Court Opinion

ID: 9790190
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:48:39.431741+00
Date Added: 2024-06-11T07:37:27.228347
License: Public Domain

CARTER, J.
I dissent. The primary issue presented in this case is whether or not there was a sale in California within the terms of the Retail Sales Tax Act. (Stats. 1933, p. 2599; Deering’s Gen. Laws, 1937, Act 8493.) It should be noted at the outset that the determination of whether a transaction constitutes a sale under taxing statutes is not necessarily governed by the technical rules applicable between seller and buyer, and that the substance of the transaction rather than its form will be examined. (See Hellebush v. Commissioner of Internal Revenue, 65 F.2d 902; Embry Realty Co. v. Glenn, 116 F.2d 682.) In that connection this court has held that' it will look through the veil of corporate entity to the actual circumstances in ascertaining whether a corporation is subject to the Bank and Corporation Franchise Tax Act. (See H. A. S. Loan Service, Inc. v. McColgan, 21 Cal.2d 518 [133 P.2d 391, 145 A.L.R. 349].)
A sale is defined by the Retail Sales Tax Act as “any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property, for a consideration, and includes the fabrication of tangible personal property for consumers who furnish either directly or indirectly the materials used in the fabrication work and the furnishing, preparing or serving for a consideration of any tangible personal property consumed on the premises of the person furnishing, preparing, or serving such tangible per*51sonal property. A transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price shall be deemed a sale.”
In the light of that definition I believe it is clear that the instant transaction constituted a sale in California. (1) Both, the seller, Standard Oil Company of California, and the buyer, Southern Pacific Company, maintain places of business in California. (2) The contract for the sale of the oil was made in California by the contracting parties. (3) The purchase price for the commodity was paid in California. (4) The seller had its oil supply in California. (5) It delivered custody of the oil to the buyer in California. (6) The price paid for the oil transported by the buyer to Nevada, Arizona and Oregon was the same as that charged for deliveries made at the point of shipment plus freight charges. In that connection, however, the seller prepaid the freight charges which were repaid by the buyer. (7) The tank cars required by the buyer “for receipt of deliveries” by the seller were furnished by the buyer and placed for loading by the seller, a clear indication that delivery was in fact made in California. The only feature of an ordinary sale in California that might be said to be lacking was, that there was no delivery of the oil in. California; that delivery under the contract took place outside of California and hence the sale was made there.
First, there are conflicting provisions in the contract with regard to delivery as seen from the seventh point above mentioned. From that provision it may reasonably be concluded that the legal delivery was in fact made in California when the oil was loaded from the seller’s supply depot into the buyer’s tank cars. This court may make such an interpretation inasmuch as the interpretation of a contract is one of law where there is no evidence outside the contract.
Second, the substance of the transaction speaks for itself. To accept the language of the contract that there was no delivery until the oil reached a point outside of California, and taking into consideration the purported dual capacity of the buyer, as both a buyer and a common carrier, as being distinct from each other, is to pursue form rather than substance. The facts of the matter are that the possession of the oil was delivered to the buyer in California and that possession was pursuant to a contract of sale. The definition of *52a sale in the tax act states that it is a transfer of possession or title or both. As between the parties the title may not have passed until the oil passed the California state line, and under the tax act a mere transfer of possession alone may not be taxable. But inasmuch as title need not necessarily pass in order to bring the transaction within the tax act, a transfer of possession under and pursuant to a contract of sale certainly constitutes a sale within the meaning of the act. It cannot be doubted that the transfer of possession to the buyer in California was pursuant to the contract of sale. True, the . bill of lading and payment of shipping charges by the seller were indicative of a transfer pursuant to a shipping arrangement. But that entire arrangement was set forth and fixed in the contract of sale. Everything in connection with the sale was completed before the oil left California except the anomalous circumstance of the buyer transferring possession from itself as carrier to itself as buyer after the oil arrived at a designated point outside of California. Can it be said that this mere fiction changed the transaction from a taxable to a nontaxable one under the law of California? I think not. Regardless of the rights and obligations of the parties to the contract, as between themselves, the taxing statutes should not be so easily evaded.
In my opinion the judgment should be reversed.
Appellant’s petition for a rehearing was denied May 1, 1944. Carter, J., voted for a rehearing.