CITY OF LOS ANGELES v. RANCHO HOMES (1952)

Plaintiff brought an action to recover a sum allegedly owed by defendant for delinquent license taxes. Both sides filed a motion for summary judgment with supporting affidavits. Defendant appeals from a judgment granting plaintiff's motion for a summary judgment in the sum of $3,085 with interest and denying its motion for a summary judgment of dismissal of plaintiff's complaint.

There is no controversy respecting defendant's operations, as set forth in the affidavit of its president, Mark A. Thoreson. Defendant was incorporated under the laws of California in January, 1948. Its articles of incorporation include the following among the purposes for which the corporation was formed: ‘Two (a) To carry on the business of acquiring, subdividing, improving, selling and otherwise dealing in and disposing of real property, and to carry on all other businesses incident thereto or connected therewith.’ In June, 1948, defendant acquired 159 unimproved lots in a tract located in Los Angeles. Defendant thereupon contracted with the Thoreson Construction Company to improve this property by leveling it and constructing streets, curbings, sewage and utility facilities. Defendant also contracted with the Thoreson Construction Company for the erection of 150 single dwellings on the lots zoned for residental use and for the construction of commercial buildings on the nine lots zoned for commercial purposes. During the years 1948 through 1951, defendant paid the Thoreson Construction Company for its performance under the above contracts, and the Thoreson Company paid a business license tax to the city of Los Angeles computed in part upon the gross receipts derived from these transactions.

Upon completion of the 150 residential units, defendant sold every one of these dwellings during the years 1949 through 1950, realizing gross proceeds in the amount of $1,539,445. Because of defendant's failure to procure a license and pay a license tax as the result of these activities, the plaintiff city of Los Angeles commenced this action, alleging defendant's failure to pay the sum of $3,085 due as a license tax under the provisions of a general ordinance, No. 77,000 (Art. I, chap. 2, Los Angeles Municipal Code), which imposes license taxes on a multifarious variety of business enterprises. Section 21.49 of the general ordinance last referred to reads in part as follows: ‘* * * a license is required to be obtained by every person engaged in any of the businesses, trades, callings, or professions specified in the following sections of this Article; and for such license a tax is hereby imposed in the amount prescribed in the applicable section.’

Plaintiff's complaint refers to section 21.190 as the section herein applicable, from which is quoted the portion pertinent to this appeal: ‘Every person engaged in any trade, calling, occupation, vocation, profession, or other means of livelihood, as an independent contractor and not as an employee of another, and not specifically licensed by other provisions of this Article, shall pay a license fee in the sum of $12.00 per calendar year or fractional part thereof for the first $12,000 or less of gross receipts, and in addition thereto, the sum of $1.00 per year for each additional $1,000 or fractional part thereof, of gross receipts in excess of $12,000.’ The affidavit of Walter C. Peterson, the City Clerk of Los Angeles, describes the administrative interpretation which has been placed on this section, popularly referred to as the ‘catch-all’ provision of the license ordinance and under which more than 200 distinct businesses, affecting over 30,000 persons, are required to pay license taxes. The Peterson affidavit declares that the city clerk has established as one of the classifications affected by this section that of ‘owner-builder,’ which is described as a type of business engaged in by an owner of real property who causes buildings to be constructed on his land with the objective of selling such improved property. The city clerk has required such so-called ‘owner-builders' to pay a license tax under section 21.190 during each year since its enactment in April, 1946.

Pursuant to section 21.26 of the Los Angeles Municipal Code, the city clerk wrote a letter to defendant corporation informing it that an assessment was levied on its operations for the years 1949 to 1951 as a Business License Tax under section 21.190. Defendant made no application for a hearing on this matter, as provided by the administrative procedure set up in the License Ordinance, whereupon plaintiff commenced the present action.

Defendant attacks the judgment of the lower court on several grounds, one of which alone is decisive of this case. Defendant contends that, assuming its operations are the type of business activity intended to be covered by the phraseology of the ordinance requiring a license fee from those engaged in any ‘trade, calling, vocation, profession or other means of livelihood as an independent contractor and not as an employee of another,’ nevertheless the proceeds received by it from the sale of its improved real property are not ‘gross receipts' within the meaning of section 21.190. We believe this position to be well founded.

Section 21.08(i) of general ordinance No. 77,000 defines the term ‘gross receipts' as ‘The total amount of the sales price of all sales, the total amount charged or received from the performance of any act, service or employment of whatever nature it may be, whether such service, act or employment is done as a part of, or in connection with, the sale of goods, wares, merchandise or not for which a charge is made or credit allowed * * *.’ (Emphasis added.) It is clear that when looked at to ascertain its essential nature, defendant's business is that of a seller of improved real property, and all of its gross receipts here under consideration flow from its sales of 150 single family dwellings. Whether its operations come within the purview of section 21.190 is dependent on whether its sales constitute a transaction taxable under this Business License Ordinance. We are guided in this matter by section 21.08(s), which defines the words ‘sale’ and ‘sell’ as follows: ‘The words ‘sale’ and ‘sell’ shall be deemed to include and refer to: the making of any transfer of title, in any manner or by any means whatsoever, to tangible personal property for a price, and to the serving, supplying or furnishing, for a price, of any tangible personal property fabricated or made at the special order of consumers. * * * A transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price shall likewise be deemed a sale. The foregoing definitions shall not be deemed to exclude any transaction which is or which, in effect, results in a sale within the contemplation of law.' (Emphasis added.)

It is thus manifest that this definition of ‘sale’ restricting its applicability to sales of ‘tangible personal property’ compel a construction of the initial clause of section 21.08(i) in the following sense: ‘The total amount of the sales price of all sales (of tangible personal property). * * *’ When so interpreted by the integration of the various parts of the ordinance, the conclusion is inescapable that the provisions of section 21.190 relating to the computation of the Business License Tax upon a basis of ‘gross receipts' is inapplicable to a seller of real property, since the term ‘gross receipts,’ when referring to the amount received from sales, is circumscribed by the language of the statute to proceeds received from sales of tangible personal property. ‘When an act passed by the Legislature embodies a definition, it is binding on the court.’ 50 Am.Jur., Stats. p. 254; Tieman v. Red Top Cab Co., 117 Cal.App. 40, 43, 3 P.2d 381. While it is true that the penultimate sentence of section 21.08(s) employs the word ‘property’ without the qualifying phrase ‘tangible personal’ previously used, it is apparent, by reference to the context and general design of the paragraph, that neither that sentence nor the final one was intended to enlarge or expand the scope of the section to embrace other than tangible personal property. Their evident function was to illustrate that certain types of transactions, not denominated as outright sales, were within the meaning of the term ‘sale’ and to clarify the status of transactions having the legal effect of a sale which the parties thereto might attempt to camouflage by the use of other terminology. Furthermore, under the rule of noscitur a sociis, ‘general and specific words in a statute which are associated together, * * * take color from each other, in that the general words are restricted to the less general. * * * The general words are deemed to have been used not to the wide extent which they may bear if standing alone, but as related to words of more definite and particular meaning with which they are associated.’ 50 Am.Jur., Stats., p. 244. See Vilardo v. County of Sacramento, 54 Cal.App.2d 413, 420, 129 P.2d 165. Where, as here, a sentence containing the words ‘tangible personal property’ is definitive of the meaning of the term ‘sale,’ and is placed in juxtaposition with another sentence using the term ‘property’ in a fashion which purports solely to describe the legal effect of a particular transaction (here a conditional sale), the general word ‘property,’ in such a context, assimilates the complexion and limitations of the more specific kindred term with which it is associated.

Plaintiff argues that in analyzing section 21.08(s), emphasis should be placed on the fact that its opening clause reads: ‘The words ‘sale’ and ‘sell’ should be deemed to include and refer to: the making of any transfer of title * * * to tangible personal property for a price. * * *' and contends that the word ‘include,’ being generally construed as a word of enlargement, cannot be held to limit the meaning of the word ‘sale’ to transfers to tangible personal property. Although we fully appreciate that the word ‘include’ is commonly employed as a term of amplification, this is not unalterably true. The word has at least two shades of meaning. Achelis v. Musgrove, 212 Ala. 47, 101 So. 670; Webster's New International Dictionary, 2d Ed. When used as a term of enlargement, it has the sense of ‘embracing’ or ‘comprising’ and imports addition. People v. Southern Pacific Co., 209 Cal. 578, 290 P. 25. However, it may serve as a word of restriction, as where it is used as a term of particular or exclusive specification when only a single genus in mentioned in a statute. Montello Salt Co. v. State of Utah, 221 U.S. 452, 465, 31 S.Ct. 706, 55 L.Ed. 810; Bunge v. Kirchhoff, 251 Ill.App. 119. The exact meaning intended must be determined from its particular context. Where, as in the ordinance before us, the sole type of property alluded to in the statutory definition of ‘sale’ is tangible personal property, and the entire phrase used is ‘include and refer to,’ and the term ‘refer’ has a usual meaning of ‘relate to’ or ‘allude,’ we are satisfied that as here used the phrase ‘include and refer to’ is a term of limitation or restriction and has the effect of confining the term ‘sale’ to the character of property specifically mentioned. In re Martinez, 56 Cal.App.2d 473, 477–478, 132 P.2d 901. This conclusion is fortified by the consideration that the City Council which passed the ordinance was unquestionably cognizant of such well-defined catagories of property as tangible and intangible personal property and real property, yet in drafting the statute it explicitly chose to limit the application of the word ‘sale’ to tangible personal property. ‘* * * the draftsmen of legislation as a rule employ language notable for its precise and definitive character rather than for its elegance. So it would appear that if the legislature had intended to include the United States within the purview of the statute, “the ordinary dignities of speech would have led’ to its mention by name (citing case).” Estate of Burnison, 33 Cal.2d 638, 641, 204 P.2d 330, 332. It is an established rule that definitions of terms contained within the structure of a particular statute govern the meaning of those terms as used therein. In re Martinez, supra, 56 Cal.App.2d at page 477, 132 P.2d 901.

The proper functioning of a court does not extend to the insertion of words in a statute which is clear and unambiguous, and appears to embody and express the complete and consiciously articulated intent of the Legislature. See Code Civ.Proc., § 1858; City of Grass Valley v. Walkinshaw, 34 Cal.2d 595, 606, 212 P.2d 894. ‘While courts are no longer confined to the language (of the statute), they are still confined by it. Violence must not be done to the words chosen by the legislature.’ People v. Knowles, 35 Cal.2d 175, 182, 217 P.2d 1, 5. An illuminating illustration of this principle of statutory construction is contained in In re Miller, 31 Cal.2d 191, 187 P.2d 722, involving a question similar to the one here presented. In that case decedent accumulated substantial separate property after marriage while living in Iowa, which would have been community property if decedent had been domiciled in California. Decedent and his wife then came to California with the property in question, where it was invested in real and intangible personal property at the time of the decedent's death. The inheritance tax appraiser confined the community property exemption to the intangible personal property and taxed the real property as if it were the separate property of the decedent. The widow objected on the ground that for inheritance tax purposes both the real and personal property were community property. The Supreme Court reversed the trial court which had sustained the widow's contentions, correlating the meaning of the inheritance tax provision, Rev. & Tax.Code, sec. 13555, with that of the similarly worded section 201.5 of the Probate Code.¹ In relation to section 201.5, the court said, ‘* * * it is significant that the statute refers solely to ‘personal property’ as the subject words to which the modifying language relating to acquisition at a former domicile points.' In re Miller, supra, 31 Cal.2d at page 197, 187 P.2d 722, 726. In deciding that section 201.5 of the Probate Code and section 13555 of the Revenue and Taxation Code must be limited to personal property, the court stated: ‘It is true that section 164 of the Civil Code, in attempting to fix the rights of living husbands and wives in marital property acquired elsewhere and brought into California, included ‘real property situated in this State and personal property wherever situated,’ while the comparable phrase in section 201.5 of the Probate Code is confined to ‘personal property, wherever situated.’ Why the legislature in the latter enactment omitted the express reference to real property does not appear. But the meaning of a statute is to be sought in the language used by the legislature (citing cases). Since only personal property is specified in section 201.5 of the Probate Code, an interpretation nevertheless including therein real property would require reading into the statute words that are not there * * *.' 31 Cal.2d at page 198, 187 P.2d at page 726.

Plaintiff urges that administrative interpretation of a statute, when reinforced by legislative acquiescence, is entitled to great weight in determining the meaning of terms used by the legislature. In support of such contention, it points out that the city clerk has interpreted the law as applying to ‘owner-builder’ since 1946, during which time the ordinance has been amended five times without any indication of disapproval of the Clerk's practice. ‘The presumption that a Legislature, in amending or reenacting a statute, is familiar with the construction which the courts have put upon terms used therein, is well recognized; but such presumption does not necessarily apply to all constructions or practices adopted by administrative boards, and should not be too generally indulged in the absence of a showing that such construction or practice has been brought to the attention of the Legislature (citing cases).’ Pacific Greyhound Lines v. Johnson, 54 Cal.App.2d 297, 303, 129 P.2d 32, 35. Furthermore, such interpretations cannot be controlling where, as in the case at bar, it is clearly erroneous and ‘* * * made without the authority of or repugnant to the provisions of a statute * * *.’ Coca-Cola Co. v. State Bd. of Equalization, 25 Cal.2d 918, 921, 156 P.2d 1, 2.

Finally, plaintiff argues that even if the term ‘sale’ is limited to sales of tangible personal property, defendant's proceeds from the sale of real property still constitute ‘gross receipts' within the meaning of section 21.08(s),² since they are ‘amounts charged or received’ by defendants for the performance of the act of conveying title to the real property in question. This argument is singularly lacking in force. Defendant's ‘gross receipts' from the sale of real property are not proceeds derived from the ‘act’ of executing a deed to its vendees, since this is but an incident of the principal transaction, which consisted of an owner's sale of real property to a purchaser for a consideration. Considered as a whole, the language employed in the Business License Ordinance is not such as would reasonably apprise a vendor of real property that such operations are intended to be embraced therein. ‘After all, legislation when not expressed in technical terms is addressed to the common run of men and is therefore to be understood according to the sense of the thing, as the ordinary man has a right to rely on ordinary words addressed to him.’ People v. Knowles, supra, 35 Cal.2d at page 183, 217 P.2d at page 5 quoting from Addison v. Holly Hill Fruit Products Co., 322 U.S. 607, 618, 64 S.Ct. 1215, 88 L.Ed. 1488.

The judgment is reversed.

FOOTNOTES

1.  Section 201.5 reads: ‘Upon the death of either husband or wife one-half of all personal property, wherever situated, heretofore or hereafter acquired after marriage by either husband or wife, or both, while domiciled elsewhere, which would not have been the separate property of either if acquired while domiciled in this state, shall belong to the surviving spouse; the other one-half is subject to the testamentary disposition of the decedent, and in the absence thereof goes to the surviving spouse, subject to the debts of the decedent and to administration and disposal under the provisions of Division III of this code.’

2.  Section 21.08 defines gross receipts to include: ‘The total amount charged or received for the performance of any act, service or employment of whatever nature it may be, whether such service, act or employment is done as a part of, or in connection with, the sale of goods, wares and merchandise or not. * * *’

FOX, Justice.

MOORE, P. J., and McCOMB, J., concur.