Republic Pictures Corp. v. St. John

NOURSE, P. J. The plaintiff corporation, hereinafter referred to as Republic of New York, sued the defendant as guarantor of Republic Pictures Corporation of California to recover taxes assessed under the California use tax. The controversy arises over the interpretation of the distribution agreement of July 1, 1938. The trial court found that it did not obligate the defendant to reimburse plaintiff on account of such taxes paid and gave judgment for defendant. The appeal is grounded on an attack upon this finding.

The facts are fairly stated in respondent’s brief from which we quote:

“Consolidated Film Industries manufactured certain motion picture films in its laboratories in California and New Jersey. It sold these films to Republic Pictures Corporation of Delaware (formerly Cajo Company) for use in the State of California.

“On these sales either one of two taxes were assessed, i.e., the California Sales Tax on the sale of films manufactured and used in California, or, the California Use Tax on the sale of films manufactured in New Jersey for use in California. The sales tax was assessed against the Consolidated Film Industries and by it passed on to and paid by Republic of Delaware. The use tax was assessed against and paid by the Republic of Delaware.

“The Republic of Delaware licensed the Republic of New York, the plaintiff herein, to distribute the motion picture films generally throughout the country and the New York corporation in turn sublicensed the Republic of California (defen[355]dant’s predecessor) to distribute the films in question in the State of California. . . .

“The contractual arrangements between Consolidated Film Industries, Republic of Delaware and Republic of New York were unknown to Republic of California. . . .

“Prior to the first part of 1936 films manufactured in California were furnished by Republic of New York to Republic of California and the sales tax was paid by Republic of Delaware ; that thereafter films manufactured in New Jersey were furnished and the sales tax was avoided. No use tax was ever paid until late in 1940. . . .

“Republic of Delaware was assessed additional penalties and interest for its failure to make the proper returns and payments. Republic of New York paid these assessments although the State of California never at any time asserted any liability against anyone other than Republic of Delaware. Republic of New York claimed that it was bound to do so by its contract with Republic of Delaware, a contract to which Republic of California was not a party and of which it was unaware.