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

HOWARD JOHNSON COMPANY, a Maryland corporation, Plaintiff and Appellant, v. The STATE of California, Defendant and Respondent.

Civ. 41533.

Decided: January 16, 1974

J. Robert Andrews, Cavalletto, Webster, Mullen & McCaughey, Santa Barbara, for plaintiff and appellant. Evelle J. Younger, Atty. Gen., David W. Halpin, Deputy Atty. Gen., for defendant and respondent.

Howard Johnson Company, a Maryland corporation (plaintiff) seeks to recover from the State of California (defendant) the sum of $21,600.00 claimed to be excessive transfer fees paid under protest to defendant to obtain the transfer of 18 alcoholic beverage licenses. Judgment below was for defendant. Plaintiff appeals.

The case was tried by the court sitting without a jury on the basis of stipulated facts. The stipulation of facts discloses that Howard Johnson, Inc. of California, a California corporation, a wholly owned subsidiary of the plaintiff, possessed 18 separate alcoholic beverage licenses issued to it by the of State of California. Prior to the dispute in issue here the California corporation was merged with plaintiff, the parent corporation, and thereafter the California corporation ceased to exist.

As part of the merger the 18 alcoholic beverage licenses were transferred to the plaintiff. The Department of Alcoholic Beverage Control required plaintiff to pay a transfer fee of $1,250.00 for each of the licenses transferred asserting that the transfers were governed by Business and Professions Code section 24072(b), which provides in pertinent part that ‘The fee for transfer of a retail license from a licensee to another person is a fee equal to 50 percent of the original fee for the license, but not to exceed one thousand two hundred fifty dollars ($1,250), or if no original fee is provided for by law, one hundred dollars ($100).’

Plaintiff contends that the transaction was governed by Business and Professions Code section 24071 which provides that a fee of only $50 is required when a license is ‘. . . transferred from a corporation to a person who owns, or whose spouse owns, the entire stock of the corporation, . . .’

Plaintiff maintains that the transfers from subsidiary Howard Johnson, Inc. of California to the parent corporation Howard Johnson Company were transfers ‘from a corporation to a person who owns . . . the entire stock of the corporation.’ (Emphasis added.)

Thus the principal question raised by this appeal is the legislative intent of the language of Business and Professions Code section 24071. If that statute does not apply to a liquor license transfer from a subsidiary corporation to its parent corporation, then such transfer is governed by Business and Profession Code section 24072 with its attendant higher fees.

Business and Professions Code section 23002 provides that ‘Unless the context otherwise requires, the definitions and general provisions set forth in this chapter govern the construction of this division.’

Business and Professions Code section 23008 defines ‘person’ to include ‘any individual, firm, copartnership, joint adventure, association, corporation, . . .’ (Emphasis added.)

Plaintiff thus suggests that these above cited sections prescribe that the term ‘person’ as used in section 24071 must be read to include a corporation. That suggestion, however, ignores the pre-condition of ‘unless the context otherwise requires.’

Statutes must be given a reasonable interpretation. (City of Santa Clara v. Von Raesfeld, 3 Cal.3d 239, 248, 90 Cal.Rptr. 8, 474 P.2d 976; Brown v. Huntington Beach, etc., Sch. Dist., 15 Cal.App.3d 640, 646, 93 Cal.Rptr. 417.) Words should be given their ordinary meaning and a sensible construction. (Universal Pictures Corp. v. Superior Court, 9 Cal.App.2d 490, 50 P.2d 500.) Illogical and absurd results are to be avoided. (In re Cregler, 56 Cal.2d 308, 312, 14 Cal.Rptr. 289, 363 P.2d 305.)

‘In the analysis of statutes for the purpose of finding the legislative intent, regard is to be had not so much to the exact phraseology in which the intent has been expressed as to the general tenor and scope of the entire scheme embodied in the enactments.’ (County of Los Angeles v. Frisbie, 19 Cal.2d 634, at 639, 122 P.2d 526, at 529.)

In context the term ‘person’ when used in the phrase ‘a person who owns, or whose spouse owns' clearly and unambiguously means a natural person. A corporation can have no spouse.

Further, the general ‘tenor and scope’ of the scheme embodied in Business and Professions Code section 21071 points to the same interpretation because of the nature of the other forms of transfer that are there described and subjected to the small fee. Those are:

(1) A transfer between spouses;

(2) A transfer of a license of a decedent to his surviving partner, executor, administrator or surviving spouse where there is no estate to be administered;

(3) A transfer of a license of a minor ward, incompetent or conservatee to the guardian or conservator;

(4) A transfer of a license of a bankrupt person to the trustee;

(5) A transfer of a license of a person for whose estate a receiver has been appointed to the receiver;

(6) A transfer of a license of an assignor for the benefit of creditors to the assignee;

(7) A transfer of a license between partners where no new partner is being licensed;

(8) A transfer between corporations where outstanding shares are owned by the same natural persons;

(9) A transfer by a licensee to a corporation whose stock is wholly owned by the licensee or his spouse.

It is clear to us that in each situation including the transfer embraced by the phrase upon which plaintiff relies, the Legislature intended to provide a lesser fee for transfers which uniquely involve natural persons and their representatives or corporations owned by them. It is equally clear that the failure to mention in this rather lengthy list a transfer between a parent corporation and its subsidiary manifests a deliberate intention on the part of the Legislature to exclude such a transfer from the reduced fee provisions of Business and Professions Code section 24071.

Plaintiff contends that charging special fees to natural persons and denying similar treatment to corporations violates the equal protection clauses of both the California Constitution and the Fourteenth Amendment to the United States Constitution.

We start with the proposition that the statutes before us come clothed with a presumption of constitutionality and the burden of overcoming the presumption is on the plaintiff. (City of Walnut Creek v. Silveira, 47 Cal.2d 804, 306 P.2d 453.)

The state has power to classify persons or property for legislative purposes. A classification based upon natural, intrinsic and fundamental distinctions which are reasonable in their relation to the object of the legislation does not violate the constitutional requirement that all persons enjoy equal protection of the law. (Roth Drug, Inc. v. Johnson, 13 Cal.App.2d 720, 57 P.2d 1022; Fox, etc., Corp. v. City of Bakersfield, 36 Cal.2d 136, 222 P.2d 879.) Where any state of facts can be reasonably conceived which would support the validity of the legislative classification, the existence of these facts will be presumed. (Lelande v. Lowery, 26 Cal.2d 224, 157 P.2d 639.)

The equal protection required by both state and federal constitutions does not forbid discrimination with regard to things that are different. (People v. George, 42 Cal.App.2d 568, 109 P.2d 404.) A corporation is a creature of the state and subject to strict regulations by the state. The difference between a corporation and a natural person is intrinsic and fundamental. It follows that the transfer of a liquor license between a natural person and a corporation owned by him is a distinctly different transaction than a transfer of a license between parent and subsidiary corporations. At least the action of the state in treating such transfers in a different fashion does not amount to the invidious discrimination which will be struck down as constitutionally prohibited. This is especially true since the effect of Business and Professions Code section 24071 is to grant an exception from a higher tax to certain limited types of license transfers. Inherent in the exercise of the state's power to tax is the power to select certain areas of exceptions and the equal protection requirement does not impose any rigid rule of equality. (Stevens v. Watson, 16 Cal.App.3d 629, 94 Cal.Rptr. 190.)

The judgment is affirmed.

COMPTON, Associate Justice.

ROTH, P. J., and FLEMING, J., concur.

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Docket No: Civ. 41533.

Decided: January 16, 1974

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

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