Opinion
10-18-1956
Carl M. FRAENKEL, d/b/a The Matthis Company, Plaintiff and Appellant, v. J. G. TRESCONY, Defendant and Respondent.* Civ. 16883.
Jack Flinn, Carroll F. Jacoby, San Francisco, for appellant. John W. Hutton, King City, for respondent.
Carl M. FRAENKEL, d/b/a The Matthis Company, Plaintiff and Appellant,
v.
J. G. TRESCONY, Defendant and Respondent.*
Oct. 18, 1956.
Hearing Granted Dec. 13, 1956.
Jack Flinn, Carroll F. Jacoby, San Francisco, for appellant.
John W. Hutton, King City, for respondent.
BRAY, Justice.
The questions posed by this appeal by plaintiff from a judgment in favor of defendant are whether the following findings are supported (they bear on the question of whether the work was agricultural, exempting plaintiff under section 7049, Business and Professions Code, from the requirement of a contractor's license under section 7031):
1. That the grain elevator was not constructed on a farm, either actually or constructively.
2. Was the fact that the elevator was to have some rental use fatal to the exemption? Record.
Plaintiff, a licensed mechanical engineer, and defendant entered into a written contract for the construction for defendant of a grain elevator and storage facility 1 on certain premises owned by defendant. Upon completion of the work plaintiff sued defendant for the balance claimed due under the contract. 2 At the trial it was stipulated that there were only two issues: (1) whether the construction was on defendant's farming land and incidental to his farming operations, thereby bringing the exemption of section 7049 into play, plaintiff admittedly not having a contractor's license; (2) the amount due. This appeal is limited to the court's finding on the first issue.
The court found that the elevator was constructed on land owned by defendant in the unincorporated town of San Lucas, at a location on Main Street (which is improved with business buildings and homes on town lots) and the Southern Pacific main line railroad tracks and highway 101, adjacent to the railroad depot and to buildings and commercial grain sheds and tanks of an individual; that the site is approximately 3 1/2 miles from defendant's farm and its only access therefrom is by public highway. This finding is not challenged. The court further found 'That said grain elevator and storage facility was designed with the intent that it would be usable primarily for the defendant own produce, but also for the storage of the grain of others on a rental basis; and that said structure was incidental to both farming and commercial operation by the defendant.' This finding is challenged, except as to the portion finding that the primary use was for defendant's own produce. The court also found, and the finding is challenged, that the elevator 'was not constructed on a farm, either actually or constructively * * *.' The court's judgment was that as the elevator was not constructed on a farm and was to be used to some extent for commercial purposes, the exemption of section 7049 did not apply, and plaintiff, not having the contractor's license required by section 7031, could not recover herein. 1. Was the Construction on a Farm?
It is conceded that plaintiff must have the contractor's license required by section 7031 unless the work contracted for is 'farming' or 'agriculture' which section 7049 exempts from the requirements of section 7031. Section 7049 reads: 'This chapter does not apply to any construction or operation incidental to the construction and repair of irrigation and drainage ditches of regularly constituted irrigation districts, reclamation districts, or to farming, dairying, agriculture, viticulture, horticulture, or stock or poultry raising, or clearing or other work upon land in rural districts for fire prevention purposes, except when performed by a licensee under this chapter.' (Emphasis added.)
In Fraenkel v. Bank of America, supra, 40 Cal.2d 845, at page 850, 256 P.2d 569, at page 572, the court said' 'So here, if the grain elevator was built on defendant's farm and designed to function as an incidental part of his own farming operations rather than as a commercial enterprise * * * there would be a factual basis for holding such structure to be within the terms of the exemption as a 'construction or operation incidental to * * * farming'. * * *' At the trial both parties assumed as the law of the case the apparent holding in the Fraenkel case (and its companion case, the former appeal herein) that to come within the exemption of section 7049 the work must be (1) on a farm and (2) incidental to farming operations. 3
Accepting the Supreme Court requirement that the construction must be on 'defendant's farm,' was the site of the elevator a part of defendant's farm? We believe that within the intent of section 7049 it was. In the Bank of America case the court said, 40 Cal.2d at pages 849-850, 256 P.2d at page 571: 'In exempting construction 'incidental' to farming, agriculture, and allied occupations from the licensing requirements, the Legislature undoubtedly considered that such construction would include only those structures so closely appertaining to and necessary for the conduct of the designated occupations that they may reasonably be dissociated from the objects and purposes of the licensing law. * * * Not only are the nature of the activity and its close relationship to agriculture among the elements to be considered, but an additional factor is the nature of the business conducted by the person for whom the service is rendered. Thus, specialized services on a farm * * * performed for the farmer himself and constituting an essential contributing factor to the efficient operation of his farming enterprise, are regarded as part of the general farming operation * * *'. Plaintiff testified that before the contract was entered into defendant wanted the elevator built on his own land, showing him concrete foundations of an old barn; that plaintiff advised defendant that those foundations were unsuitable and it would be more advantageous to build the elevator near a railroad track. Defendant then stated that his sister had land near the railroad which he thought he could obtain from her. This he did. Suppose that the elevator had been built just across the highway from the 5,000 acres owned by defendant, on a site purchased for and limited to the elevator, could it be contended that the site was not a part of defendant's farm? The use by a farmer of a grain elevator for storage of his own grain produced on his own premises is certainly incidental to his farming operation and in the sense required by section 7049 is likewise a part of his farm. Particularly is this so when it is realized that the logical place for an elevator is near a railroad, and unless the farmer is fortunate enough to have a railroad adjacent to the land where his crops are grown, he must necessarily build such a structure where the railroad exists. The fact that to construct the elevator at the most convenient and adequate spot meant constructing it approximately 3 miles from the growing operations would in no wise make the elevator and its use any the less incidental to his farming operation, nor the site any less a part of his farm. It is undoubtedly true that if 'on a farm' means on a single tract of land which is used for growing crops, the elevator was not 'on a farm'. But such an interpretation of this phrase seems much too narrow in this day and age. 'A farm' is no longer predominantly thought of as a unitary acreage where all the operations pertaining to that farm are carried on. Farming is now commonly a more complex operation primarily because of the advancements in mechanization of farm machinery and transportation. No longer is a farmer restricted by the practical factors of time and apace to operating on a single tract. He may now conduct an efficient operation on multiple widely-scattered tracts. Applicable here is the following from Irvine Co. v. California Emp. Comm., 27 Cal.2d 570, 582-583, 165 P.2d 908, 915: 'Agriculture, like industry, has developed, changed and grown under modern conditions incident to the adoption of new methods and the advent of improved machinery, including the use of electrical power and the internal combustion engine. This has also brought about, in some cases, changes in the methods and ways of doing the necessary work in carrying on agricultural operations. * * * A large part of agricultural production now takes place on large farms, the efficient operation of which would, in many instances, have been impossible a generation ago, and which systematically utilize modern methods and machinery. But despite such changes in methods and means of operation, they still are agricultural enterprises and are operated for the purpose of producing agricultural crops. It may fairly be said that the determinative consideration here is whether the act in question contemplated 'agricultural labor' under the conditions then actually existing and well known to the Legislature, and as broadly applying to the business of agriculture in its entirety, or whether the general exemption was intended to be limited to 'agricultural labor' under primitive conditions or as pursued a century or more ago, and to apply only insofar as those conditions and methods may still survive. Reasonably viewing the generality of the term, it would seem that it was intended to cover and apply to the conditions prevailing when the act was adopted and under which agriculture now flourishes throughout the state.'
We can well paraphrase the following portion of the paragraph above quoted by inserting the words 'farming' and 'agriculture' for the words "agricultural labor." 'It may fairly be said that the determinative consideration here is whether the act in question contemplated * * * ['farming' and 'agriculture'] under the conditions then actually existing and well known to the Legislature, and as broadly applying to the business of agriculture in its entirety, or whether the general exemption was intended to be limited to * * * ['farming' and 'agriculture'] under primitive conditions or as pursued a century or more ago, and to apply only insofar as those conditions and methods may still survive.'
In determining that the Supreme Court did not intend a narrow interpretation of the expression 'on a farm' used in the Bank of America case, the following language from that case is significant: '* * * the Legislature undoubtedly considered that such construction would include only those structures so closely appertaining to and necessary for the conduct of the designated occupations that they may reasonably be dissociated from the objects and purposes of the licensing law. Thus, the Legislature may well have had in mind prevailing conditions in many rural districts where there are few, if any, licensed contractors and where other persons in the area having the necessary training and experience are readily available for doing various constructions jobs as the need may arise. Moreover, many farmers themselves develop special skill in various construction trades qualifying them for contracting among themselves for undertaking the erection of structural improvements upon neighboring farms and yet they are not regularly licensed for such occasionally performed work.' 40 Cal.2d at p. 849, 256 P.2d at page 571; emphasis added.
It is inferable that the Legislature in taking cognizance of the situation described in this quotation, also took cognizance of the factual situation which seems to obtain in the instant case in relation to large farming corporations, particularly grain farming not far from a railroad. The word 'on' does not necessarily have a fixed, rigid, narrow meaning. The word 'on' is frequently understood to mean "with respect or pertaining to". Jerome H. Sheip Co. v. Amos, 100 Fla. 863, 130 So. 699, 704; 29 Words and Phrases, p. 426. It may mean 'near, or adjacent to'. O'Mara v. Jensma, 143 Iowa 297, 121 N.W. 518, 519; Fisher v. Sun Ins. Co. of London, 74 W.Va. 694, 83 S.E. 729, 730, L.R.A.1915C, 619; Hinton v. Vinson, 180 N.C. 393, 104 S.E. 897, 900; 29 Words and Phrases, p. 422. In interpreting 'on a farm' in the Bank of America case it is important to bear in mind the discussion in California Employment Commission v. Butte County, etc., Ass'n, 25 Cal.2d 624, 636, 154 P.2d 892, 897, where the Supreme Court was considering 'agricultural labor' "incident to ordinary farming operations". There the court said, 25 Cal.2d at page 636, 154 P.2d at page 897: 'Thus, to come within the 'agricultural labor' exemption, off the farm services must be an integral part of farming operations performed for the farmer as such--not for a third person separate and apart from such fundamental concept.' It thereby recognized that a farming operation could be conducted 'off the farm', that is, off the growing area of the farm, provided that the 'off the farm' operation was not only incidental to farming but to the farming of the employer. Thus, in the Bank of America case the court required (1) that the construction be incidental to the farming operation of the owner and (2) that it be 'on a farm' in the sense that the operation is limited to the owner's own farming operation. An operation might be incidental to the farming operation of a farmer, but not restricted thereto. Thus a farmer building an elevator principally for commercial purposes, would nevertheless be using it incidentally for his own farming operation if he used it for storage of his own grain, and yet such storage might be a minor portion of the elevator business. But the Supreme Court said that in addition to the construction being for a purpose incidental to his farming operation, it must be 'on a farm' in the sense that it is primarily for that purpose rather than secondarily.
Defendant contends that the specially concurring opinion in the Bank of America case proves that the majority opinion intended to give a very narrow interpretation of the phrase 'on a farm', because the concurring opinion points out in effect that although the only limitation placed by section 7049 upon the type of construction exempted is that it must be 'incidental * * * to farming,' and the majority opinion might be construed to require the construction to be on the physical limits of the growing area. Such is not necessarily the fact. The interpretation of the writer of the concurring opinion is not necessarily the interpretation which the majority had in mind. Moreover, the writer of the concurring opinion may have written for the purpose of suggesting by way of precaution a means of broadening sometime in the future the seemingly narrow interpretation of the expression 'on a farm'.
A somewhat similar situation was presented by the majority and the specially concurring opinions in People v. Gory, 28 Cal.2d 450 and 459, 170 P.2d 433, involving the question whether or not a charge of violating the narcotics law included, as an element, knowledge by the defendant that the substance possessed or sold was of a narcotic character. Some things said in the majority opinion seem susceptibel to the interpretation that all the defendant needed to know was that he possessed or sold this substance, not that he needed to know that it was of a narcotic character.
The write of the specially concurring opinion said in part: 'I do not agree to the implication, if there be such, that mere conscious possession of an object, not knowing its true character (as, for example, possession of marijuana believed in good faith of be ordinary tobacco), any more than conscious possession of an object lawful in itself but within which, unknown to the possessor, contraband is concealed, constitutes a criminal act.' 28 Cal.2d at page 459, 170 P.2d at page 438.
Later, in People v. Cole, 113 Cal.App.2d 253, 258, 248 P.2d 141; People v. Candiotto, 128 Cal.App.2d 347, 350-353, 275 P.2d 500; People v. Winston, 46 Cal.2d 151, 293 P.2d 40, is was held that the majority opinion in the Gory case did not mean what the concurring opinion said it implied. Thus, here, the statements in the concurring opinion in the Bank of America case do not require a narrow interpretation of the expression 'on a farm' as used by the majority.
The test as to whether land not attached to the particular land upon which growing operations are carried on is a part of a farm, is the use to which the former is put. As stated before, storage of grain produced on the owner's own property is a use necessarily incidental to and a part of his farming operation. 2. Commercial Use.
The court found that while the purpose of the elevator was primarily for the storage of defendant's own produce, it was also to be used for the storage of the grain of others on a rental basis. Defendant contends that the latter part of the finding is not supported by the evidence. The finding is based upon defendant's own testimony. He stated that although he proposed to use the elevator for his own crops, he intended that if he had a short season he would rent storage for his neighbors. He had been told by the owner of the adjoining elevator that he would rent storage if defendant had space. He stated that plaintiff had told him that he could make money renting the elevator. Was the fact that rental of space not necessary to defendant's use was contemplated fatal to the exemption? In considering this question, it must be remembered that a narrow interpretation of this question will result in the plaintiff, who according to his testimony was told by defendant that the elevator was to be used only for defendant's own grain, being denied a recovery for his work and material, and defendant will, by a technicality, receive an unconscionable gain.
The building consisted of a concrete dump put where trucks would unload grain into a bucket elevator which would raise the grain to an elevation where it could be spouted into the five tanks erected to store it. The fifth tank was not include in the original contract but was added during the construction of the rest of the building to be used specially for defendant's seed grain. The size of the structure was determined from the acreage and past harvests as stated by defendant. Defendant claimed to be producing 800-1000 tons of grain per season and desired such capacity. Defendant told plaintiff that the elevator was for use in his farming operations and mentioned nothing about using the elevator for commercial renting or storage or any use other than for his own grain. After the construction was started defendant told plaintiff that his crop came out exceptionally well that year and he wanted another storage bin for his seed grain. Defendant did not have a warehouseman's license. Defendant borrowed money from the Commodity Credit Corporation for the erection of the elevator. The note he signed stated that the loan was made "for the purpose of enabling the borrower to construct farm storage facilities." Defendant understood that the regulations of the Commodity Credit Corporation allowed such loans only for the purpose of erecting storage facilities for the farmer's own produce, and not for commercial or other purposes. This regulation was read to defendant when he signed the note: "Storage loans will not be available to increase storage facilities for commodities purchased or for commodities in which the borrower has no interest in the production." Defendant testified that when he first discussed the capacity of the elevator with plaintiff he said he would need 800 tons, which was the capacity contemplated in the contract. The additional 200 tons capacity was added later as above set forth. The capacity of the elevator as built was 1000 tons. In actual use defendant used the elevator for his own grain and only rented the excess storage space. Thus, the first year he stored 800 tons of his own grain, and 200 tons of rental; the next year he stored 700 tons of his own grain and 300 on rental. We doubt that the rental of excess space changes the purpose of the elevator's use to commercial. In determining this question, it must be borne in mind that it must be determined as of the date of the construction. What was the intended use? The mere fact that after construction the building was used for a different purpose than originally contemplated, if it were, would not relate back to the period of the construction so as to deprive the contractor of payment for his services and material. For example, suppose that a contractor agreed to construct a barn for a farmer who represented that it was to be used for storage of hay, and that after being finished, the farmer used it as a public dance hall, could the farmer successfully claim that he did not have to pay for the barn's construction because the contractor did not have a license? Obviously not. So here, as far as the contractor was concerned, this was to be an elevator for the farmer's own crops, built for a farmer who had acreage enough to reasonably require the storage space provided, had no warehouseman's license, and who had obtained a loan from the Commodity Credit Corporation based upon his representation that he would only use the building for his own crops. The plaintiff denied that defendant told him he intended to rent excess space. The court did not find whether defendant did; it only found that the defendant intended to rent excess storage space. Assuming, however, that defendant told plaintiff that he intended to rent space if his crops did not come up to expectations, we do not believe such fact, in view of all the circumstances, required plaintiff to obtain a contractor's license. Defendant did not intend to and did not enter into a commercial enterprise. We see no reason why the renting of the amount of excess space here would convert defendant's operations in any sense or part into a commercial enterprise. Certainly in constructing a farm building, a farmer must allow space for variance in the size of his crops, and when a smaller crop occurs, he should have the right to rent his excess space. Suppose that during vacation the farmer should rent his home for a month or two, while he is on a trip with his family, such fact would not make the home any less a farmhouse.
Machinery Engineering Co. v. Nickel, 1951, 101 Cal.App.2d 748, 226 P.2d 78, is not in point. There the plaintiff constructed a large and complicated hay mill adjacent to extensive hay lands owned by several of the defendants. Admittedly the mill was not to be connected with, used as a part of, or in connection with, any particular farm. It was to be used to mill the hay of others than the six individuals who contracted for its construction. It was intended to be 'a commercial enterprise * * * to grind the hay of farmers generally * * *.' 101 Cal.App.2d at pages 751-752, 226 P.2d at page 80. Nor are the facts in California Employment Commission v. Butte County, etc., Ass'n, supra, 25 Cal.2d 624, 154 P.2d 892, at all comparable to those in our case. There the defendant was an incorporated cooperative association. The warehouse was to service nonmembers as well as members. As said by the court, the defendant intended to operate 'a profitable public warehouse business.' 25 Cal.2d at page 636, 154 P.2d at page 897.
There is no evidence that defendant's estimate of the capacity required for his crops was not made in good faith, nor that his statement that his crops ran from 800 to 1000 tons per year was untrue. The fact that defendant contemplated renting storage in the event that the crops in any year did not come up to expectancy did not justify a finding that defendant was building the elevator for 'commercial operation.'
The judgment is reversed.
PETERS, P. J., and FRED B. WOOD, J., concur. --------------- * Opinion vacated 309 P.2d 819. 1 Hereafter referred to as 'elevator.' 2 Formerly plaintiff appealed from an order sustaining defendant's demurrer to his complaint without leave to amend. Fraenkel v. Trescony, 40 Cal.2d 905, 256 P.2d 573. That appeal was consolidated with his appeal in Fraenkel v. Bank of America, 40 Cal.2d 845, 256 P.2d 569, hereafter discussed, the decision in which was expressly made controlling of both appeals. 3 We have some doubt as to whether the setting forth of the rule in those cases was not dicta, as the only questions before the court were (1) the propriety of sustaining a demurrer to a complaint which alleged neither that plaintiff had a contractor's license nor that the proposed uses of the building were those for which exemption was allowed, and (2) the propriety of denying plaintiff the right to amend. See Millsap v. Balfour, 158 Cal. 711, 714, 112 P. 450; Tomaier v. Tomaier, 23 Cal.2d 754, 757, 146 P.2d 905, for the proposition that dictum cannot establish the law of the case. However, the case was tried on the sole theory that the test of exemption is as set forth in the Bank of America case.