*1 24, 1958.] Bank. Oct. 24818. In A. No. [L. (a Corporation), CORPORATION DYNAMICS
GENERAL AN OF LOS Respondent, COUNTY Plaintiff and OF STATES Appellants. UNITED al, et GELES Respondent. AMERICA, Intervener 24,1958.] 24819. In Bank. Oct. A. No. [L. Corporation), (a CORPORATION AEROJET-GENERAL AN OF LOS Respondent, COUNTY Plaintiff and OF STATES Appellants; UNITED al., et GELES Respondent. AMERICA, Intervener *3 County Counsel, Kennedy, Boiler, Harold W. As- Gordon County Deputy Counsel, DeFlon, Alfred sistant Charles County Counsel, Keller, MacDougall, William R. Don James Attorney County (San Diego), District Counsel Carroll Ray Smith, Deputy, County Sullivan, Jr., H. T. Counsel (Riverside), Weller, County (San Albert E. Counsel Bernar- dino), Coakley, Attorney Frank J. District (Alameda), Collins, Attorney (Contra Francis District Costa), W. Keith Attorney Sorenson, (San Spencer District Mateo), C. M. County Williams, (Santa Roy Counsel Clara), Gustafson, A. Attorney (Ventura), County District Heinrich, John B. Roy (Sacramento), Gargano, County Counsel J. Counsel (Kern), County Walsh, Robert M. Counsel (Fresno), Fred- County Reyland, Jr., erick N. (Stanislaus), Counsel Auten City Attorney (El Bush, F. Segundo), City Frank Perry, L. Attorney (Redondo Beach), City Palla, Ferdinand P. At- torney (San Jose), City Attorney DuPaul, (San J. F. Diego), City Attorney Cugler, (Chula Manuel L. Vista), and Arlo E. City Attorney Rickett, (Pomona), Appellants. Brown, Attorney Edmund General, G. Sabine, James E. Attorney Assistant General, Deputy Ernest Goodman, P. At- torney General, Dixwell L. Pierce and Robert Hamlin G. Appellants. Amici Curiae on behalf of Watts, Robert Conway B. MeDevitt, John Gray, Cary, Ames Frye,& John Cranston, M. Waddell, Jr., Ward W. William J. Donahue, Hill, Burrill, Farrer & Stutsman, Jr., Carl A. Mark Page True E. and Vincent C. Respondents. Plaintiffs and K. Rice, Attorney Charles Assistant (United General Joseph States), Goetten, F. A. F. Prescott and Eugene H. Department Heine, Jr., Attorneys, of Justice, Laughlin E. Waters, Attorney, United States and Edward McHale, R. Attorney Assistant United States for Intervener and Re- *4 spondent. Plaintiffs, General TRAYNOR, Dynamics Corporation J. Aerojet-General brought
and Corporation, these actions county city personal recover and ad valorem taxes
63 they no They had year 1953-1954. assert for the fiscal inter- The United States taxable interest belonged to it alleged property assessed that the vened and plaintiffs reimburse obligated by contract to and that it was judgments for paid. The trial court entered for the taxes appeal. plaintiffs intervener, defendants and and per- Monday 1953, plaintiffs were March, On the first relating production contracts forming research and various with prime contracts to national defense. Some were were subcontracts. Some services, others were armed and cost-plus-a-fixed-fee were fixed-price contracts, others Dy- Aerojet operated plant, and its own General contracts. Navy. by the operated plant United States namics a owned real possessory interest this Dynamics’ on The tax General not in issue here. is personal all of the contracts, title to terms of the Under day. It on tax States the United involved was goods or producing equipment used comprised tools and being forces, materials carrying for the armed out research forces, armed products be delivered to into fabricated standby for use the event on a basis held production. increased research or defense possessory contend that Defendants had taxable government-owned personal property. They interests this adopted concede, however, that the method evaluation now by the assessor was and therefore seek reversal erroneous appropriate correctly judgment directions plaintiffs’ evaluating taxing interests. private now settled that contractor’s may government property subject made the of a non diseriminatory tax measured the value of the used though the even economic burden of the tax on falls (City Murray Corp. America, United States. Detroit v. 486, 458, 441, 355 489 2 460]; U.S. S.Ct. L.Ed.2d United [78 City Detroit, 466 2 States 355 U.S. S.Ct. L.Ed. [78 Township 424]; 2d Muskegon, States v. United U.S. 436].) fortiori, A S.Ct. L.Ed.2d a state stop impose imposing short of such a tax and a tax aon privately possessory exempt property in tax held (Kaiser Reid, measured the value of that interest. Co. v. question 879].) in these Cal.2d 610 The first has so. cases whether state done logical no be
Defendants there is distinction contend that personal property. They possessory in real tween *5 64
point possessory that are out interests real taxable (De County Homes, Diego, v. 45 Luz Inc. San Cal.2d 546 of Reid, 544]; Kaiser 30 610 P.2d Co. Cal.2d P.2d [184 104) section 879]; Code, Rev. & and invoke 1 of Tax. § XIII of and article the California Constitution Revenue and establishing Code, 201, as the same rule with Taxation section personal respect to provides XIII that “All 1 article Section of except provided, this State as otherwise Constitution exempt States, shall not under laws of the be United provided proportion value, as taxed in by to be ascertained its provided. ‘property,’ as
law, or as hereinafter The word hereby section, is declared include used this article and dues, all stocks, franchises, and other moneys, credits, bonds, capable personal, mixed, of real, matters and and things, provides that “All private ownership. Section ...” exempt this the laws United State, not under subject this under code.” State, or of this to taxation States general however, these respect personal property, With statutory and provisions other constitutional are controlled personal expressly of provisions dealing taxation property and interests therein. provides part XIII that Section 14 of article “The provide power
Legislature shall for the assessment, have the levy tangible all of per collection of taxes forms capital of notes, debentures, stock, all shares sonal bonds, any trust, mortgages, legal credits, solvent deeds of exempt equitable therein, not from taxation or interest under Constitution, manner, provisions of in such and at this pursuance may provided law, and in rates, as power all Legislature, two-thirds of the exercise voting in to each of two houses of the members elected may any personal prop classify all thereof, kinds favor a erty purposes in manner of assessment and taxation proportion from a rate or to value different and at any rates may subject property in to taxation and other this State types exempt entirely forms, all or from taxation personal property.” classes of provisions Legislature provide these Under tangible personal property” of “all the taxation forms “any legal We equitable therein.” have con- Legislature provided however, cluded, has tangible personal property. the taxation limited including personal property a has not defined Code, possession property (see has Tax. real Rev. & merely a reflects not lack 104, 107), and this omission §§ taxing personal pattern tangible a detail, but consistent entity property as an at all. Although property may taxable be assessed to a mere possessor (Rev. City & Code, 405; Gump Tax. S. & G. Co. § County
& Francisco, San 18 Cal.2d possessor 595]) required A.L.R. and such to file (Rev. possession statement of his & Code, §442), Tax. *6 property is (Rev. assessed at full “its cash value” & Tax. Code, 401) personal is listed on assessment roll as § property possessory and not as a pro interest therein.* No vision declaring assessing possessory is made for exempt personal property. tax Moreover, section 612 provides person “a agent, trustee, that when is assessed as representative bailee, guardian, executor, administrator, his designation shall name, be added his and the assessment separately from (Italics entered his individual assessment.” added.) against The is assessee liable taxes him assessed only representative capacity. (County under this section in his Angeles Morrison, 368, Los v. 15 Cal.2d P.2d 371-373 [101 470, 443].) property 129 Accordingly, if A.L.R. capacity held in exempt, is assessment of it tax would necessarily self-defeating be tax be could not enforced against possessor at personally, least cases as these, interest in the where the bailee’s could not transferred. is viewpoint true that from an economic a bailee’s
right exempt personal property may use tax be as valuable right exempt property. use tax real construing In ad valorem tax legislation, however, we cannot overlook the personal historical distinction real between that only statutory provisions reflected not but common provides Code, *Revenue Taxation section that the “local roll shall show: ‘ ‘ (a) address, The name and if known of the assessee. “(b) Land, by legal description. “(e) description possessory identify A interests sufficient to them. property.] [Section 107 confines such interests to in real interests “(d) Personal . . . ‘ ‘ (e) estate, except improvements. The cash value of real “ (f) improvements The cash value on the real estate. ‘ ‘ (h) “ (i) possessory The cash value of interests. personal property, intangibles. The cash value other than
66 necessary property is understanding of interest of what sort meaning of tax within the property itself qualify as Reid, v. recognized in Kaiser Co. was The distinction statutes. Douglas in both was held 879], and it P.2d 610 Cal.2d [184 15], and Cal.App.2d P.2d Byram, 57 [134 Co. v. Aircraft Cal.App.2d 666 Quinn, 149 Co., Engineers v. & C. C. Moore tangible personal possessory interests 781], P.2d that [308 Corp. v. property. Timm were taxable Aircraft contrary 715], is not to P.2d Byram, 34 Cal.2d [213 taxpayer was concluded case the court for in that Timm ease The involved. the funds owner of fact the property rather than theory is the that it consistent with tax was tax, for the subject of the is the therein that interests was owned ground that on the sustained States. taxpayer, the United an right to obtain economic from benefit property may possession of be a relevant consideration in or determining actually purposes who is its owner tax Corp. (Timm Byram, 34 doubtful cases Cal.2d Aircraft Reid, 715]; Kaiser 30 Cal.2d 632, 638 P.2d Co. of such is not 879]), but the existence controlling. that a warehouseman No one would contend government property him, or stored with was the owner shop proprietor repair was the owner of that a though brought repairs, to him for even their automobiles profit were possessory in such *7 understanding, the In with such common able to them. accord plaintiffs present cases not assess to himself in the did assessor supplied government to property them the government to perform their enable them to contracts. however, contend, now that it
Defendants is immate long as the rial who has title so essential economics of the difference, they ask, remain the same. What transaction should government may supply it make that one case the tools already by it, whereas in another it re and material owned acquire material quires the contractor to tools and that imme government diately property, and still another title become goods until the are delivered and the contractor remains the tools disposed of, if in all three eases the contractor receives essentially compensation performing essentially for the same Although may no difference services? there be the same significance as practical if the contract carried out of a in the event of be vital difference planned, there (See v. Ansonia Brass United or termination. States breach
67 1107]; 49, 54 L.Ed. Copper Co., 452, 471 S.Ct. & 218 U.S. [31 the 316.) In one ease Inc., 313, Read-York, In 152 F.2d re property right to do with the government as owner has the the contract subject only such limitations pleases to as it taxpayer who has it is the imposes; the other only irrelevant such subject However to such limitations. application of a on the use tax might be to the considerations appli they possession are not irrelevant of property itself. an tax cation of ad valorem on any given Although impact ease the of a use tax property might appear they and a tax identical, are not thing, property same ground and we cannot sustain a here tax on the Legislature provide constitutionally that the could levy equal a tax a amount under different scheme. possession apply To be valid use or tax all would have to exempt property tax private against so to discriminate possession owned United States, and it the Legislature, court, is for not the to determine possessory nondiscriminatory whether such a in tax on exempt personal adopted tax should determine the measure such tax. question plaintiffs The remains whether retained such an or all of the that they so were in fact purposes despite owners tax the clauses in the various vesting contracts title in the United States. A title standing clause purposes alone is ownership conclusive for tax appears taxpayer when it that the retains the essen tial ownership (American indicia Corp. City Motors v.
Kenosha, 274 315 363, Wis. 367], N.W.2d aff’d 356 [80 U.S. 21 559, S.Ct. 2 578]; Co., Engi L.Ed. 2d [78 C. C. Moore & Quinn, neers that Cal.App.2d 781]) P.2d security only. (Timm title is Air Corp. Byram, 715], Cal.2d craft eases cited.) Accordingly, necessary examine the terms contracts to rights determine whether retained ownership by inconsistent United purposes. States for tax typical cost-plus-fixed-fee title clause of a con provides tract personal title acquired by the “ passed contractor to the (1) in the ease of purchased by which is the contractor for per formance this contract, delivery to the contractor at *8 plant the plant contractor’s or at supplier the of the on f.o.b. purchases Inspector plant if the Naval at the contractor’s given approval shall (2) property have his in the case of not by purchased, so the allocation thereof to the contract by of processing the commencement the contractor or use vesting passage and thereof Such title shall otherwise. impair any right might the which Government otherwise including contract, have under but not to the this limited reject right any supplies hereunder, shall and not relieve any obligations this the contractor of of its under contract.” essentially passed, property After title was treated government property supplied the same manner to the con- by directly government carrying for tractor the use out “by was the contractor for the the performance to be used contract. the of this contract of other contracts with” limitations the risk loss was government, and with certain government. The contractor retained no bene- borne right carrying its other than the of use in out ficial interest Scrap longer no needed was sold contract. or other supervision proceeds applied government and the close under payments owing from the contractor to the reduction completed government. the property or terminated If contract was already govern- to the part, delivered whole or government disposed for directed ment was either government’s sole benefit or made available further government and performing The could other contracts. if fit, even at time’it saw remove did its of the contractor’s removal constituted violation appear that the contractor it does not use the pursue purely prevent other contract remedies it or than could operations plaintiffs’ Throughout under the breach. fully government exercised control consistent contracts the ownership property involved, the trial of the with its use evidence that on the basis substantial court found super- watchful immediate close, direct and “under was ’’ representatives United States. vision and control supplied by govern- in the ease of Accordingly, cost-plus- took title under to which ment nor plaintiffs neither secured retained contracts, fixed-fee ownership were therefore not the indicia essential purposes. tax of such owners sup- respect foregoing discussion applies also cost-plus-fixed-fee contracts plied property under separate agreements supplied under performing con- their generally for use *9 government supplied property performing tracts and to for fixed-price contracts.
Contractor-acquired property fixed-price contracts, under however, separate respects in differently, requires is treated some Only plaintiff Aerojet fixed-price discussion. had typical provided: A contracts. title clause Upon payment payment “(1) any progress of the to the legal contract, equitable Contractor under this title to all materials, assemblies, subassemblies, parts, inventories, work in process, completed prop- tools, non-durable work and other erty produced acquired, by or allocated the Contractor absolutely the performance of this vest in contract shall the Gov- production ernment acquisition, forthwith or allocation by property performance. the of Contractor such for such passage Such vesting of shall not title relieve the Con- any respective rights or tractor the of their Government of or obligations respon- this shall it affect contract, under nor the sibility of the Contractor the of or of event loss destruction damage property. or “ (2) Property, may title to which is or hereafter become provisions vested the under the of Government this Section (i) incorporated supplies hereunder, be furnished disposed (ii) by obsolete, out, worn or the Contractor damaged, expended in (iii) (iv) the time, altered from time to production supplies. of such the extent such To incorporated supplies hereunder, is not or dis- delivered posed expended in the obsolete, damaged, of as or worn out production pass supplies, such shall title to longer to necessary no and vest in the when such Contractor contract, performance sub- of this useful for the provisions ject, in the Sec- termination, case to the hereof entitled, tions Convenience ‘Termination ” Government’ ‘Default.’ government the termination
Under and default clauses the possession could retain title and assume or otherwise direct disposition of the operations Under normal the distinction between the contractor-acquired treatment fixed-price under contracts and fixed-fee contracts was that in the former case dispose the contractor had the of title receive longer necessary performance no useful or the contract government whereas the latter case the retained rights; in the former the risk loss was borne contractor, latter, by government. and in the These dis government’s however,
tinctions, are not inconsistent ownership purposes during tax of the the crucial period Placing risk of loss when title was vested it. government, contractor, on the contractor benefits ownership. and is itself inconsistent with (United Co., 466- Brass v. Ansonia & C. U.S. States property was 1107].) While the S.Ct. 54 L.Ed. performance of it necessary for the the contract still useful or only performance contract unless could be used in govern practice directed, and otherwise supervision over the dis ment posal and control exercised the same fixed-price did *10 scrap of contracts material under under fixed-fee contracts. respects problem pre In some the the converse of that Corp.
sented in
Byram,
Timm
interpreted fixed-price contract to the ones similar involved right Company’s acquire here and stated that “the [for dispose or of passed the to which had itself] the [title government] subject restriction, only require- to no price being acquisition ment agreed that for such be Contracting paid with the Officerand the amount involved be ’’ credited to Government Officer direct. right Company concluded that “the unrestricted of under acquire dispose contract to and the ownership risk of loss are elements inconsistent with the vesting prop- as would title Government render the erty from immune taxation.” The decision the American however, appears Motors fact case, have overlooked the dispose right acquire prop- that the contractor’s erty scrap only option other than exercised at the could government. option exercised in favor Until was contractor, it, acquire Aerojet, like had no dispose government property. Moreover, pointed out above, the mere fact that the risk of loss was borne ownership. contractor is not inconsistent We were conclude not the owners of purposes the personal here for the involved of ad valorem present under taxation California statutes. judgments are affirmed. J., Carter,
Gibson, Shenk, J., J., C. Spence, J., con- curred. McCOMB, I concurin the affirmance the judgments J. expressed Traynor for the reasons Mr. Justice in major *11 ity opinion also the reason the property that here attempted upon which to levy
involved defendants had plaintiffs. property of collect taxes was not the Article XIII of the state Constitution authorizes the tax- “property.” “property” ation term in the broadest meaning ownership; right the unrestricted and exclusive to right dispose thing every thing; legal way, to possess every to it, it, to exclude from one else Dictionary interfering (4th Law (Black, 1951), with it. ed. p. 1382.) Cal.App.2d Douglas Byram, In Co. v. Aircraft Bishop “A 15], says, P.2d Mr. Justice commoncharacter disposed it trans right, of,
istic of a is that ferred to another.” Dist., In Yuba River Power v. Nevada 207 Cal. Co. Irr. given “the 128], definition P. right possession, enjoying, disposing
exclusive thing; of a right which a it is ‘the and interest man has lands chattels, others’; and ciently comprehensive to the exclusion of and the term is suffi- every species
to include estate, real personal.” foregoing definitions, In of the involved view plaintiffs was since did instant cases not it above. not have the attributes defined any part not use of the Plaintiffs could without plaintiffs government. Neither did have the consent possess it, ownership, is, the unrestricted everyone interfering else from with it. it, to use exclude power dispose of it, not to transfer Plaintiffs did have hypothecate far as pledge it. The so it, to or to exchangeable concerned, no value and did had were Therefore, part plaintiffs’ since go up make estate. question plaintiffs, property in was not the properly defendants. was taxable J., concurred. Schauer, rehearing November
Appellants’ petition for a was denied 19, 1958. 24, 1958.] In Bank. Oct. A. 25060. No.
[L. (a Corporation), Peti- BORGWARD, G.M.B.H. F. W. CARL OF ANGELES COURT LOS tioner, v. SUPERIOR ah, et Respondent; A. W. WOOLVERTON COUNTY, Interest. Real Parties in