# Appendix — Los Angeles County v. Scandinavian Airlines System, Inc. (No. 354)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1961

## Text

APPENDIX “A”

Opinion of the California Supreme Court

[.As filed May 29, 1961 and notified in) Bank June
21, 1961 |

SCANDINAVIAN AIRLINES SYSTEM, ING. (a
Corporation), Respondent, v. COUNTY OF LOS
ANGELES ect al.. Appellants.

[On hearing after decision by the District Court of
Appeal, Second Appellate District, Division Two, Civ.
No. 24265 (183 A.C.A. 69, 6 Cal. Rptr. 694) reversing
with directions judgment of the superior court. Judg-
ment affirmed. ]

APPEAL from a judgment of the Superior Court
of Los Angeles County. Philbrick McCoy, Judge.
Affirmed,

Action by owner of foreign owned and registered
aircraft to recover property taxes leived by both a
city and county against airplanes flown exclusevels
in foreign commerce, Judgment for plamtiff af-
firmed. 5

Harold W. Kennedy, County Counsel. and Alfred
Charles De Flon. Deputy County Counsel, for Ap-
pellants.

Musick, Peeler & Garrett. Elvon BP. Musick, Roder-
wk M. Hills, Richard I). Esbenshade and Kenneth F.
Seott for Respondent.

les

Condon & Forsyth, Darling, Shattuck & Ed-
monds, Cyril H. Condon, Hugh W. Darling, Rodol-
ley, James J. Conran, Pillsbury, Madison & Sutro.
D. Mackenzie, Foley, James & Conran, Frank J. Fo-
ley, James J. Conran, Pillsbury, Madison & Suntvro,
Turner H. McBaine, Noel Dyer, Chapman, Walsh &
O’Connell, Joseph J. O’Connell, Jr. and Arthur K.
Mason as Amici Curiae on behalf of Respondent.

PETERS, J.—Defendants, the County of Los An-
geles and the City of Los Angeles, have appealed from

1 judgment requiring them to refund to the plaintiff
certain personal property taxes which were levied
against plaintiff’s foreign owned and based aircraft
flown exclusively in foreign commerce, and which
utilized Los Angeles International Airport as their
sole United States terminus. The United States Sn-
preme Court, and the highest courts of the several
states, have spoken with apparent finality regarding
the right to tax and the method of taxation of ocean-
going vessels engaged in both foreign and interstate
commerce, and the courts have had oceasion to de-
termine similar questions involving aircraft en-
gaged solely in interstate commerce (Northwest
Atrlines v. Minnesota, 322 U.S. 292 [64 S.Ct. 950, 88
L.Ed. 1283, 153 A.L.R. 245]: Braniff Airways, Ine.
'. Nebraska State Board of Equalization, 347 US.
990 [74 S.Ct. 757, 98 L.Ed. 967]. Slick Airways Ine.
" County of Los Angeles, 140 CalLApp. 2d 311 [295

a

P.2d 46)), and domestically owned and based air
planes engaged in foreign commerce (Flying Tiger
Line, Ine. v. County of Los Augeles, OV Caled 34
[333 Pd 323]). However, the precise problemi pre
sented here, Wheretm the airplanes sought to be taxed
locally are: (1) foreign owned, (2) foreign based and
registered, and (3) flown solely in foreign commerce
with but a single Uhited States port, has not as vet,
insofar as we have been advised. been passed on by

the appellate courts.

The facts are undisputed. Defendants” general
demurrer to plaintiff's complaint was overruled, and
the parties then stipulated that the material facts of
the complaint be taken as true, that Judgment be en
tered in favor of plaintiff, without necessity of fur
ther proof, and that defendants retain their right te
appeal from: such judgment. The following is a sum-
mary of the material allegations of the complaint:

1. Plaintiff operates an air line, solely in foretn
commerce, between Copenhagen, Denmark. and Paes
Angeles, California. All of its airplanes are owned,
based and registered ino one of | three Seandina-
vian home ports.’ The service referred to is— ren-

'For the purpose of this decision, plaintiff may be considered as the operator
and owner of the mentioned airplanes. Actually. plaintiff is but the United
States representative of a consortium of Danish Airlines. Swedish Airlines and
Norwegian Airlines. The airplanes are individually owned by the respective
members of the consortium. and are registered and based in Copenhagen. Stock.
holm and Oslo. respectively. For the purpose of their United States flights
the European terminus of each is Copenhagen

ae ee

dered under a permit granted by the United States
Civil Aeronautics Board. The planes step en route
in_Canada, but touch the United States only at) Los
Angeles International Airport.

2. During the period involved herein cach of
plaintiff's airplanes averaged eight) —round-trip
flights per vear, and remained at its Los Angeles ter
minus for less than 34 hours on each flight.

3. None of the planes was physically present im
Los Angeles (or in the United States) on the first
Monday of March in the vear for which taxes were
levied.

4. Defendant County of Los Angeles assessed
each of the airplanes upon an “apportionment” basis.
by means of a formula which was intended to deter:
mine that portion of the airplane's value measured by
the period during which it was physically present in
the county. “Such formula added one hour ‘flying
time’ per trip, to the actual time spent on the sround
in Los Angeles, and divided this figure into the total
hours in the tax vear. Based upon the assessment se
‘aleulated, defendant county levied a personal property
tax on each of the airplanes on its own behalf. and
upon behalf of the defendant city.

?Although the complaint is silent in regard to the use to which each airplane
is put during the balance of the year, it may be assumed that by far the greater

rtion of such period is devoted either to maintenance at its home port. to
ocal transportation in its home country. or to international transportation in
which California is not involved

a -
5. During the period for which defendants levied
such tax, each of the airplanes was taxed, on an un
apportioned basis, in its home port.

6. No foreign country levies a property tax on air
eralt operated by any United States sar tine Fly ine

planes in foreign commerce.’

7. The taxes levied by defendants constitute double

taxation.

x. Plaintiff's eperations in making the Copenha:
en-Los Angeles flights are subjeet to extensive regula
tion by the United States coverniuent: ( 17 speenfie ree
ulaterv measures being alleged), and the United States
is party to 19 separate, and specifically alleged, mter-
sational treaties direetly or indirectly resulating and

affeeting such operations.
9, Plaintiff paid the taxes demanded by defend
ants, under protest wind subsequenth filed acelin tor

refund.

The pleadings raise he ts ste regarding the proprrety
of the procedures taken on the claim for refand, and
plamtitf does hot question the formula by which de
fendants “apportioned” the tax. Henee the sole qies

tion involved is the validity of the tas.

8Denmark. Sweden and Norwas cach taxed the “operations — of ther ore
spective nationals which operated zirplanes based in those countnes and Non
way levied a property tax on the entire value of those planes which were reeis
tered and based in Osic

*Alshough not alleeed in the complaint. ites argued by respondent. and net
denied by appellants, that seh reprisal taxation is now being threatened
several foreign countries

oe a

Because of their interest herein, most of the for-
eign airlines serving California have filed amici curiae
briefs.

Contentions of the Parties:

Insupport of the judgment, plaintiff contends that:
(1) the commerce clause of the United States Consti-
tution prohibits the levy of this tax; (2) the tax is fur-
ther prohibited by the due process clauses of both the
federal and California Constitutions; and, (3) there is
no California statutory basis for this taxation.

In stipport of its first contention—conflict with the
commerce clause—plaintiff makes a three-fold argu-
ment. First, it claims that sinee there is no relevant
distinction between aircraft flying the international
skies and ocean-going vessels plying the high seas, the
former should be subjected to the same **home-port*’
doctrine of taxation which the United States Supreme
Court has applied to the latter. Second, plaintift
claims that taxation of aircraft based and owned in a
foreign country is a matter of international concern
within the exclusive jurisdiction of the federal gover.
ment (citing various federal regulatory acts and inter-
national treaties alleged to control). Its final areu-
ment in regard to the commerce clause is that appor-
tioned taxation” by California, together with unap-
portioned taxation by the government of the aircraft's
home port, conflicts with the commerce clause in that
it imposes double taxation, and places a far heavier

.

en aa
burden upon such foreign arreralt: than exists in the
ease of aireraft owned domestically.

Plaintiff bases its second contention—repugnaney
to the die process clauses—upon the claim that its air-
planes have not acquired a taxable situs in California.

Its third contention is predicated upon the argu-
ment that California’s constitutional and general stat-
utory provisions for taxation of the various forms of
personal property do not contemplate the taxation of
aircraft owned and based in foreign countries and en-
gaged in foreign commerce, and that without specific
legislative authority these defendants are without Jur.
isdiction to levy this tax.

Defendants contend that the commerce clause is m-
applicable on several grounds. The first is that al-
though that clause vives Congress the exclusive power
to reetulate commerce, such power is not denied to the
several states until Congress has preempted the field,
which defendants claim has not been done. The see-
ond is that taxation of personal property does not fal!
within that class of subjects whieh ‘admit only of one
uniform system, or plan of regulation,” which phrase
has heen applied as the test for exclusive legislation
hy the federal Congress. Defendants also.elaim that
the decisions of the United States Supremeé Court: in-
dicate a trend away from the *thome-port” doctrine of
taxation. and that if the question were to be submit-
ted to that court today it would repudiate its former

setulae

rule. Asa final reply to the contention that the com-
merce clause prohibits the instant tax, defendants ar-
gue that instrumentalities of commerce, by their very
nature, acquire more than one taxable situs, and that
the undue burden on commerce which would otherwise
be imposed is properly avoided by a system ot appor-
tioned taxation in each such situs: that the undue bur-
den, if any, imposed on the instant aireraft is not the
result of defendants’ apportioned tax, but results from
the fact that the domiciliary situs has levied taxes on
the full value.

Replying to plaintiff's contention that the due pro-
cess clauses prohibit this tax, defendants contend that
the sole test, insofar as due process is concerned, is
whether the proposed tax has reasonable relation to
the opportunities, benefits or protection conferred or
accorded by the taxing state. Defendants then point
out that an apportioned tax, based solely upon the per-
centage of time which the property is actually within
the County of Los Angeles, satisfies this test.

In meeting plaintiff's third and last) contention
(lack of statutory basis for the tax) defendants argue
that the California Constitution fixes the liability of
the property to taxation and the standard upon which
it is hased (i.e., in proportion to its value)! and that.

®Article XIII, section i. provides: “All property in the State not
exempt under the !aws of the United States. shall be taxed in propertion to
gas

Ss os

the only further requirement is that the Legislature
provide the machinery by which to ascertain such value
(eiting MeHeary vo Downer, 116 Cal. 20 [47 P. 779, 45
L.ROA. 737). and Crocker v. Scott, 149 Cal. 075) [87 P.
102}). How, or in what manner, the Legislature has
met this further requirement is not spelled out in de-
fendant’s briefs.

The “HMome-Port’” Doctrine:

As stated above, plaintiff's main contention mn sup-
port of the judgment is that the tax imposed by de-
fendants vivlates the commerce clause of the United
States Constitution. Its first point in support ef this
contention is that the United States Supreme Court
has clearly prohibited such state taxation ina line of
decisions enunciating the “home-port™’ doctrine. By
a series of opinions, covering a period of ever a hun-
dred years, that court has developed a hody of law
dealing with the power of local authorities to levy prop-
erty taxes on instrumentalities of commerce Which are
transitory in character, and, in the course of engaging
in trade. come within the territorial limits of one or
more of the states of the Union. Tn each of the deer
sions embraced in that body of law, the United States
Supreme Court has emphasized the importance of the
true domicile, the port of registration, or home port,
of the particular instrumentality sought to be taxed.
[t should be noted that im determining the validity
or invalidity of a particular tax in light of this doe-

_~"

trine, the Supreme Court has not confined itself to a
discussion of the commerce clause, but has also predi-
cated its decision on the impact of the due process
clause on such taxation.” But if a decision in this case
is cqntrolled by principles heretofore announced by the
federal courts, it makes little difference whether those
principles were predicated upon one constitutional
ground or another. The task with which we are faced
was well stated in the Northwest Airlines opinion
(supra) as follows: ‘*The answer involves the appli-
cation of settled legal principles to the precise eireum-
stances of this case."" Thus, it is our duty to determine
what *'settled legal principles,’ if any, are applicable
to the tax here under consideration. If that determi-
nation leads to the conclusion that the ‘home-port"’
doctrine applicable herein it is our duty to so declare,
not only*heeause the United States Supreme Court has
spoken with finality in a field which is peculiarly fed-
eral in nature, but because such principles have been
definitely settled, and should not be overruled except
for most compelling reasons which do not here exist.
It should also be noted that the basic principles which

*The earlier decisions dealing with the “home-port’” doctrine appear to be
based upon the commerce clause, in that they refer to an area of commerce
subject to the “laws of the general government, to which velongs the regulation
of commerce with foreign nations and between the states.” (Hays v. Pacific
Mail Steamship Co., 17 How. (U.S.) 596 [15 L.Ed. 254].) Subsequent de-
cisions, as will be noted below. base the doctrine squarely upon the due process
clause by reason of lack of taxable situs in the taxing state. Still later, in Nerth-
west Airlines :. Minnesota, supra, 322 U.S. 292, the court held the question to
involve both the commerce and the due process clauses, and failed to indicate
clearly on which the decision was predicated. See State Taxation of Interna.
tional Air Transportation, 11 Stan.L.R. 518. at p 520) _

ie.

will determine the appheability or inappheability. of
the “Shome-port™ doctrine have been enunciated by
this court as well as by the United) States Supreme
Court.

A reading of both the federal and state cases on the
subject demonstrates that both courts have considered
the subject to embrace a federal question without ref:
erence to any theory that it becomes such onty when
Congress pre-cmpts the field by enacting legisiation.
In fact, the basie decisions (both federal and. state)
have declared the ‘thome-port’” doetrine Cand hence
the invalidity of a proposed tax) although the federal
legislature has never spoken on the subject. Inherent
in the opinions, even when unstated, Is a concept of
the dual nature of a port of entry. Thus, Los Angeles
[International Airport is. on one hand, an integral por-
tion of the city, county and state, subject to the sov-
ereign powers thereof, and on the other hand is a port
of entry to the United States. In its latter capacity
its actions must be viewed as they may affect eom-
merce with foreign nations. Such view jposes federal
questions even in the absence of Con pssional en-
actment.

As early as 18dl taxing authorities in California
attempted to levy property taxes on vehicles of com-
merce that touched temporarily in the various ports
of this state. In 1854 the United States Supreme Court
held. in [ays v. Pacific Mail Steamship Co. supra,

=

17 How. (U.S.) 596, that California could not tax an
ocean going vessel, owned and registered in New York
ond operating in interstate commeree between that
port and various ports in California and Oregon. The
decision announced the rule that such a vessel might be
taxed at its full value in its home port, and that the
other states where it engaged in commerce were not
entitled to levy a property tax of any nature, even
though the vessel made regular stops therein for the
purpose of discharging or taking on passengers and
eargo, and remained on each trip for repairs and main-
tenance, and to await announcement of the next voyage.
The decision was predicated in part upon the lack of
a taxable situs in any but the “home-port’’. and held
that such vessels enter the ports of other states, ‘‘inde-
pendently of any control over them, except as tt respects
such municipal and sanitary regulations of the local
authorities as are not tneonsistent with the constitu-
tion and laws of the general government, to which be-
longs the regulation of commerce with foreign nations
and between the states.’ (17 How. (U.S8.) at p. 598,
emphasis added.) The opinion failed to mention any
specific constittitional provision or federal law with
which the attempted tax was in conflict. The refer-
enee to the lack of taxable situs gives credence to the
claim that the doctrine was placed, in part at least.
upon the due process clause. However, the statement
to the effeet that regulation of foreign and interstate
commerce belongs to the federal government. indieates

|

that the court alse predicated the doctrine. in part,
pon the commerce clause, eren in the absence of any
federal legislative enactment on the subject. This
theory is bolstered by the fact that the OpIMion alse
stated that a vessel plying the high seas in Interstate
commerce is subject to admiralty law, even when lving
Ina domestic port other than that of her registry, and
as such differs from vessels whieh remain wholly with-
in national waters. Thus.’ the Mle appears to have
been further predicated Upon a concept that a vessel
Which sails upon international Waters must be sub-
jected to different rules than one which never leaves
national waters. This appears to be the only logiea!
explanation for holdine that an instrument of inter-
state Commerce is immune fron) state control or tax
ation in the absence of any showing that the Coneress
has entered the field.

Thus, the earliest statement of the “home-port
doctrine granted the state of domicile the power to tax
In full, and denied to all other Jurisdictions any power
or right to tax except as might arise under the police
power, when a vessel engaged in either Interstate or
foreign commerce used the open seas as a highway he-
tween ports.

Since that date, the rule of the Havs case has been
extended and modified. to fit different situations. but
Insofar as we have heen able to determine, it has hevey
been overruled. In faet. the eourt has specifieally

pe * etm

stated, as will be noted below, that certain of the limita-
tions subsequently placed upon the rule were not to be
deemed as altering the doetrine as applied to ships plyv-
Ing international waters.

California thereafter accepted and applied the doc-
trine as announced in the Hays decision(City and
County of San Francisco v. Talbot, 63 Cal. 485, 488-
489; Olson v. City ond County of San Francisco, 148
Cal. 80, 82-83 [82 P. 850, 113 Am. St. Rep. 191, 7 Ann.
Cas. 443, 2 L.R.A. N.S. 197]: California ete. Co. v. City
& County of San Francisco, 150 Cal. 145 [88 P. 704];
Sayles v. County of Los Angeles, 59 Cal. App.2d 295
[138 P.2d 768], and other cases).

In 1870 the “*home-port** doctrine was extended to
vessels engaged in interstate commerce, and plying ex-
elusively inland waters (St. Louis v. Ferry Co., 11 Wall.
(U.S.) 423), but such extension was overruled in 1948.
(See Ott v. Mississippr ete. Barge Line, 336 U.S. 169
[69 S. Ct. 432, 93 L.Ed. 585]. )

At a very early date the United States Supreme
Court held that the doetrine, denying to Jurisdictions
other than that of domicile the power to impose prop-
erty taxes, was nof dependent upor actual taxation in
the “*home-port™ (Morgan v. Parham, 16 Wall. (U.S.
471, 478 [21 L.Ed. 303]). By such desision, the United
States Supreme Court inferentially held that the
home-port”’ doctrine was not based so much upon mul
tiple taxation (whieh would clearly constitute a bir

Se

den upon commeree in derogation ot the COMMETEE
clause), as it was Upon a concept of exclusive federal]
Jurisdiction onee an instrumentality of commerce left
Its hotie port for International waters, Viewed In light
of the rule Cestablished by the same court in Cool; yor.
Board of Wardens of Port of Philads Iphia, 12 How.
(UN.) 229 [13 LoKd. 996]) that the commerce Clatise
hoes net prohibit the states from regulating commerce
except in those fields wherein the federal congress has
acted or those fields which admit only of one uniform,
system. it must be assumed that the authors of the
“home-port’’ doctrine held that taxation of a vessel
Which arrived in port via international waters falls
Within one of the two stated exceptions. Since it was
het contended that Congress had acted in regard te
Such matters, it follows that taxation Cexeept in the
home ports of vessels “uling upon the high seas was
Within the latter classification. As the eourt stated in
the Cooley Opinion: : Whatever subjects of this power
[to reculate commerce} are in their nature national,
oradmit only of one uniforn, s¥stem, or plan of regu.
lation. may justly be said to be of sueh a nature as te
require exelusive legislation by Coneress." (12> How.
(US.) at p. 319.)

During the Process of mterpreting the Note port a
doctrine the courts carefully distinguished between the
home port in its tre sense Cdomicile Of owner or per
manent doniteile of vessel) and. fictitious home ports

created solely by registry OS, Lows ¢. Ferry Co,. SM pp

= oe

ra, V1 Wall. (U.S.) 423; Old Dominion Steamship Co.
v. Virginia, 198 U.S. 299 [25 S.Ct. 686, 49 L.Ed, 1059],
Ayer & Lord Tie Co. ve K entuchy, 202 U.S. 409 [26 8.
C't. 679, 50 L.Ed. 1082]; Southern Pacifie Co. v. Ken-
tucky, 222 U.S, 68, 67 [82 S.Ct. 13, 56 L.Ed. 96]; Olson
r, City and County of San Francisco, supra, 148 Cal.
80, 82 P. 850; Sayles v. County of Los A ngeles, supra,
59 Cal. App. 2d 295: Ships ete. Corp. v. County of San
Diego, 93 Cal. App. 2d 522 [209 P. 2d 148]. By such
limitation, the courts prevented the possibility of a
misuse of the doctrine by owners who would other-
wise create a fictitions home port in order to escape
taxation.

In 1890 the United States Supreme Court declared
a distinction between vessels in interstate commerce
and railroad rolling stock similarly engaged. InPull-
man’s Car Co. v. Pennslyvania, 141 U.S. 18 F118. Ct
876, 35 L. Ed 613]. it held that because rolling stock
has no fixed situs, and travels over land, traversing
and retraversing the various states, it-must be treated
differently for the purpose of taxation from ships
which travel on international waterways, have a home
port, and touch land only incidentally and temporarily.
Quoting the earlier case of Baltimore & Ohio R.R. Co.
vr. Maryland, 21 Wall. (U.S.) 456 [22 L. Ed. 678].
the court stated that interstate commerce on land is
so dissimilar from interstate commerce on water that
the two operations do not have the same aspects in
reference to constitutional powers and duties of state

a

and federal government, and that since vehicles of
commerce by water are instramentalitics of communi-
cations with other nations, the regulation of them is
fo be assumed by the national Legislatare (AAL US.

at pp. 23-24)!

The distinction thus announced between vessels
sailing the high seas and railroad stock traveling by
land ultimately led to the “apportionment doctrine”
of taxation as applied to the latter. Such doctrine.
thereafter applied by both federal and California
courts, authorizes property taxation in each jurisdic-
tion into which a vehicle of interstate commerce en-
ters (American Refrigerator Transit Co. v. Hall, 174
U.S. 70 [19 S.Ct. 599, 43 L.Ed. 899]; Union Refriger-
ator Transit Co. v. Lynch, 177 U.S. 149 [20 S.Ct. 631,
44 L.Ed. 708]; Union Transit Co. v. Kentucky, 199 U.
S. 194 [26 S. Ct. 36, 50 L. Ed. 501]). Such eases, how-
ever, did not alter the original ‘shome-port’’ doctrine
as applied to vessels, whether sailing the high seas or
exclusively inland waters. The doctrine remained ap-
plicable to all vessels which left the jurisdiction of a
single state until LY48, when the United States Supreme
Court had occasion to re-examine the rule. In the case
of Off v. Mississ(ppi ete. Barge Line, supra, 336 US.
169, the court inferentially overruled the St. Lonis de-
cision, and held that there was no distinction insofar

‘Again inferentially holding that the “huime-port” doctrine is not predicated
upon any present pre-emption of the field by the national Legislature

—|s—

as the due process and commerce clauses are concerned,
between railroad cars and vessels when ¢ ih move be-
tween the states by exclusively inland routes. In up-
holding an apportioned tax by Louisiana on tugs and
barges operating out of another state on the Mississipy!
River, it distinguished the fortner cases (which ad-
hered to the “home-port * doctrine} on the ‘ground that
they involved ships sailing the high seas. As to those
eases Which had applied to the CRs doctrine
of taxation to vessels plying only inland watees (pre-
sumably the St. Louis case ) the court stated that se
one reason or another the apportionment method «

taxation had not heen considered. Thus, the St. sed
ease was overruled by implication. The decision would
have been more precise had the court expressly over-
ruled the St. Louis decision on the ground, only implied
in the decision, that further analysis indicated that the
very basis of the home-pert’’ doctrine (.e., exclusive
federal concern in regard to instrumentalities of com
munication with other nations) does not ¢ ‘ist when the
instrumentality does not leave the national boundaries.
Of utmost importance, however, is the language of the
Ott opinion (pp. 173-174) wherein the court said, “We
do not reach the question of taxability of ocean car-
riage but confine our decision to transportation on in-
land waters.” Thus. the Hmitation placed upon the
“home-port” doctrine hy the Ott decision does not
rest upon whether the commerce is interstate or for-
eign. but upon whether the instmentalit. staved
within the continental limits of the United States or

er

travelled in international waters. Probably the court
in making this distinetion had in mind the reasoning,
originally expressed in the Hays case, that when a ves-
sel sails the international seas it becomes subjected to
the rules of admiralty law, even while at rest ina do-
mestic port. In other words, the court held (without
specifically stating) that an instrumentality of com-
merce Which leaves the nation’s shores becomes so pe-
euharly imbued with international characteristics that
it would be unwise to allow any state but that of do-
micile to exercise sovereignty bevond that necessary
under ordinary police powers.”

When the apportioned method of taxation was or-
iginally adopted (first as appheable to railroad roll-
ing stock, and subsequently to ships operating exclu-
sively on inland waters) the taxation was held to be
valid if levied under any formula which was reasonably
related to the use of the property in the taxing state, or
to the benefits or protection conferred on the property
by that state. But in Southern Pacifie Co. 0. Ken-
fuchy, supra, 222-U0.S. 63, the court appeared to re-
pudiate the doetrine of measuring the legality of the
tax by the benefits or protection received. Because
the ease involved ocean-going vessels. subject to the

“Althouvh it might have been more logial to have stated a distinction be-
tween interstate and foreign commerce if serves no real purpose to speculate on
what the court might do if presented with the same problem today. Since we
are here dealing with insthumentalities of foreign commerce. traveling inter-
national skies, the distinetion of anv between the two bases for the doctrine
is moot herein

—

‘**home-port"’ doctrine, it cannot be said to be determ-
inative of any rule or formula for taxing those instru-
mentalities which are subject to apportioned levies. .Al-
though we have found no case which requires the use
of any specific formula, it appears that any methed
which a state uses to determine an otherwise legal ap-
portioned tax must bear such relationship to time or
use within the taxing state that the sum total of all
apportioned taxes so levied by all state will not exceed
one full ad valorem assessment. This conclusion is fur-
ther strengthened by the ultimate announcement by the
Supreme Court (predicated on due process) that :** The
rule which permits taxation by two or more states on
an apportioned basis precludes taxation of all the prop-
erty by the state of domicile.” (Standard Oil Co. v.
Peek (1952), 342 U.S. 382, 384 [72 S.Ct. 309, 96 L.Ed.
27, 26 A.L.R.2d 1371].)

It was inevitable that the issue of full taxation at
the home port versus apportioned taxation at each port
of call would arise in regard to airy transportation.
Certain phases of that issue have been presented to
both the United States Supreme Court and to the var-
ious appellate courts of this state; but imsofar as we
have been able to determine, the precise question in-
volved herein has not been heretofore before any court.

The first United States Supreme Court case to con-
sider the subiect was Northwest Airlines v. Minnesota
(1944), supra, 322 US. 292. That ease involved a fleet

— ae

of airplanes owned and operated by a Minnesota cor-
poration, registered with a city of that state as their
home port, utilizing that city as their rest and overhaul
base, and operating therefrom: entirely ino interstate
commerce, “The court held that a Minnesota property
tax levied upon the entire fleet on a full ad valorem
basis did not violate either the commerce clause or the
due process clause. Even though the planes were known
to be engaged in commerce ino several other states
(which migat prestamably tax them on an apportioned
hasis) the majority opinion held that taxability by such
other states was not before the cout. Thus, although
the Northwest case authorized the full ad valorem tax
in the state of domicile, it cannot be said to have ap-
plied the “Shome-port** doctrine to interstate aircraft.
Neither can it be taken for authority that apportioned
taxes may be levied on such instrumentalities in each
state. The apparent inconsisteneyv of the language (in-
ferring that both full ad valorem tax and apportioned
tax night be possible under some circumstances) may
be explained by the feet that the ease preceded, by
eight vears, the Standard Oil case which put an end te
such possibility. At least. such was the basis on which
the court later explained the decision. (See Braniff
Airways case, 347 U.S. 560, infra.) A more substantive
question arises from the facet that the Northwest de-
cision did net give consideration to those cases wherein
it had previously held that instrumentalities of inter-
state commmeree which do not leave the continental limits

=)

of the United States will be taxed on an apportioned
basis in each state visited. (Oft v. Mississippi ete.
Barye Line, supra)! Analyzed in hght of subsequent
decisions, the Northwest case stands only for the prop-
vsition that dumestic airplanes, flying exclusively in
interstate commerce, and not leaving the continental
limits of the United States, may be taxed at their home
port on a full ad valorem basis if the parties do not
urge the possibility of taxation elsewhere. It cannot
be held to be a final determination of whether the full
ad valorem tax or an apportioned tax is proper when
all the facts are known; and it is no manner a determin-
ation of the basis for taxation of airplanes engaged
in either interstate or foreign commerce and which fly
outside the limits of the country. It is certainly not
authority of any kind regarding foreign owned and
based airplanes flying exclusively in foreign ecom-
merce.

Taxation of airplanes was next presented ten vears
later in Braniff Atrivays ve. Nebraska State Board of
Equalization (1954), supra, 347 U.S. 590. In that de-
eision the court authorized an apportioned tax by

| *The authorization of a full ad valorem tax in the jurisdiction of domicile
follows the original “home-port” doctrine as the same stood before it was modi-
fied to exclude vehicles of interstate commerce which do not leave inland routes.
The various inconsistencies inherent in the decision are not surprising when it is
noted that the court was unable to muster a majority to a single opinion, and
that the decision consisted of a majority opinion by three justices, concurred
in by two separate opinions of single justices, together with a dissenting opinion
of four (making four separate and distinct opinions). Only the dissenting opin-
ion discussed the rlation between taxation of ocean-going vessels and other
interstate vehicies as applied to airplanes.

_

Nebraska on plaintiff's airplanes which were domierler
elsewhere, but which were engaged in interstate corn
merece in Nebraska. The ease did not involve foreign
commerce, and the planes did not leave continental
United States. The court predicated the decision on
taxable situs in Nebraska (due process) and held that
since there was no demonstrable burden on interstate
conmneree, the commerce clause was no bar. [nh order
to set at rest the Inconsistencies of the Northwest de-
cision, the court said, 347 U.S. at p. 602: "When Stiid-
ard Oil Co. v. Pech... was here, the Court interpreted
the Northwest Airlines case to permit states other than
these of the corporate demicile to tax boats in inter
state commerce on the apportionment basis in accord.
ance with their use in the taxing state. We adhere te
that interpretation.“ The Northwest and Branift
cases (taken together with the intervenine Standard
Oil decision) therefore stand only for the proposition
that airplanes. flying solely in’ interstate commerce,
and not crossing international boundaries, are to be
treated (for the purpose of taxation) in the same man
ner as vessels engaged in similar commerce via exe
sively imtland waters. The language and rationale of
the decisions create the inference that. should) the
United States Supreme Court be presented with a sit-
Nation involving airplanes engaged in) foreign come

Perhaps it would have been clearer had the court frankly adnatted that
the apportioned doctrine of taxation was not urged by the parties in the North
west case. and hence the court had failed to consider its impact upon then
decision therein

/

7

Ineree, or planes engaged in interstate commerce via
International routes.” it: would apply the same doc-
trines as it has consistently applied to oceangoing ves-
sels sim arly engaged.

Two years subsequent to the Branift decision the
question of taxation of airplanes was presented in Cali-
formia, in S/rehk A micays V. County of Los Angeles,
supra, V0 Cal App.2d 311." In that case the parties
conceded that Los Angeles County was entitled to tax.
onan apportioned basis, a fleet of airplanes owned hy
a Delaware corporation and operated in interstate com-
meree between airports in various states, includine Los
Angeles, The only issue was whether Los Anveles was
entitled to tax on a full ad valorem basis a single air-
plane which plaintiff purchased in that county and
Which it kept therein for the purpose of conducting
“shakedown"™ flights prior to adding it to the fleet.
The court held that such facts did not vive the airplane
such permanent situs in Los Angeles as would preclude
taxation on an apportioned basis elsewhere, and that
defendant county was therefore without the power to
levy more than an apportioned tax. From, the point
of view of its place in this review.of the erowth of the
doctrines govemming taxation of instruments ef con-
merce, the case is important only in that it is the first
California decision in which there was an opportunity
to determine the status of airplanes. The opinion fol-

MAs between Alaska and other states of the union. with steps in Canada.
oras between Hawaii and the mainland.

Hearing by the Supreme Court was not requested

i

lowed the lead of the United States Supreme Court by
subjecting the airplane in question to the same doe
trines Which were applicable to ships similarly engaged,
The decision does not purport to deal with taxation of
airplanes cugaged in Mights outside of continental
United States.

In 1958 this court decided Flying Tiger Line, Ine.
t. County of Los Angeles, supra, ol Cal. 2d 314, 333 2.
2d 323. Plaintiff, a Delaware corporation with its
principal place of business in Los Angeles, operated
airplanes in interstate cohmmerce, as to which there was
ho issue.” It also owned five arplanes which it oper-
ated under the control of the United States military
authorities on the Pacific arlift, in support of the war
in Korea. Ina four to three decision arrived at by a
majority opinion of three, one other Justice concurring
in the result, the court held that a full ad valorem tax
on such planes was Improper, and plaintiff was granted
the only relief which it sought, ie, refund of the dif-
ference between the tax paid on the full ad valorem
basis and a tax caleulated on an apportioned basis. Mhe
dissenting opinion expressed the view that since it Was
hot shown that the property was subject to taxation
elsewhere, it should be subjected to a full ad valorem
tax in California." None of the three opinions dis-

The interstate planes were taxed on ar: apportioned basis. and were not
involved in the action before the court.

“The dissent acknowledged that muluple taxation would be unconstituuonal
“9 a burden in violation of the commerce lause, but predicated its areument
on the lack of evidence that the planes might be taxed elsewhere: thus avoid
ing conflict with the established rule that power to tax clewhere ryther than
actual taxation. is controlling

—I5—

cussed the impact of the “Shome-port™ doctrine as it
might be applicable to airplanes flying international
skies. The authorities relied upon by the majority
(Northwest Airlines; Ott vo Mississippr cte. Barye
Line; Standard Oil v. Pech; Brauff AMirways, and
Slick Airways, all supraj were all cases involving i-
strumentalities of interstate commerce which did not
leave the continental limits of the U: ‘ted States. By
placing reliance on these a cisions, th iajerity seemed
to have been of the view that the Flying Tiger air-
planes were to be treated as if they were engaged in
interstate commerce. The case cannot be considered
authority for the proposition that airplanes flying only
in foreign commerce will be taxed on either the home-
port’’ or the apportioned basis.

From the foregoing summary of United States and
California decisions dealing with the **home-port ver-
sus apportioned doctrines of taxation of instrumentali-
ties of commerce, certain conclusions may be drawn.
These are the “settled principles” which determine the
validity or invalidity of the imstant tax, and may be
stated as follows:

1. Although movable personalty is generally held
to be taxable only at its owner’s place of residence,
it may attain tax situs different from such place by
reason of permanency of location or use within the
taxing jurisdiction:

2. The basis for such alternative tax situs must
be a reasonable one, and eannot be supplied by ar-

bitrary acts of the owner, taken for purposes of tan
avoidance :

3. Ocvean-going vessels, plying international waters,
engaged in either interstate or foreign trade, even
When owned by residents or citizens of this country,
tay not be taxed by any jurisdiction other than that
of their home-port, as such is defined above; and
the jurisdiction of domicile may tax such imstrumen-
talities on a full ad valorem basis:

+. The denial of taxing power to the nondomiciliary
states does not depend upon the actual fact of taxation
at the domicile, but is based upon the proposition that
instrumentalities of communication with other nations
comprise a field which admits of but one uniform
system of regulation, which by its very nature must In
exclusively federal:

9. Beeause of the exclusively federal nature of the
field, it makes no difference that the Congress has not
acted in the field of taxation of such instrumentalities.

» Because the proposition stated as (4, above, does
not pees to them, instrumentalities of interstate com-
merce which do not leave United States (such as rail:
road rolling stock and vessels plying inland waters.
only) may be taxed in each jurisdietion wherein they

are engaged in commerce :

In order to avoid a burden on commerce. the
various jurisdi¢tions authorized to tax under the last

i

stated principle must confine themselves to a levy on
an apportioned basis, related to the time or use with-
in the jurisdiction, rather than to the benefits con-
ferred, in order that the total taxes so assessed shall
not zmount to more than one single ad valorem: tax =

8. It follows that the right of one such jurisd te-
tion to tax on an apportioned basis precludes the right
of the jurisdiction of domicile to tax ona full ad val-
orem basis ;"°

Y, Since said pratice would do violence to the prin-
ciples stated above, the furnishing of benefit and pro-
tection, standing alone, does not confer on any juris-
diction the power to tax an instrumentality of com-
merce unless the instrumentality falls within the class
of property which may be taxed according to the stated
principles ;

10. Airplanes flying solely in interstate commerce,
and based in the United States, or owned by don.estic
concerns, and which do not leave the jurisdictional
limits of the United States, will be taxed under the
same principles which apply to other instrumental-
ities of interstate commerce.

Neither state nor federal courts have as yet been
‘alled upon to determine the application of these prin-
ciples to domestically owned and based airplanes fly-

“Obviously. this rule car only be enforced within the United States where
the Supreme Court may act @. arbiter between the several jurisdictions.

"See footnote 15, supra

—-29-

Ing on foreman cotmueree, other than im the Ply
Tiser case, whieh, for the reasons already discussed, i
hot here controlling. Nor has there been ANY OCCASION
(prior to the instant ease) to detemnine the appliea-
bility of such principles to foreign owned and based
airplanes operating solely ins foreign commerce and
touching only one port in the United States.

[t could be held that the instant case is controlled
by the “home-port’ doctrine which has been uniformly
apphed by both state and federal courts for over a
hundred vears; that under that doctrine no Jurisdic-
tion, other than that of the true domicile. Inav tax
Instrumentalities of conmiunication engaged in foreign
commerce; and that airplanes, flying the international
skies, do not differ substantially from: vesse Is sailing
the international seas. Tf these conclusions are sound,
then, under the doctrine of stare decisis, the Judgment
of the trial court should be affirmed.

But. because the precise question here invelved has
hot vet been passed upon by the federal courts. we think
we should also decide the question on principle. ‘The
question is, should the ‘home-port* doctrine, asx a mat-
ter of principle, be applied to the facts of the instant
‘ase ?

We think that that doctrine should be so applied.
The prior cases, while they have not decided the pre-
cise point here involved, have laid down a very definite
pattern of constitutional law which we think is sound

30H

and controlling. It certainly has been established that
any instrumentality of Commerce is subject to taxation
in its true domicile. But this power to tax is subject
to limitations as to the manner of taxation when a
taxable situs has been acquired in another jurisdic-
tion. The need for such limitation arises from the
necessity of protecting against double taxation. Thus
the instrumentality which, by reason of being engaged
in interstate commerce, gains taxable situs in two or
more states, is subjected to taxation on an apportioned
basis only; and that fact limits the right of the dom-
icile to impose a fuil ad valorem tax. But, by reason
of other considerations. not every instrumentality of
commerce may gain more than a single tax situs. When
such a vehicle becomes an instrument of communica-
tion with foreign nations it is apparent that the ap-
portioned basis of taxation is unworkable because the
courts of this country can exercise no control over the
foreigen taxing authorities. The matter then should
become an exclusively federal one. To this extent we
agree partially with the appellants herein who state in
their briefs on file that: “State taxation of the planes
of foreign air carriers involves international political
and economic¢ problems whieh the courts are ineapable
of satisfactorily resolving. Decision of whether the
states should have the power to tax planes of foreign
air carriers eneaged in foreign commeree should be
left exclusively with the exeeutive and legislative
branches of the federal government.”” Of course, ap-

a ee

pellants’ quoted statement was made In Support of the
argument that we are unable to act in contravention of
the tax. We cannot agree with that conclusion. We
de, however, find in their statement solid ground on
Which to hold that. the exclusively federal nature of
the field requires us to apply the “home-port* doctrine.
end thus to hold that no Jurisdiction save that of dom-
icile has any iuthority to levy a personal property tax
on these airplanes. There is no lozieal basis for hold-
ing that these airplanes differ from other instrumen-
talies of communication with foreign nations, so as to
avoid that doctrine. As the vessel which sails the
seas Is subject to admiralty law, airplanes flying in-
ternational skies are subject to all manner of inter-
national aviation law. They are in no manner the
equivalent of instrumentalities of commerce which tra-
vel exclusively between the various states of this coun:
try.’ In our opinion, the basic reasonine behind the
controlling principles is that any inst rumentality which
engages In commerce between two or more sovereign
hations must have but one taxable situs. Common sense
requires that such situs be the port where the instru-
mentality is in good faith domiciled.

"Such instrumentalities. be they terry beats. tugs, motor vehicles or rail-
road rolling stock. remain for unlimited periods of time within the taxirg state.
utilizing the wharves. port facilities. rails. roads. streets and other facilities of
the state, moving from point to point therein. loadine and unloading at various
points, and perhaps engaging in intra-state activities therein. Tiey have there-
fore been considered to have gained a taxable situs in such state fae beyond
that which mieht be applicable to that of a ship or airplane which enters the
state only ata port of entry to the United States. and which remains in such
port until it again leaves the country. There appears to be no reason why the
former should not be taxed in proportion t its semi-permanent sejourn in the
state and its use of divergert facilities unconnected with those of the Port of

entry

— I2—

It is true that this conclusion does not explain the
inclusion in the ‘thome-port’” doetrine of vessels ply-
ine international waters but engaged solely ino inter:
state commerce. Such vessels were originally included
in the doctrine on the ground that they never gamed
taxable situs in the port which they temporarily visited.
The view expressed in this opinion would exclude them
from the doctrine because, not being instruments of
communication with a foreign country, they do not pose
an exclusively federal question. This distinction, per-
haps, ean be explained on historical grounds, The fact
that the courts have not announced a change in the
home-port’? doctrine to the extent of excluding such
vessels may be attributed to the fact that no case in-
volving such an instrumentality of commerce has been
brought before them in recent times. As a matter of
principle it should be held that both seagoing vessels
and airplanes engaged solely in interstate Commerce
are subject to the apportionment theory of taxation,
regardless of utilization of inland or international
routes. But even if it were so held, such holding would
not affect the status of instrumentalities engaged in
commerce With foreign nations. Whether they be sail-
ing vessels, steamships or airplanes, they are in a dif-
ferent eategory. Tn our opinion, being inst rumentalities
of communication with foreign nations, they remain
subject to the “home-port” doctrine and are not tax-
able anywhere but in the jurisdiction of their domicile.
They enter the territory of a viven state for the sole

=. ae

PUrpose of Utihizine a port thereet asa port of entry
to the United States. Ln this respect tlre is no dis-
Nnetion between a ship oran urplane when both engage
In Commerce between nations. Both are amenable te
International law and agreement. Each nay be fully
axed in its home port in such manner as the laws of
the domicile provide, and those laws are not subject te
review by the courts of the nation in which the non-
domiciliary port is located. Otherwise double taxntion
would inevitably result. In the language of the Hays
ease, each must be considered to enter the non-domi-
ciliary port ‘independently of any contro! over them,
except as it respects such municipal and sanitary reg-
tations of the local authorities as are not inconsistent
with the constitution and Jaws of the veneral govern-

ment to which belongs the reeulation of commeree ...

A somewhat analogous situation has been discussed
in those cases involving the second and third clauses
of section 10 of article T of the United States Cousti-
tution.” Tn reviewing attempts by various ports of
entry to levy charges against ships entering their har-
hors, the federal courts have held such charges to he
valid wh a ther the ship or its owner was domiciled
within the ¢ ag authority The North Cape (ND. WM,

"The pertinent language provides

“fel. 2] No State shall. without the Consent of the Congiess. lav any
Imposts or Duties on Imports or Exports, except whac may be absolutely neces.
sary for executing its inspection laws

“fel. 3) No State shall) without the Consent of Congress lay anv Duty ot
Tonnage 7

- — *

18 F.Cas. 342), or When the charge was Imposed fer the
use of wharves or other facilities, as distinct from a
eeneral' tax (Vielksbarg v. Tobin, WO ELS. 430, 455 [25
L.Ed. 690]; Clyde Mallory Lines v. Alabama, 296 U.S.
261 [56 S.Ct. 194, 80 Led. 215]). But the federal
courts have held such charges to be invalid when they
constituted an attempt to levy a property tax on instru-
mentalities of Commerce not domiciled therein. (See
Gibbons v. Ogden, 9 Wheat. (U.S., 89 [6 L.Ed. 23):
Packet ete. Cow. Keokuk, 95 US, 80 [24 Led. 377] ;
Peete ve Morgan, 19 Wall. (U.S.) 581 [22 L.Rd. 201]:
State Tonnaye Tar Cases, 12 Wall. (U.S.) 204 [20 L.
Ed. 370].) The rationale of those cases appears to be
that: a duty of tonnage imposed upon an instrumental-
itv of commerce (i.e., the carrier as distinct from the
fargo) Which is not owned or domiciled within the
state, and which duty is not a charge for a specific
service rendered, amounts to a duty levied as a condi-
tion to being allowed to enter or leave port; such a duty
represents an interference with commerce; and, no
state is at liberty to interfere with foreign commerce.
The fact that the present case involves an ad valorem
tax rather than a tax based upon tonnage of vessel does
not alter the underlying principles. While valuation
may be used as a basis for taxing an instrumental-
ity of commerce when the owner is a resident, or when
the instrumentality has otherwise acquired a taxable
situs, the power to so tax is based upon the right to

!
tax the person upon his financial investment (Trans.

an oe

portation Conv, Wheeling, 99 UL. 26-5, 269 (25 L.Ed.
#12]). Tf the charge attempted to be imposed is one
Which, by the terms of the statute or ordinance impos-
Ing it, may become due from ath instrumentality. of
foreign commerce without any services being rendered
to it, or without the enjoyment. of special benefits,
and from the mere fact ap it has arrived in a port
of the state, it is a char¢e on tonnage, and therefore
hot collectible (48 Am. Jur, $651, p. 404, citing various
Federal cases as well as this court's opinion in Oakland
MB. K. Wood Limber Co., 201 Cal. 16, 292 P. 1076).
There is no logical reason Why the stated) principles
shottld apply only if the proposed tax is based upon
the'gross tonnage of a vessel, and be inapplicable if the
same tax is based upon the vessel's value. Those prin
eiples are equally applicable as a basis for applying
the “home-port™ doctrine to urplanes flying exehis-
ively in foreign commerce ane utilizing a port of this
state as a port of entry to the United States.

In attacking the “home-port’ doetrine as here ap
plied, defendants urge several areuments. They con-
tend that the real basis for distinguishing between ves
sels sailing the high seas and those plying only inland
Waters Is Hot a commerce concept at all and that. it
springs solely from the conmon law concepts of ad-
Miralty whieh are not necessarily appheable te air
Planes. Such an argument overlooks the fact that the
Vessels between whieh such distinetion was made we

all engaged in interstate commerce. and that here we

ine.

are dealing with instrumentalities of foreign commerce.
Another answer to the argument is that since the ad-
vent of the airplane there has developed an equally
large body of international air law, which, when sub-
stifuted for the admiralty concepts, provides equal
reason for considering international air flights on the
same basis as vesscis sailing international waters.

Defendants also urge the apparent trend of the
United States Supreme Court in declaring more and
more exceptions to the application of the rule as first
announced in the Hays decision. This, they argue, in-
dicates a definite attitude in opposition to the **home-
port” doctrine: They claim that if the higher court were
viven the opportunity today, it would repudiate the en-
tire rule as contrary to modern theories of taxation.
Crie answer to this proposition comes from the United
States Supreize Court itself. As mentioned above, in
our analysis of the growth of the doctrine, in 1948 that
court excluded vessels utilizing only inland waters from
the application of the “home-port”’ rule (Ott 1. Mussis-
sipm ete. Barge Line, supra, 336 U.S. 169). In so do-
ing, it expressly refrained from making the decision
applicable to interstate vessels traversing the open seas.
Why, then, should we anticipate a change in regard to
instrumentalities of foreign commeree, as to which there
is greater cause to apply the doctrine? If, as is arened.
that court is about to reverse itself, it is not for us to
anticipate such action, At this point we would not -con-
sider a request to hold that a steamship plying the high

a

seas In foreign commerce is to be exeluded from apph
cation of the “home-port’’ doctrine. We should) not
be expecicd to do so in reeard to an urplane similarh
engaged, when the controling principles Cand reason:
Ing behind thems) are equally applicable. We there
fore hold the *home-port’? doctrine to be appheable
herein, and that the power to tax urplanes cneaged
solely in commerce with foreign nations is vested ex-
clusively in the place of true domicile, which juris-
diction may impose a tax on the full value, to the ex-
clusion of property taxation elsewhere, whether upon
An apportioned basis or otherwise. —

Is the tas barred by federal regulation or inte rnational

freaty 2

This conclusion is sufficient to dispose of the case,
But because we have elected to decide this case on prin-
ciple as well as on the doctrine of share decisis there are
other considerations that should be considered — One
Ix the Impact, if any, of federal regulation and treaty
on defendants” power to impose the instant tax. Ad.
mitted|y, under the commerce clause of the United
States Constitution. the Congress is given the power
to legislate as to interstate and foreion COMMNEPCE to
the exelusion of the several states. Tf it: has done se
the tax here involved must be held to be invalid. Plain.
tiff does not ete us te any federal levislation Which,
by its nature, specifically excludes state taxation. The

reemlatory enactments whieh it) pleads indicate that

tie

Congress has pre-empted the field of regulating: air
traffie (hoch foreign and interstate) to the extent of
protecting public safety, welfare, convenience and ne-
cessity. But none of the regulatory enactments indicate
an intent to enter, or to bar the states from entermeg
the field of taxation. Insofar as they should be con-
sidered herein, the federal regulations which have been
called to our attention do not bar the tax imposed by
defendants. They do, however, indicate the peculiarly
federal nature of the entire field.

The international treaties upon which— plaintiff
relies pose a more difficult problem. They represent
executive action, and although approved by the Senate
Ch S. Const... art PP os 2) el 2) are not the Con-
eresstonal action conteniplated by the commerce clause
art dee Soeh 3). But they are equally binding on the
states. Treaties are the supreme law of the land, bind-
Ing Upon the courts of every state (art. VI. el. 2).
If the tax here under review is repugnant to the terms
of any such treaty, the tax must be declaved invalid.

OF the several treaties Alleged in the complaint
as regulating plaintiff's operations, three are of par-
ticular interest. These are: (1) “Convention and pro-
tocol between the United States of America and Sweden
respecting double taxation,” dated) March 23, 1959,
ratified August 2. 1939, proclaimed December 12, 1959,
and effective January 1, 1940 (54 Stat. 1759, TAS. No.
Qds8). (2) “Convention between the United States of

ie

America and Denmark respecting doul
dated May 6, 1945. and effective De
(62 Stat. P30, TEAL. No. TS54) 5 an
tion between the Crited States of Ame
for the avotdance of double taxation .
1d, 1949 (2 CAST. [1951] pt. 2 p. 22
25a. and 2 UST. P1951] pt. 2. p. 238

OS),

These treaties, by their langu
at the avotdance of duplication of taxa
hatory powers, or by political subdivis
eases Where nationals of one signator

or
~

aged tn business in the territorial lim
power. [tis also clear that they are in
shipping and air traffie within the 4
of business ventures. ‘The extent to
particularly with reference to the tyy
seaimst Which protection is afforded, i

reference is made to the titles, only, t]

Denmark and Norway would appear tf

taxes on income, estates and. inherita
In the tithe of the treaty with Sweden

of taxes which is intended to be covered

Of the latter states that the parties art

avoiding double taxation and of establ
reciprocal admunistrative assistance in
come and other taxes... 0° CEmphasis :
[of the treaty sets forth a list of tax
type rather Gham speetfie named as the?
too im this Convention.” Tm the

ease

le taNation oo 00
1 (3) *Conven-

cember

lea and Norway
. dated June
Oo PLAS. No.
1 Aas Ws

mt’,

re aimed

-_

Hien by the sie:
ons thereof, im
power are en-
ts of the other
ended to cover
rrotected) types
Which they eo,
of

KR not clear.

taxation
If

e treaties with

ii

rhe dinuted te
Nothing
Wnits the type

Wes,

The preamble
“desirous of
jshine rules of
the case of in-
dded.) Article
¢s (bv veneral
tases referred
tf the United

States the list includes federal income tax (including
surtax and excess profits tax) and federal capital
stock tax. In the case of Sweden income and property
taxes are mentioned. As to both powers, the list: in-
cludes “any other or additional taxes lmposed = by
either... upon substantially the same bases as the
taxes enumerated herein.” Tf we were to read no fur-
ther it might be assumed that the treaty does not
apply to property taxes Imposed by the several states
of this nation. However, article NIL, without refer-
ring to the statements made in the preamble or in
article I, provides that in regard to certain types of
property (specifically ineluding air transport under-
takings) **taxes on property or increment of property
_.. may be levied only in that contracting State which
ix entitled under the preceding Articles to tax the in-
come from such property.”” Referring to such preced-
ing articles, it is clear that neither nation may tax

the profits of enterprises of the citizens of the other

except as such profits are allocable to a permanent
establishment in the taxing nation (art. IT). Even
more specific is the provision that income of an enter-
prise derived from the operation of a ship or aireraft
shall be taxable only in the nation in whieh such ship
or aireraft is registered (art. TW). Taking the treaty
asa whole, we find that the United States and Sweden

have agreed that each will refrain from taxing either

the income of or the property belonging to the na-
Hionals of the other country except insofar as such

a e

Income Is allocable te or the Property is a portion of
to permanent establishment in the taxine nation. Pnse-
faroas ships and air lines are concerned they have
agreed te levy neither tneome mor property tax even
Where there fs a permanent establishment. if steh
Velich: of commerce is not registered im the taxing
hation. Sinee plaintiff maintains no permanent estab
lishinent in the United States. and one-third of its
wrplanes are registered and based in Norway, Sweden
and Denmark, respectively. it follows that the jistant
tax.at least insefarias it is applied to the one-third
of the planes registered in that country. bo barred dy
the provisions of the treaty with Sweden.

“Turting now to the treaties with Norway and Den
mnark, we find no stich specifie han upon property taxes
as appears mn the Swedish treaty. Towever, article
NVIoof the Danish treaty provides that citizens of
either of the contracting tations Cieluding persons,
paltnerships, corporations, associations, ete.) whale
resident in the other contracting uation shall not tbe
subjected therein to other or more burdensome taxes
than are the eitizens of such other contracting State
residing in its territory, As used in this) paragraph

. “taxes” means taxes of every kind or description
whether national. Federal, state. provineial or mame
pal.’ This article obviously expresses an intent to pre-
vent a state. such as California, or a city or a county,
suchas the defendants herein. from levying a diserin

Inatory tax agaist Danish nationals. Pt ean be arcued

~— *

that the apportioned property tas which defendants
seek to impose upon these airplanes is the same tas
which they impose upon all citizens (i.e., domestic air
lines) of California or the United States. The fact
remains. however, that such tax is a Ctimoere burden-
conn tax than imposed upon domestic lines because
the latter do not alse pay ad valorem property taxes

in Denmark.

Those Nomvegian treaties mentioned above do not
make specifie reference to personal property taxes,
but they do contain language which may be relied on
for an argument that the federal government intended
to relieve the Norwegian viv lines from taxes such as
are at issue here, The treaty dealing with income taxes
provides that imcome which enterprises of either na-
tion shall derive from the operation of ships or aire
eraft shall be exempt) from taxation in the other
contracting nation. ‘The treaty concerning taxes on
estates and inheritances, 12 providing for the taxable
situs of. movable property in veneral, makes a specific
exception of ships, aircraft and shares thereof by pre-
viding that their taxable situs shall be the place of
recistre. ion or doctumentation.

In addition to the format treaties alluded to above.
there are also in existence a series of executive agree-
ments with each of the three countries, referred to as
Air Navigation Sgreements,” Air Transportation
Agreements. Arr Worthiness Agreements.” Pilot

a. woe

License Agreements. ete. The various Air Pranspor-
tation Agreements” (Denmark-—os Stat. 1458, ELAS.
No, 430, amended 60° Stat. 1o46, PsLAS. No. Lolg;
Norway—o9 Stat. 1608, ELAS. No. 4825 Sweden—-—ds
Stat. 1466, ELAS. No. 451, amended 60> Stat. [soo
TADLALS. No. 1500) contain artieles designed to ‘pre:
vent diss rimninatery: practices, and to assure equalits
of treatment, 7 specifiealiy prohibiting unequal charges
for airport facilities, exemption from: custom duties,
ete. but none mentions taxation as such. On the one
hand this fact tends to sustain an argument that the
contracting parties did not intend to melide taxation
within the possible discriminatory practices which thes
sought to eliminate. On the other hand, it may be argued
with equal force that since there had never been a tan
of this TV pe lnposed on the dates of the respective
treaties and agreements, the parties did not have the
question of local taxes in mind, and would have inelides
them as a prohibited method of discrimination had
they existed. Certainly. itis within reason te fer
that the foreign negotiators, unfanihar with our dual
rederal-state svstem, may have assumed that once thes
had eliminated all possibility that the federal govern:
ment would levy a double or multiple tax, there was
nothing left to fear except the possibility. of unfair
discriminatory practices by airports and other non

eovermmental agencies.

[hoot opinion, the language of the various treaties
and agree nents clearly eliminates the possibility of

a * on

local property taxation oniy dnsefar as concerns those
airplanes owned and registered in Sweden, As te that
portion of the tax. the judgment of the trial court
must be affirmed on this point alone. As to the renin
ine tWo-thirds of the airplanes, there renin Colsid

: erable doubt as to the effect of the federal comunity

ments, with only a possibility. that the contracting
states intended te prevent any taxation of any nature
Clocal or otherwise! which would afford the domestic
air lines of one country any advantage over those of
the other country where such domestic and foreign
lines maay be in competition, The instant tax would
diseriminate in favor of any United States lines cot
peting with these Senndinavian lines i Commerce
between the respective nations. But the mere possi bil:
ity that the stomatery powers may have so mtended 1+
net suffietent ground on whieh to invalidate that por
tien of the tax dnipesed pen the planes revistered in
Norway aud Denmark. Because we eannot spell out
such an iitent in the treaties wath these mations. Ww

cannot invalidate the tas upom the ground that itis
repucnant to the: tents of those Treaties, However, we
have already detemuined that the tax is repuctant te
the treaty with Sweden. and must: be deemed iivalid
as te the aitplanes based and registered in that coun:
trv. Does this mean that defendants are prohibited.
from: taxing Swedish airplanes. and vet free te tar
planes operating tna similar mauner, hut owned) cane
Wased dn oother forema countries 2 We think not. Snel

Sa.

EONTT UT Wendie MMe bates ebesate cbsenrunuinatper
Pe tvvee ty fran Pot eotutie ree baaseed an sy Treat COUnTPY
Mel stmitlar commerce based an ethed hatlehs. Sued
CLseripibation: Wotihd ectstitun Phitemt: petiee wath the
Trees Plan trl CoE epee, AS std iti Netth woste ry ote
Comet Cor. Minnesota, DOS US. yn pos P79 S.Ct
ree Led. 2d 420, 7 cpotgue oth F202). and wn Bie.
mene be iti, B29. L4G ony jy met, 254, 96 3 Bal
hy, Three ceodnstypes dens ehiatise cletrpes tes {lie stiifes meat
~Hhighe-taX-worth of dipeet ited fe depiere- Wath the tre
flow of cotatmieree Pt ys eMyvietis thert ree rpedav idea!
“Tate has pewer te diseruminmiate between foreren na
Thoms, The prinenples af state SeVerednty apply te
Internal matters. omly. Ne state of this dinner as sen
erersn dn the eves cof a foremn nation. ON state enn,
et dent direetily wath ao foreron natpern DV Treaty or
eterwise, “Pins et mitist desve: tes the: feedeperl rr wie
coemt, Pf ate tfetiipiteed UeTberts~ Whe ce ved: The lel woeotgle

POST in serimiinatery peraetiens cs betwen tie for
eTete Peat beotis, Thety at past esedeen Thest fred) in ate er

trrety. This is but ainether was of saving. a weoosrd
thowe that tanatpary ct Peorerod. ow tpend cored bagesece| besten
Petits cof coterie ve Pepesetits a fteld that pe preentlncat

Pederat mn natin without regard te stich speerfte eon
STaMitienal considerations as the ecnmaeres elspa an
the due process Clatise. and whted: mast dee fet te thy
SMT Strcetieny, of the feces! OV ePbitent. even ony thre

tbserree anf TILDEN Poberne pit feats ry! leary dea Preor Pres dereay

= ae

For the reasons set forth, we are of the opinion
that the terms of the treaty with Sweden prevent
the several states from imposing any type of) prop-
erty tax upon airplanes owned, based) and registered
In avy foreign country, unless the overall operations
of the owner bring such airplanes within the area of
property to be taxed. as such is defined in that treaty.

¥

Additional issues urged by the parties:

The foregoing considerations are determinative of
the matter, We expressly refrain from any decision
upon plaintiff's contention that neither the California
Constitution nor ariv statutory provision provides a
basis for the instant tax. The balance of the arguments
have been answered above, or have become moot by

reason of the crounds upon whieh we base our decision.

It is significant that we have been cited to ne in
stance wherein any state or political subdivision has
ever attempted to levy a property tax upon an istru
mentality. of foreign commeree which was both owned
nnd based ina foreign country. And this is true even
though each of our major seaports is visited regularly
by passenger liners and freighters, opermiting on recu-
Nar schedules, in the same manner in whieh plamtiff's
airplanes visit Los Angeles International Airport. All
of the cases cited above dealt with vessels. airplanes,
and other instrimmentalities owned or based im this
country, The entire lack of any ease dealine with an

it

Instrumental y owned op based elsewhere indieates that
no state has bver attempted to tax foreign instrumen-
talities of commerce arriving within its Jurisdiction
solely in foreign trade. If, during the IS3 years of
eXistence of the United States seh property has been
asstined to be Hontarxable, it makes little difference
Whether that belief stemmed from: constitutional prohi- -
bitions or from considerations of polley, [fy sueh as
sUbnption Were tow to be overruled, we woutle Open
the doors to state taxation of eVErY ocean Vessel whieli,
for TSO vears. has been believed to be nontaxable. The
reperetsstons Would be world-wide, Retalitery taxation
wottld be Inevitable. Phe states could not Cope with
such a situation. The only escape from: such a result
would be by holding that airplanes might be taxed
Under chretmistanees wherein a ship may net. Ne low

eal basis for such a distinetion has been ndvaneced,
The judgment as affirmed,
Schauer, Jo. MeComb, he. and White. Jo. conenrred,

DOOLING, J.--T conenr in the qudgment and with
the conelusion that the eNXisting decisions of the Su
preme Court of the United States om the “hotne-port
déetrine as it relates to the right to tax vessels eneaved
in foreign commerce are binding Upon this court. This
phase of the ‘thome-port’’ doetrine has never been
modified or overruled and. if the doetrine is to be
reexamined, the nation’s highest judicial tribunal whieh
ammetneed itis the only court which can effectively

i —-

inake such reexamination. Unless that court sees fit
to do so, and this case might afford a handy vehicle
if its Justices are so minded, | feel bound to follow
the existing law in this field as declared by its carher

decisions.
TRAYNOR, Je-—l dissent.

Neither the due process clause nor the commerce
clause nor the tonnage clause of the United States
Constitution precludes state taxation on an apportioned
basis of aircraft flown in interstate commerce. (Braniff
Airways v. Nebraska State Board of Equalization, 34%
U.S. 590, 600 [74 S.Ct. 957, 98 L.Ed. 967]: see also
Flying Tiger Line, Inc. v. County of Los Angeles, 5}
Cal. 2d 314, 318 [333, P. 2d 323].) They do not preclude

_equivalent taxation of aircraft owned by foreign domi-

ciliaries flown in foreign commerce.

“So far as due process is concerned the only ques-
tion is whether the tax in practical operation has re-
lation to opportunities, benefits, or protection conferred
or afforded by the taxing State. [Citation.] Those re-
quirements are satisfied if the tax is fairly apportioned
to the commerce carried on within the State.” (Ott r.
Mississippi ete. Barge Line, supra, 336 U.S. 169, 174:
Braniff Airways v. Nebraska State Board of Equali-
cation, supra, 347 U.S. 590. 600.) Since plaintiff's
relationship to California is no different from. that
of airlines engaged solely in interstate commerce, and
since the “opportunities. benefits. or protection con-

—
ferred or afforded” ave not affected by the locations

of plaintiff's out-or-state termini, the due process
clause does not preclude the taxation of its aireraft.

Nor does the conmneree clause or the tonnave clause’
exempt the instrumentaliiies of foreign commerce from
state ad valorem: property taxes. (Gloucester Ferry
Coo. Pennsylvania, 4 US. 196, 206 [5 S.Ct. 826, 29
Led. IOS]; Old Dominion Steamship Co. v. Virginia, -
198 US. 299, 305-306 [25 S.Ct. G86, 49 LIEd. 1059]:
Pullman's Palace Car ve Pennsylvania, 141 USS.
22-23 [11 S.Ct. 876, 35 L. Ed. 613]; see also, Trans-
portation Co. ve Wheeling, 99 U.S. 273, 279-280 [25
LL. Ed. 412].) Onee their situs is determined, a state
Inay apply its own tax rate and collection procedures,
It is idle here to discuss the pros and cons of national
uniformity. It could be achieved only if the states
were declared powerless to tax instrumentalities of
foreign commerce at all or were empowered to tax
them only pursuant to federal legislation.

The issue is whether there is discrimination against
foreign commerce, Obviously there is mo diserimina-
tion if a state taxes migratory property used in such
commerce in the same way it taxes migratory property
used in interstate commerce, Moreover, it) precludes
discrimination against interstate commerce. Plaintiff
hevertheless contends that sinee the United States

MNo State shall. without the consent of the Coneress. las ans Duty ot
Tonnage > OFS: Cent... at Sf FH

_~--

Supreme Court cannot compel foreign countries to
apportion their taxes by taking into account the ab-
sences from home of their domiciliaries’ migratory
property, taxation here even on an appo ‘tioned basis
may lead to discriminatory cumulative bu ‘dens on for-
eigen commerce, This argument errone ously attributes
to such taxation the risk of discrimination. Actually
it ix attributable to the freedom of foreign countries,
hot permitted to our own states, to adopt rules of their
ewn that can result in multiple burdens. The court
cannot prevent foreign countries from taxing instru-
mentalities of foreign commerce owned by their domi-
ciliaries even if: those instrumentalities are perman-
ently located here, just as it cannot prevent foreign
countries from taxing American aire ‘aft temporarily
abroad even thought they have been taxed at full value
at the domicile of their owners here. [t is without
power to compel independent nations to adopt a un-
form nondiscriminatory system of taxation, It does
not follow that the states must forego the power to
impose taxes that are not in themselves discriminatory.
It bears noting that Congress remains free to prohibit
altogether state taxation of instrumentalities of foreign
commerce. Alternatively, treaties could govern such
taxation to preclude the risk of discrimination.

Plaintiff also contends that for purposes of ad val-
orem taxation, aireraft flying in foreign commerce are
logically indistinguishable from: ships sailing the Ingh
seas and henee taxable only at the domicile of their

on ae

owners, When the home-port rule was formulated for
the taxation of ships in interstate as well as foreign
commerce, there had vet to be developed the concept
of taxation on an apportioned basis, (See Ott vr. Misses:
sipp cle. Bard Line, 330 US. 1o9, 17S P69 S.Ct. 452.
OSB. Ed. 585]: Ayer de Lord Co. ve. Kentiehy, 202 US,
409, 421 [26 S.Ct. 679,50 Lid. L082]; Southern Paertic
Cov. Kentucky, 222 U.S, 63, 69 [32 S.Ct. 13, o6 L.Ed.
YO]: NZ. Lous v. Ferry Co, 8 US. Wa. 450-452:
Morgan ve Parka, WG Wall CUS.) ATT, FES [21 Lede.
303]; Gloucester Perry Co. 0. Ponnsyleani, WA ES.
196, 206 [5 S.Ct. 826, 29 Led. 1o8ly Mags ov. Pacrpie
Mail Steamship Co. VW How. CUS.) 596, 597-599; Od
Dominion Steamship Co. ve Virginia, Ws Us. 299,
305 [25 S.Ct. 686, 49 L.Ed. 139].) The rule was
abandoned in faver of apportioned taxes as to vessels
plying inland waters in Olf vo Mississrppe te. Barge
Line, 336 U.S. 169 [69 S.Ct. £32. 93 LE. S85]. See
also Standard Oil Co. vo Peek, 342 US. S82. oS84 [72
S.Ct. 309, 96 L.Ed. 427, 26 ALAR. 2d Tach .y Tn tea
ing open the question of ocean carnage. the court m
ho Way suggested that the taxation of either ocean car
riage or Inland carriage would depend Npon whether
it was interstate or foreign commerce. Thereafter, im
Braniff Airways, Tne. v. Nebraska Scate Board of
Kanalization, 34 TES. 990) [TA Stet. Te, BB TFA.
O67" when the analogy between the high seas bordering
the savion and the airspace above the nation was urged

against apportioned taxation of aireraft. the cour

52

nevertheless held that aircraft flying in interstate com-
Inerce could be taxed on an apportioned basis. ‘This
court adopted the same rule with respect to aireratt
(ying in foreign commeree in Flying Tiger Line, Ine.
W. County of Los Angeles, 51 Cal. 2d 314 [333 P. 2d
325]. (See also Slick Atrways 1. County of Los An-
yeles, 140 Cal. App. 2d 311, 315, [295 P. 2d 46].)

In the Flying ‘Tiger case all members of the court
agreed that aircraft flying in foreign commerce could
not be taxed at full value at the domicile of the owner
In California if they also had attained a taxable situs
elsewhere. In contrast, the majority in the present
ease Invoke the home-port doctrine for the conclusion
that aircraft regularly flying into California from the
foreign domiciles of their owners attain no taxable
situs here and that taxation on an apportioned basis
is therefore unconstitutional, Rationally, however, the
home-port doctrine should apply to all aircraft reeu-
larly flying in foreign commerce or to none. If the
home-port doctrine is applicable to all aireraft regu-
larly flying in foreign ¢ numeree, the Flying Tiger
case Inust be overruled.

The Braniff case broke away from the home-port
doctrine when it upheld an apportioned tax on aircraft
flown in interstate commerce. There is no more reason
toinvoke th‘ ctrine for aircraft regularly flying in
foreign commeree and bearing an identical relation-
ship te the nondomiciliary state into which they ily.
Hfas plaintiff contends. aireraft cannot logically be

ie

distinguished Prom ships, It is the hhomie-port doctrine,
hot the Branifl decision. that mist vive Wah,

Plait’ contends, further, that the treaties be-
tween the Uhited States and the}Seandinayian coun
tries with respect to double taxation prechide ad
Valorem property taxation of its adreraft in California.
(See Convention and protocol thetween the United
States of America and Sweden respecting double taxa-
tion, dated) March 23, 1939, ratified Nueust 2. 1939.
proclaimed December 12, 1939, and effective January
1, 1940, 54 Stat. 1759, TuS. No. 958, 199 LINAS. 17:
Convention between the United States of America and

Denmark respecting double taxation, dated May 6,
1948, and effective December 1, 1948, 62 Stat. 1730,
TAEAAS. No. D854; Convention between the United
States of America and the Kingdom of Norway for
the avoidance of double taxation, dated June 13, 1949,
2 Use. (980i) wt. 2, poe. TLAM. No. S57: 2
U.S. {1961} pt. 2p. 2468, TLAB. Na 2368.) he
notes that cach treaty provides that income from the
operation of aireraft shall be taxed only in the home
country of such aircraft (Treaty with Denmark, art.
Vi: Treaty with Norway. art. Vie Treaty with Sweden.
at. PV). [tf contends that this pohey of reciprocity
on taxation of Income connotes a like reciprocity as to
local property taxation. There is no merit in plaimtiff's
contention. The draftsinen of the treaties were farnil-
iar with both uational and local taxation of property
as well as of income (Treaty with Sweden. art. 1;

—fi-

Treaty with Denmark, arts. 1, NVI; Treaty with Nor-
Way, art. 1), and they carefully specified the taxes to
Which the treaties applied and the limitations on the
taxing powers of the respective nations. Under these
circumstances it is uot reasonable to infer that restric.
tions on income taxation connoted restrictions on
‘property taxation; such an inference would require
reading provisions into the treaties that were knowine-
lv omitted.

It is contended, however, that article XITL of the
Swedish treaty makes the rule governing income taxa-
tion applicable to the property taxes imposed on the
Swedish-owned aircraft in this case. Article XITT pro-
vides :

“In the case of taxes on property or increment of
property the following provisions shall be applicable:

“(1) Tf the property consists of: (a) Immovable
property and accessories appertaining thereto; ())
Commereial or industrial enterprises, inechiding mari-
time shipping and air transport undertakings: the tax
may be levied only in that contracting State which is
entitled under the preceding Articles to tax the income

from such property.

(2) In the case of all other forms of property.
the tax may be levied only in that contracting State
Where the taxpayer has his residence or, in the case of
a corporation or other entity, in the contracting State

ee

Where the corporation or other entity has been created
or organized.

“Phe same principles shall apply to the United
States capital stoek tax with respeet te corporations
of Sweden having capital or other property ino the
hited States of America.”

Article NEED must be reas together with article I.
Which provides:

"The taxes referred to in this Convention are:

(a) In the case of the Urited States of America:
(1) The Federal income taxes, including surtaxes and
excess-profit taxes. (2) The Federal capital stock tan.

“(b) In the case of Sweden: (1) The National in-
come and property tax. including surtax. (2) The Na-
tional speeial property tax. (3) The communal income
tax.

“Tt is mutually agreed that the present Convention
shall also apply te any other or additional taxes im-
posed by either contracting State, subsequent to the
date of signature of this Convention,. upon substan:
tially the same bases as the taxes enumerated here-

is So

Article | thus exeludes local property taxation in
the United States from the ambit of the treaty and
nakes clear as the Senate Foreign Relations Communit:
tee stated in urging ratification of the treaty. that

——

“the United States Makes no agreement respecting
any of our State or local taxes.” (Report of the Senate
Foreign Relations Com., Exee. Rep. No. 18, 76th Cong.
Ist Ness. 1939; see alse Oittker and Ebb, Taxation of
Foreign Income [1960], p. 612.) Had it been the in-
tention to include such taxes, they would have been
specifically mentioned as were the Swedish national
property taxes and communal income tax. Ao matter
so Vital as restrictions on the taxing power of the
states and their subdivisions would hardly have been
left to implication from the provisions of article NITY,
which are directly referable to Swedish property taxes
and the United States capital stoek tax.

An interpretation of article NIPD as appheable
only to the taxes defined in article T does not render
the general language of article NITDT governing prop-
erty taxation meaningless insofar as the United States
is concerned, for that language states the principles
that shall also apply to the United States capital stock
tax or “any other or additional taxes imposed by [the
United States] subsequent te the date of signature
of this Convention, upon substantially the same bases

* (Art. [.) Such an interpretation gives effect,
to =" articles and avoids conflict between them.
(See City of Long Beach v. Vickers, 55 Cal.2d —.
(10 Cal. Rptr. 359, 358 P. 2d 687]: Hough v. MeCarthy,
54 Cal. 2d 273, 279 [353 P. 2d 276]. )

‘Advance Report Citation: 55 AC 155. 164

DI

Finally, plamtift contends that the Legislature has
hot provided for the taxation of aircraft on an appor
thoned basis. Section 404 of the Revenue and ‘Taxation
Code provides that “AL taxable property, except
State assessed property, shall be assessed hy the assess
Ing agency of the taxing ageney where the property is
situated.” (See also Rev. & Tax Code, ss 201, 405.)
The word “situated” in this scetion refers not te mere
physical presence on tax day, but to the situs of prop-

tax. (Brock & Co. v. Board of Supervisors, 8 Cal. 2d
286, 289-290 [65 P. 2d T9T, TO ALAR. T00].) Sines a
properly apportioned part of migratory property recu-
larly used in interstate or foreiga commerce in the
state has such a situs, the Legislature dias provided
for ats assessment and taxation. (See Flying Tiqer
Line, Ine. v. County of Los Angeles, 51 Cal. 2d 314
[333 DP. 2d 323]. Shrek Ntraeys 0. County of Los An-

geles, 140 Cal. App. 2d 311 [295 P. 2d 46].)

It bears einphasis that this case involves, not the
wisdom of local taxation of foreign aireraft {ving im
foreign commerce, but the question whether the Urited
States Constitution prohibits a state from: taxing such
aircraft as it taxes other property that comes into thie
state. When. as here, there is ne such constitutional
prohibition, this court has ne choice but to uphold the
state constitution and statutes. [It is not for us to de-
termine whether reciprocal exemptions away from

home ond exehisive taxation at the domicile would

=.
~~ -

iil

foster commerce, siinplify. tax administration, and
fairly divide tax revenues among the jurisdictions that
aireraft link, Such a decision involves: policies that
properly can be erystallized only ine legislation or
treaties. .A court ventures beyond its appropriate
bounds when it crystallizes its own views of tax policy
as constitutional doctrine.

Gibson, Co J.. concurred.

APPENDIX “B”

Opinion of the California District Court of Appeal
Reported 6 California Reporter 694

ee eres

IN THE DISTRICT COURT OF APPEAL.
OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT

DIVISION TWO

SCANDINAVIAN ATRLINES SYS
TEM, INC. a New York Corporation,
. Plarntiff and Respondent,
vs. one ee

COUNTY OF LOS ANGELES. a po ed

litical subdivision of the State of a ci
Cahiforma, and CITY OF LOS AN

GELES) a raunicipal corporation,

Defendants and Appellants.

_—-————

APPEAL from judgment of the Superior Couat
of Los Angeles County. Philbrick MeCov. Judee.
Reversed with directions.

Harold W. Kennedy, Counts Counsel Alfred
Charles De Flon, Deputy County Cotinsel for Appel
larits.

Musick, Peeler & Garrett, Roderick Mo Hills. Rieh
ard 1D). Eshenshade. for Respondent.

—_—

ox. Presiding dustiee.

a ie

Plaintiff brought this suit te recover property axes
levied by beth the City and County of Los Angeles
against certain of plaintiff's planes e miployed in foreign
commeree, Which taxes had been paid by plaintiff under
protest. Thirteen different aircraft belonging te
plaintiff( SAS) were present in this county at one
time or another during the period here in issue. The
3 aireraft made a total of 104 flights per year, or an
average of S fhehts per plane. Each of the airerait
was registered and based in one of the three Seandt-
navian countries, Denmark, Norway or Sweden. As
of the first Monday of March, 1955, the SAS service
consisted of two flights per week into Los Angeles.
Fach week one plane would arrive in Los Angeles ™
the early afternoon on Tuesday and depart a day and
one-half later on early Thursday morning, and another
plane would arrive during early Saturday afternoon
and would depart carly on the following Monday morn-
ine. The only point in the United States w ith which
said planes had physical contact was International
Airpert in Los Angeles.

.

Los Angeles City and County, as of the first Mon-
day of March, 1955, assessed and levied a personal prop-
erty tax upon these planes on an apportionment basis:
that is, only a portion of the full value of the subject
planes regularly entering Los Ange les County consti
tuted the basis for the assessed valuation. That frac
tion of the total value of the aireraft equal to the hours
spent in Los Angeles County as compared with the to-

a en

tal hours in the year, was the basis upon which the tas
was levied. Mach of the aircraft is taxed in the country
in Which it was registered on an unapportioned basis.

Dased on these facts, the trial court awarded judg
ment to SAS and the defendants County and City of
Los Angeles have appealed.

SAS advances three grounds upon which it argues
the judgment must be sustained: (1) that the tax vi-
lates due process; (2) that the tax is an unconstitu
tional regulation of foreign commerce; and (3) that
there is no statutory authority for the tax.

We first consider the validity of the challenged tax
with relation to the due proeess clause of the 14th
Amendment to the Constitution of the United States.
In this connection, the due process Inquiry is whether
the property taxed has acquired a situs in the taxing
Jurisdiction through having had sufficient contact with
the jurisdiction. A further criterion is that the *. .. tax
in practical operation has relation to opportunities,
benefits, or protection conferred or afforded by the
taxing State.” (Ott. v. Mississippi Valley Barge Line,
336 U.S. 169.) See also Braniff Airways, Ine. v. Ne-
braska State Bd. of Equalization, 347 U.S. 590, 600:
Slick Airways, Inc. v. County of Los Angeles, 140 Cal.
App. 2d 311, 314, 295 P. 2d 46; and. Flying Tiger Line
Tne, v. County of Los Angeles, 51 Cal. 2d 314, 319-320
333 P. 2d 323. In the Braniff case. supra, the Su-
preme Court said: *. 2. [T]he bare question whether

oo

an instrumentality of coumerce has a tax situs In a
state for the purpose of subjection to a property tax Is
“one of due proces: "(347 US. at 598-099. )

SAS contends that their aircraft have acquired no
tax situs in this state. Reliance is placed om the old
‘home port’’ doctrine cases to support this proposi-
tion, principally Hays v. Pacific Mail 8.8. Co., 58 U.S.
(17 How.) 596; Old Dominion S.S. Co. v. Virginia, 198
U.S. 299; Southern Pac. Co. v. Kentucky, 222 U.S.
63; and Morgan v. Parham, 83 U.S. (16 Wall.) 471.
These cases dealt with the tax situs of ocean going ves-
sels engaged in commerce between states. The Hays
case held a vessel taxable only by New York, its state
of registry. This rule found support by way of dicta
in the Old Dominion case, but the court nevertheless
allowed Virginia to tax vessels which had a permanent
situs in the state even though registered in another
state. The Southern Pac. Co., and Morgan eases al-
lowed taxation only by the state of domicile of the own-
er on the rationale that no permanent situs had been
developed in any other state and thus the vessels would ,
escape taxation entirely unless taxed by the domiciliary
state. This rule was also applied to vessels moving
solely in inland waters. (St. Louts v. Wiggins Ferry
Co.,78 U.S. (11 Wall.) 423; Ayer & Lord Tie Co. v.
Kentucky, 202 U.S. 409.)

Clearly, the early rule was that permanent presence
in the taxing jurisdiction was essential to the develop-

one . The term lite annuities” referred to an Article
\ of this Convention means a stated stim payable per
odically at stated times during life, or durtag a spect
fied number of vears, under an obligation to make
the payvinents in consideration of a gross sim paid for
such obligation.

6. The Swedish so-called ‘fees tax” Chevillmings-
aveift for vissa offentlga forestallningar) based on
gross income in ose far as it affeets such individuals
as actors, artists, musicians and professional athletes
shall be deemed to be an income tax for the purposes
of Article NIV (a).

The credit for taxes provided in Article NTV shall
have no application to taxes deducted at the source
from dividends and interest except to the extent pro-
vided in paragraph (b) (2) of that Article.

In the application of the provisions of this Conven-
tion the benefits of section I3t of the United States
Revenue Act of 1938, relating to eredits for foreign
taxes, shall be accorded. but the credit provided for ii
Article XTV (a) shall not extend to United States
exeess-profits taxes nor te the sur-tax imposed on per-
sonal holding companies.

—
st eee

Citizens of each of the contracting States re-
siding within the other contracting State shall not be
subjected, in the latter State to other or higher taxes
than are imposed upon the citizens of such latter State.

8. The provisions of this Convention shall not be
construed to deny or affect in any manner the right
of diplomatic and consular officers to other or addi-
tional exemptions now enjoyed or which may hereafter
be granted to such officers, nor to deny to either of
the contracting States the right to subject to taxation
its own diplomatic and consular officers.

9. The provisions of the present Convention shall
not be construed to restrict in any manner any exemp-
tion, deduction, credit or other allowance accorded by
the laws of one of the contracting States in the deter-
mination of the tax imposed by such State.

10. In the administration of the provisions of this
Convention relating to exchange of information, service
of documents, and mutual assistance in collection of
taxes, fees and costs incurred in the ordinary course
shall he borne by the State to which application is made
but extraordinary costs incident. to special forms of
procedure shall be home by the applying State.

It. Documents and other communications or in-
formation contained therein, transmitted under the pro-
Visions of this Convention by one of the eontracting
States to the other contracting State shall not be pub-
lished, revealed or disclosed to any person except. to

”
an | oie

the extent permitted under the laws of the latter State
with respect to similar documents, communications of

information.

1. As used with respect te revenne claims my Ar
ticle XVIL of this Convention the term ‘finally de-
termined” shall be deemed to mean:

(a) In the case of Sweden, claims which have
been finally established, even though still open te
revision by exceptional procedure ;

(b) Inthe case of the United States of Auner-
ica, Claims Which are no longer appealable, or which
have bee determined by decision of a competent
tribunal, which decision has become final.

13. As used in this Convention the term: “con
petent authority” or ‘competent authorities © Mieans,
in the case of the United States of America, the Seere-
tary of the Treasury and in the case of Sweden, the
Finance Ministry.

14. The term United States of America” as used
in this Convention in a geographical sense includes
only the States, the Territories of Alaska and Hawai,
and the District of Columbia.

15. Should any difficulty or doubt arise as to the
interpretation or application of the present Convention,
or its relationship to Conventions between one of the
contracting States and any other State, the competent
authorities of the contracting States may settle the

question by mutual agreement,

—

16. The present Convention and Protoco! shall not
he deemed to affect the exchange of notes between the
United States of America and Sweden providing relief
from double income taxation on shipping profits,
signed, March 31, 1938.

Done at Washington. this twenty-third day of
March, nineteen hundred and thirty-nine.

SUMNER WELLES [SEAL |
W. Bostkém = [ SEAL ]

AND WHEREAS the said convention and the said protocol
have been duly ratified on both Parts and the ratifications
of the two Governments were exchanged at Stockholm on
the fourteenth day of November, one thousand nine hundred
and thirty-nine;

AND WHEREAS, as is provided in Article XXII, the said
convention shall become effective on the first day of Jan-
uary following the exchange of the instruments of ratifica-
tion;

Now, THEREFORE, be it known that I, Franklin D. Roose-
velt, President of the United States of America, have Caused
the said convention and the said protocol to be made public
to the end that the same and every article, clause and part
thereof may be observed and fulfilled with good faith by
the United States of America and the citizens thereof on
and from the first day of January, one thousand nine hun-
dred and forty.

i

IN TESTIMONY WHEREOF, I have hereunder set my hand
and caused the Seal of the United States of America to be
affixed.

Done at the Cit, of Washington this twelfth day of

December, in the vear of our Lord one thousand

(seaL] nine hundred and thirty-nine, and of the Inde-
pendence of the United States of America the one
hundred and sixty-fourth.

FRANKLIN D. ROOSEVELT
By the President:

CorveLt HuLi
Secretary of State.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386420_1205%3A3. Public record. Not legal advice.