerce.”
As we read Crew Levick Co. v. Pennsylvania (1917) 245 U.S. 292, 38 S.Ct. 126, 127, 62 L.Ed. 295, it requires the conclusion that the imposition of the tax exacted of the plaintiff does constitute a burden on interstate commerce. The Supreme Court was there considering the validity of a state merchandise license tax of one–half mill on each dollar of the whole volume, gross, of the annual business of those engaged as wholesale venders of or dealers in goods, wares and merchandise. “The bare question, then,” wrote Mr. Justice Pitney for the unanimous court, “is whether a state tax imposed upon the business of selling goods in foreign commerce, in so far as it is measured by the gross receipts from merchandise shipped to foreign countries, is in effect a regulation of foreign commerce. * * * We are constrained to hold that the answer must be in the affirmative. * * * The * * * imposition of a percentage upon each dollar of the gross transactions in foreign commerce seems to us to be, by its necessary effect, a tax upon such commerce, and therefore a regulation of it.” In support of its conclusion the court cited many cases concerning which it said: “Most of these cases related to interstate commerce, but there is no difference between this and foreign commerce, so far as the present question is concerned.” Speaking further of the tax, the opinion declares: “It operates to lay a direct burden upon every transaction in commerce by withholding for the use of the state, a part of every dollar received in such transactions. That it applies to internal as well as to foreign commerce cannot save it. * * * That portion of the tax which is measured by the receipts from foreign commerce necessarily varies in proportion to the volume of that commerce, and hence is a direct burden upon it.”
We are of the opinion, therefore, that so much of plaintiff's revenues as is received from its foreign or interstate business may not be included in the gross receipts by which any license tax of the city is to be measured. As it is practicable to separate the gross receipts which may be taxed from those which may not be, the whole tax is not bad. Ratterman v. Western Union Teleg. Co. (1888) 127 U.S. 411, 8 S.Ct. 1127, 32 L.Ed. 229; Bowman v. Continental Oil Co. (1921) 256 U.S. 642, 41 S.Ct. 606, 65 L.Ed. 1139.
The contention that plaintiff's payment of the tax was voluntary, and hence may not be recovered, we find answered by Vitale v. City of Los Angeles (1936) 13 Cal.App.(2d) 704, 57 P.(2d) 993, and cases there cited. The fiction that every one knows what is the law, which is a necessary fiction for many situations, and seems to have been the basis for the rule contended for by the plaintiff (Brumagim v. Tillinghast [1861] 18 Cal. 265, 79 Am.Dec. 176), is not necessary to accomplish justice in such a case as that under review. The necessity of a demand before suit affords the city an opportunity to escape litigation, if it desires. One who is confronted with the possible alternative of paying a tax or facing criminal prosecution, with the possibility of fines and imprisonment, in a situation where the legality of the tax is debatable, cannot be said with reason to have voluntarily paid the tax, just because the long arm of the law has not actually reached out to grab him.
The judgment is reversed.
I dissent. I am not at all in accord with the conclusion contained in the prevailing opinion; namely, that “All that we need to decide in this case is that a store, over 98 per cent of whose business is the sale of furniture and household goods, and which has only a few minor departments selling other merchandise, is not a department store within the meaning of ordinance No. 56,600,” for several reasons: First, because the opinion does not define furniture and household goods; second, because to my mind the evidence does not show that only a few minor departments sold other merchandise; and, third, that the percentage of sales of one character of merchandise as compared with the others is not the true test for the determination of the question presented.
The ordinance reads: “For every person, firm or corporation conducting, managing or carrying on any store which is commonly known as a department store or any store where a variety of goods, wares and merchandise are arranged in or offered for sale from several departments or sections. * * *” The question is: Was there a variety of goods arranged in several departments or sections? The amount of sales in any one department as compared with the others is immaterial. The prevailing opinion injects into the ordinance the element of degree which obviously, to my mind, is beside the issue. The findings of the trial court in this regard are abundantly supported by the evidence. Indeed, the assistant controller of appellant testified as to the various sections through which goods, wares, and merchandise were sold by appellant, and, in brief, these sections, according to the testimony of the witness, included, besides sections selling furniture and similar objects, children's accessories, furniture rentals, repossessed merchandise, repairs and refinishings, rubber tile, linoleum, basement floor coverings, drapery hardware, drapery fabrics, window shades, wall paper, decorative sales, that is, paintings, oil paintings, china and glassware, silverware, printed pictures, art and gifts, linens, bedding, toys, desks, filing devices, electrical, small electrical equipment, vacuum cleaners, stoves, electrical refrigerators, electric laundry equipment, kitchenware, pianos, radios, confectionery, tapestries and art objects, contract wall beds, and a brokerage business. The witness furthermore testified that appellant maintained departments selling linens, blankets, and comfortables, silverware, jewelry, infants' ware, furniture including mattresses and springs, domestic floor covers and coverings, draperies, curtains, upholstery, lamps and shades, china and glassware, electrical household appliances, miscellaneous house furnishings, gift shop, radios, talking machines, and records, toys, candy; and further, that during the year 1934, a lingerie department, hosiery department, and clock department were maintained by appellant.
Thus the trial court found on sufficient evidence that appellant conducted a department store within the meaning of the section, and to my mind there is no reason suggested in the record for disturbing the trial court's judgment, for the evidence reveals that the foregoing merchandise was arranged in and offered for sale from several departments or sections.
From my viewpoint, the argument presented in the prevailing opinion which undertakes to compare the arrangement of soup and crackers in a grocery store and the sale of garden seeds in a hardware store, with conditions revealed by the record to have prevailed in appellant's place of business throws no light upon the questions presented for determination by this appeal.
The views expressed in the prevailing opinion would seem to have no stronger support in the evidence than is found in the fact that while, in truth, conducting a department store, appellant assumed the name of a furniture store.
BISHOP, Justice pro tem.
I concur: YORK, Acting P. J.
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Docket No: Civ. S. C. 30.
Decided: April 30, 1937
Court: District Court of Appeal, Second District, Division 1, California.
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