City of Los Angeles v. Western Union Oil Co. (1911) · DecisionDepot

City of Los Angeles v. Western Union Oil Co.

Name: California Superior Court Tentative Rulings
Creator: DecisionDepot
License: https://creativecommons.org/licenses/by-nc/4.0/

California Supreme Court Oct 17, 1911 No. L.A. No. 2584.Published

Before: THE COURT.

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Holding. The court held that the assessor's method of valuing a corporate franchise by deducting the value of tangible property from the aggregate market value of shares is valid, and that an excessive valuation alone does not constitute constructive fraud.

Issues

Whether the method of valuing a corporate franchise by deducting tangible property from the aggregate market value of shares is legally permissible.
Whether a grossly excessive tax assessment constitutes constructive fraud in the absence of other evidence.
Whether the assessment of domestic corporate franchises is discriminatory because foreign corporations are not taxed on their franchises within the state.

Disposition. affirmed

Quotations verified verbatim against the opinion

“It is settled law in this state that a proper method for ascertaining the value of the franchise of a corporation is by deducting from the aggregate market value of its shares the value of its tangible property”

“an excessive valuation by itself alone is not evidence of fraud”

Synopsis

The facts are stated in the opinion of the court.

Gibson, Trask, Dunn & Crutcher, Edward E. Bacon, and Henry M. Young, for Appellant.

Leslie B. Hewitt, City Attorney, John W. Shenk, City Attorney, and C. B. Penn, Deputy City Attorney, for Respondent.

THE COURT.

This action was instituted to recover from the defendant $16,654.24 taxes with ten per cent penalty added thereto" for nonpayment thereof and interest. This represented the tax upon defendant’s “franchise to be a corporation” assessed for $1,423,555. The value of this franchise was arrived at by multiplying the amount which the shares of defendant corporation were selling for upon the stock ex

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change in the city of Los Angeles on the first Monday in March, 1907 ($303 per share), by the total number of shares of the capital stock of the corporation and deducting therefrom the assessed value of all the other property of the corporation,—namely, its leasehold interest in lands in Santa Barbara County, together with derricks, oil boring machinery, tanks, reservoirs, and oil assessed at $82,580 and money in hand amounting to $8865. The sum so reached as the value of the franchise of the corporation was by the assessor divided in two and fifty per cent of it, the sum above given, fixed as the assessment value of the franchise. Upon these facts the trial court gave judgment for plaintiff and from that judgment defendant appeals.

The trial court found as follows: “In the opinion of the court the value placed thereon, to wit: the sum of $1,323,555.00 was grossly excessive, but the court holds that it has no jurisdiction to review the action of the board of equalization of said city of Los Angeles in fixing the value of said franchise to be a corporation at the sum of $1,323,555.00, and also that the method pursued by the assessor in arriving at the value of the franchise was in accordance with the rule established by the supreme court.”

The trial court truly declares that the method adopted by the assessor in this instance is in accordance with the rule established by the decisions of this court. In

Crocker

Scott,

149 Cal. 575, 592, [87 Pac. 102], it is said: “It is settled law in this state that a proper method for ascertaining the value of the franchise of a corporation is by deducting from the aggregate market value of its shares the value of its tangible property, and taking the difference as the value of the franchise. (See

City of Los Angeles v. Western Union Oil Co.

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Synopsis

THE COURT.

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