Director of Agriculture and various growers

Defendants, the Director of Agriculture and various growers and handlers of avocados, appealed a judgment of the Superior Court of San Diego County (California), which granted the relief requested by plaintiffs, various growers and handlers of avocados, and enjoined the Director from enforcing a marketing order for the promotion of California avocados under the California Marketing Act, Cal. Agric. Code §§ 1300.10-1300.29.

Persons associated with the avocado industry requested the Director to cause a public hearing to be held on a proposed marketing order for avocados. The director had no lists of producers available at that time, so he prepared such a list from the reports given him by handlers in response to the statutory notice requesting such. The handlers furnished the Director with the names of persons who had sold avocados to them. Visit the best Los Angeles employment lawyer when you face any employment issues.

From these names a list of producers was compiled, and notice of the public hearing, copies of the proposed marketing order, and written assent forms were sent to them. It came to the Director's attention that some of the persons on his list were not producers within the statutory definition of that term in that they were not in the business of producing avocados but were "back-yard growers." The Director sent out a letter to growers who had sold 1,000 pounds or less of avocados and from the responses, the Director eliminated certain growers he determined to not be producers. The court held that the action of the Director in correcting his list of producers was not arbitrary or capricious and constituted a valid discharge of the duties imposed upon him by statute.

The court reversed the judgment.

Plaintiff City levied a business tax measured by gross receipts on defendant taxpayer, a limited liability company doing business within the city. The taxpayer disputed the tax, and the City filed a complaint for money due on the unpaid assessment. Following a court trial, the Superior Court of Los Angeles County, California, entered judgment in favor of the taxpayer. The City appealed.

The taxpayer was a limited liability company owned by a financial corporation. The taxpayer elected for tax purposes to have its separate entity disregarded and to be treated as a division of the financial corporation, against which the business tax could not be enforced. The financial corporation paid a higher tax rate "in lieu of" other taxes, including municipal taxes, and, as a result of its election, the taxpayer's net income was subject to tax at the higher rate of the parent financial corporation. The City argued that the "in lieu" tax provisions were expressly applicable only to the financial corporation and thus that a valid business tax could be imposed against the limited liability company. The court disagreed and held that the taxpayer was entitled to the benefit of the in lieu provisions of Cal. Rev. & Tax. Code § 23182. The taxpayer's separate existence as a limited liability company was disregarded. Thus, the higher rate of tax to which its net income was subject was in lieu of the City's gross receipts business tax. This conclusion was supported by the statutes, the legislative purpose of tax parity between banks and financial corporations, and common sense.

The court affirmed the judgment of the trial court and awarded costs on appeal to the taxpayer.

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