California Pear Growers Assn. v. Johnson

WASTE, C. J.

Plaintiff brought this action to recover a corporation franchise tax paid under protest. Judgment was entered for the defendant and plaintiff appeals.

Plaintiff is a nonprofit co-operative marketing association without capital stock or corporate excess, incorporated under the laws of the state of California, and having its place of

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business in this state. During all the time here pertinent, it was engaged in marketing pears, produced by its members, on a nonprofit basis, returning to its members the proceeds of the sales less necessary selling expenses. It does not declare or pay dividends, and is not engaged in business for its own account.

■ The state board of equalization, in determining the value of plaintiff’s franchise for the year 1928, considered, among other things, the business done by plaintiff for its members during the year 1927, as indicated by the amount of money returned to the members and by crop and market conditions of the product handled, and determined that a reasonable value of the advantages enjoyed by plaintiff as a result of the corporate franchise was one-sixtieth of the amount which plaintiff had so returned during the year 1927. On that basis, the board levied a tax, computed at the legal rate, amounting to $301.50, which plaintiff paid under protest, and now seeks to recover.

When the assessment and tax here involved were levied and collected, the state board of equalization applied the same process of arriving at the value of the franchise tax of all nonprofit co-operative associations marketing agricultural products, but assessed a nominal franchise tax of $8 against all other nonprofit co-operative associations. Appellant contends that the tax ascertained and arrived at by the method adopted by the board of equalization and assessed on its franchise is arbitrary, discriminatory and unauthorized. The state Constitution (art. XIII, sec. 14, subd. [d]) provided, at the time here pertinent, that all franchises (with designated exceptions) should be assessed at their actual cash value, in the manner to be provided bylaw. The law, at the same time, provided (Pol. Code, sec. 3664d) that these franchises “shall include the actual exercise of the right to be a corporation and to do business as a corporation under the laws of this state ...”