7 N.W.2d 691 | Minn. | 1942
Lead Opinion
On May 1, 1939, at defendant's maintenance bases at Chicago, Minneapolis, Fargo, Billings, Spokane, and Seattle, mechanics were employed and the necessary tools and equipment provided for service, repair, and maintenance work. Major repairs and overhaul work were done at St. Paul, where defendant maintained its airplane and engine overhaul base.
At all of the stops, with the exception of St. Paul, defendant employed, on the date stated above, a radio operator and station manager. Baggage handlers, ticket sellers, information clerks, dispatchers, and the like were kept at many of the stops. At all of the stops defendant either owned or leased buildings for housing the operations conducted at these points. At several of the ports at which the planes landed, defendant owned or leased hangars and office space. The flight crews, including pilots, copilots, and stewardesses, were located at definite bases at which they began and ended their runs. One of these was at Minneapolis. The routes of defendant's planes were along fixed paths, marked by radio stations operated continuously by the Civil Aeronautics Authority. Also along the entire routes, at regular intervals, were emergency landing fields maintained by the same authority. These routes were always followed except when weather conditions made it necessary to pursue another course for brief periods.
While flying in the course of defendant's operations, its airplanes were constantly changing from place to place along its routes, and flew from state to state. Their location was constantly changing from one county to another and from one state to another, except for brief stops at the airports and occasional lay-ups for repairs and overhauling.
All of defendant's airplanes were in Minnesota from time to time during the year 1939, carrying passengers, property, and *398 mail, and they came here also for the purpose of periodic overhauling.
On May 1, 1939, there were present in this state for at least part of the day 17 airplanes. On that date, the total length of the routes over which defendant was operating its scheduled flights was 2,466 miles. Of this total, 320.2 miles were maintained in this state. The scheduled plane mileage on that date over all of these routes was 14,414 miles, of which 2,348.4 were in Minnesota.
Defendant filed its tax return for the year 1939, in which it included a portion of its airplanes at the full value of $77,000. This valuation was based on planes in the state on May 1, 1939. Later, an additional assessment was made by the county auditor in which he included the remaining airplanes owned by the defendant at the full value of $511,500.
From the foregoing facts the lower court concluded that all of the planes "had a situs for taxation in the state of Minnesota and not elsewhere" and accordingly directed judgment to be entered for the taxes upon all of the planes in the sum of $16,913.60, together with penalty thereon, making a total of $18,266.68.
The question before us is whether this state may impose a tax upon all of defendant's planes. The right to do so is attacked on the grounds that it is a violation of the due process clauses of the state and federal constitutions (Minn. Const. art.
Taking up first the claim that the tax is a violation of due process, the general rule is that a tax by a state which has no jurisdiction to impose it violates the constitutional prohibition against taking property without due process of law. For present purposes it is unnecessary to consider separately the due process clauses of the state and federal constitutions. If under this clause of the federal constitution this state may impose a tax upon all of the planes owned by defendant, it may also do so under the state constitution. The state provision was not intended to be more restrictive *399
than that of the federal constitution. State v. Weyerhauser,
"It is our aim to follow the decisions of the Supreme Court of the United States, since we are construing a provision of the federal constitution, although our own state constitution contains a similar provision."
If, therefore, the tax may be imposed under the due process clause of the
The airplane has raised many unique legal questions in other fields. We do not, however, consider it of such a nature that it must be placed in a new and independent category so far as taxation is concerned. It is but personal property used for the transportation of persons and goods. Its distinction lies in that it leaves the ground and travels through the air. But this is not of significance here. The sovereign power and jurisdiction of a state is not limited to the ground. An airplane in the air over the territory of a state is within the state and subject to its sovereign power. As the Supreme Judicial Court of Massachusetts has said in Smith v. New England Aircraft Co. Inc.
"It is essential to the safety of sovereign States that they possess jurisdiction to control the airspace above their territories. It seems to us to rest on the obvious practical necessity of self-protection." See also People v. Katz,
The question we have, then, is the broader one of when and under what conditions the state of the owner's domicile loses jurisdiction to tax tangible personal property moving about from state to state. May the state of domicile tax the whole thereof? *400
Two classes of cases have particular bearing on this question. The first deals with ships upon the high seas. It has been held in those cases that where a ship sails from its home port and into the port of a foreign state and stays there but temporarily for the purpose of loading or unloading it cannot be taxed by the latter state. Hays v. Pacific Mail S. S. Co. 58 U.S. (How.) 596,
In some of these cases the court relied upon the maximMobilia sequuntur personam; immobilia situm. Mobilia non habentsequelam. Another reason given was that the property had not "become incorporated with other personal property of the state" seeking to impose the tax. Hays v. Pacific Mail S. S. Co. 58 U.S. (How.) 596, 598,
If the ship has obtained an actual situs in a state other than that of the home port, that state might validly subject the ship to the ordinary property taxes of that state. Old Dominion S. S. Co. v. Virginia,
The second class of cases relating to the question here involved deals with the taxation of rolling stock of railroad companies. *401
For the purpose of determining whether such property has acquired a situs in a state foreign to that of the domicile of the company, Pullman's Palace Car Co. v. Pennsylvania,
Defendant contends that the principle of the Pullman Car decision,
That leaves the further question whether the acquisition of a situs in a foreign state removes the jurisdiction of the state of the owner's domicile to tax. The cases so far discussed do not, except by incidental comment, bear upon that problem. They deal only with the right of the foreign state to tax. So far as a specific item of tangible personal property is concerned, the question was decided in Union Refrigerator Transit Co. v. Kentucky,
It is the claim of defendant that the Transit Company case,
A careful examination of the Transit Company case will disclose that it does not go to the length so claimed for it. It appears that there Kentucky sought to impose what was treated as a property tax upon all the railroad cars owned by the transit company, which was incorporated in Kentucky. The headquarters for its cars were located at Milwaukee, Wisconsin, at which point they were rented to shippers who used them for the carrying of freight in the United States, Canada, and Mexico. The court held that Kentucky had no jurisdiction to tax all the cars of the company. The record in the case reveals further that some of the cars were in fact constantly coming into and going out of Kentucky, and that the state trial court had found that a definite average number of cars was in the state during the year for which the taxes were imposed. But it is also evident that there were large numbers of the company's cars which were never within the state at any time during the tax period. The opinion of the court makes it clear that it was this last fact which the court deemed controlling. The court states the question before it to be (
In defining the basis upon which the court denied the right to tax, it said (
"The power of taxation, indispensable to the existence of every civilized government, is exercised upon the assumption of an equivalent rendered to the taxpayer in the protection of his person and property, in adding to the value of such property, or in the creation and maintenance of public conveniences in which he shares, such, for instance, as roads, bridges, sidewalks, pavements, and schools for the education of his children. If the taxing power be in no position to render these services, or otherwise to benefit the person or property taxed, and such property be wholly within the taxing power of another State, to which it may be said to owe an allegiance and to which it looks for protection, the taxation of such property within the domicil of the owner partakes rather of the nature of an extortion than a tax, and has been repeatedly held by this court to be beyond the power of the legislature and a taking of property without due process of law."
It is plain that the court in denying the right of Kentucky to tax was speaking about those cars which were permanently in other states and did not reach Kentucky at all. The facts did not raise the question, and there is nothing to indicate that the court intended to hold, that cars going from Kentucky and from time to time returning to it could not be taxed by that state because they had contributed to an average which had acquired a situs in another state. The only question before the court was the validity of the tax on all of the company's cars, some of which were permanently in other states. It is noteworthy that the court cites and states the holding of the Pullman Car case without suggesting that it had any direct application to the facts before it. We conclude, therefore, that the case does not sustain the claim of defendant that this state has lost the right to tax all its planes because an average of them had obtained a situs in other states.
The only other cases requiring consideration upon this point are New York ex rel. N.Y. C. H. R. R. Co. v. Miller,
In the Johnson Oil Ref. case,
We are left, therefore, without any controlling authority to guide us, and in its absence we must resort to the basic constitutional principles upon which the right or jurisdiction of a state to tax depends. In so doing, we cannot rest upon any logical application of some legalistic concept ofsitus. When we say that property has a situs within a state for the purposes of taxation we mean only that it is proper and consistent with due process that that state may impose the tax. There is no constitutional justification for giving the concept a controlling power of its own.
For a time, under the decisions of the United States Supreme Court, this was not true. An attempt was made to use the concept of situs with respect to both tangible and intangible property for the purpose of limiting the power to tax to a single state. See Farmers L. T. Co. v. Minnesota,
We look, therefore, not to whether another state is entitled to tax, but rather to whether the power to do so exists in this state. Property may have a situs, if we wish to use that term, in more than one state, depending upon whether the basic considerations are present which give a state the right to tax under the requirements of due process. These considerations have repeatedly been stated to be, first, the sovereign power of the state over the person or property, and, second, the rendering in return of a substantial benefit or protection to the person or property taxed. Thus, in the recent leading case of Curry v. McCanless,
"The power of government and its agencies to possess and to exclude others from possessing tangibles, and thus to exclude them from enjoying rights in tangibles located within its territory, affords adequate basis for an exclusive taxing jurisdiction. When we speak of the jurisdiction to tax land or chattels as being exclusively in the state where they are physically located, we mean no more than that the benefit and protection of laws enabling the owner to enjoy the fruits of his ownership and the power to reach effectively the interests protected, for the purpose of subjecting them to payment of a tax, are so narrowly restricted to the state in whose territory the physical property is located as to set practical limits to taxation by others. Other states have been said to be without jurisdiction and so without constitutional power to tax tangibles if, because of their location elsewhere, those states can afford no substantial protection to the rights taxed and cannot *408 effectively lay hold of any interest in the property in order to compel payment of the tax."
Again, in Wisconsin v. J. C. Penney Co.
"A state is free to pursue its own fiscal policies, unembarrassed by the Constitution, if by the practical operation of a tax the state has exerted its power in relation to opportunities which it has given, to protection which it has afforded, to benefits which it has conferred by the fact of being an orderly, civilized society * * * [The] test is whether property was taken without due process of law, or, if paraphrase we must, whether the taxing power exerted by the state bears fiscal relation to protection, opportunities and benefits given by the state. The simple but controlling question is whether the state has given anything for which it can ask return."
See also quotation, supra, from Transit Company case,
We need not consider whether all the cases can be logically reconciled with the principles thus laid down. It is sufficient that, particularly in the recent cases, they have been insisted upon and made the criteria for the constitutional basis of the power to tax. It is our duty to follow them.
Applying these principles in this case, we have no difficulty in sustaining the tax of this state upon all the planes owned by defendant. The power of this state over defendant and the property taxed was present. Defendant was incorporated here. Its principal place of business is located in this state, and all the planes at some time or another come within its borders. The benefits conferred upon defendant by the government and laws of this state in relation to all of defendant's planes are equally clear. The policies and decisions made by defendant in connection with the operations of its planes were made here and under the protection and benefit *409 of the laws of this state. The manner and extent of their operations were determined and directed from this state. Particularly significant is the fact that when planes were in need of major repairs and overhauling the necessary repairing and overhauling were done here. These benefits did not cease the moment the planes crossed the border into another state. They continued and contributed to the successful operation of the planes throughout the course and scope of their operations.
There is, therefore, no violation of due process in the taxation by this state of all the planes. There was a fair basis in the power of this state over defendant and its planes and in the benefits conferred with respect to this property upon which the tax may rest. We hold, therefore, that the tax here in question on all the planes was a valid one.
Our decision does not rest upon any application of the discredited maxim Mobilia sequuntur personam; immobilia situm.Mobilia non habent sequelam, nor upon the bare fact that defendant was incorporated here. A more substantial reason for the tax exists. The state is giving a real and substantial return for the tax it seeks to impose. Neither do we question the principle that a specific item of personal property, permanently located in another state, cannot be taxed here. That is not the case before us. We hold only that there is a fair basis upon which this state may impose the tax in question and that any right of another state to impose a similar tax upon some portion of the planes does not adversely affect that basis. It may well be that defendant will be required to pay taxes in other states upon some portion of its planes. If so, it is because, under the principles stated, a fair basis for the tax exists in those states also. In any event, on the facts as they appear before us and under the principles already stated, states other than this one would not appear entitled to tax to any greater extent than the average number of planes within its borders during the tax period. As stated in the concurring opinion of Mr. Justice Frankfurter in State Tax Comm. v. *410
Aldrich,
"Modern enterprise often brings different parts of an organic commercial transaction within the taxing power of more than one State, as well as of the Nation. It does so because the transaction in its entirety may receive the benefits of more than one government."
Whether or not it is economically wise or fair to impose the tax herein sustained we are not entitled to consider under the principles already stated. That question is more properly addressed to the legislature, whose prerogative and responsibility it is to enter into such considerations. The power to make a good law of necessity carries with it the power to make an unwise one. "A tax within the lawful power of a state" may not "be judicially stricken down under the due process clause simply because its enforcement may or will result in restricting or even destroying particular occupations or businesses." A. Magnano Co. v. Hamilton,
Defendant's second objection to the tax is equally without foundation. That the planes were engaged largely in interstate commerce does not deprive this state of the right to impose the tax. Property engaged in the transportation of interstate commerce may be subjected by a state to the usual nondiscriminatory property taxes if jurisdiction to tax otherwise exists. Pullman's Palace Car Co. v. Pennsylvania,
The provisions of the statutes relating to taxation of personal property are sufficiently broad to include all the planes of defendant. All nonexempt personal property owned by a resident is taxed. See Minn. St. 1941, §
The judgment of the lower court is affirmed.
Concurrence Opinion
The dissenting opinion of Mr. Justice Loring is based principally upon his interpretation of Johnson Oil Ref. Co. v. Oklahoma ex rel. Mitchell,
"Thus we have a situation much like that presented to us in the case at bar except that the Johnson company was incorporated in Illinois instead of Oklahoma, a matter which the United States Supreme Court and the majority here seem to regard as immaterial insofar as tangible property is concerned."
But an examination of the opinion of Mr. Chief Justice Hughes establishes the contrary. To quote (
"Appellant had its domicile in Illinois and that State had jurisdiction to tax appellant's personal property which had not acquired an actual situs elsewhere. 'The State of origin remains the permanent situs of the property notwithstanding its occasional excursions to foreign parts.' "
In support of this statement, the Chief Justice cites New York ex rel. N.Y. C. H. R. R. Co. v. Miller,
I not only fully but emphatically agree with Mr. Justice Loring that "to subject all the taxpayer's planes * * * to double or multiple taxation * * * would not only be unjust but would create a situation so burdensome to the airlines as materially to handicap their development and extension, so vital to the national interest."
As a court we cannot, however, concern ourselves with policy, a purely legislative question. Our only inquiry is power. It is an uncontroverted doctrine that courts will not consider the justice, wisdom, expediency, propriety, necessity, or policy of tax laws or other legislation. That cardinal principle is the basis of the circumspect avoidance by the judiciary of encroachment upon the exclusive domain of the legislature, a coequal branch of the government. 11 Am. Jur., Constitutional Law, pp. 802-3-4, 900, §§ 136-138, 198; 1 Cooley, Const. Limitations (8 ed.) 346; State v. Fairmont Creamery Co.
As recently as November 9, 1942, in the case of Wickard v. Filburn,
"An Act of Congress is not to be refused application by the *421 courts as arbitrary and capricious and forbidden by the Due Process Clause merely because it is deemed in a particular case to work an inequitable result."
Mr. Justice Pirsig has convincingly demonstrated that this state's power to tax defendant's entire fleet of airplanes exists so long as no part of it is permanently located in another state. I therefore concur in his conclusion, though reluctantly and not without suggesting that, for reasons so forcibly pointed out by Mr. Justice Loring, remedial legislation to correct any possible unfairness to defendant and other companies similarly situated be enacted without delay lest congress assert its undisputed power and authorize "the incorporation of airlines under national law and control of taxation."
Dissenting Opinion
I find my views at variance with the conclusion arrived at by the majority. I agree with them that, insofar as tangible personal property is concerned, the doctrine of mobiliasequuntur is outworn and discarded. See Union Refrigerator Transit Co. v. Kentucky,
I think the majority are misled by failing to distinguish between what that court has said in cases involving intangibles and what it has held in those involving tangible property. If the broad expressions used with reference to intangible property such as those used in State Tax Comm. v. Aldrich,
The Supreme Court has drawn a clear distinction between tangible personal property and intangible property in the application of due process. In Curry v. McCanless,
"Very different considerations, both theoretical and practical, apply to the taxation of intangibles, that is, rights which are not related to physical things. Such rights are but relationships between persons, natural or corporate, which the law recognizes by attaching to them certain sanctions enforceable in courts. The power of government over them and the protection which it gives them cannot be exerted through control of a physical thing. They can be made effective only through control over and protection afforded to those persons whose relationships are the origin of the rights. [Citing cases.] Obviously, as sources of actual or potentional wealth — which is an appropriate measure of any tax imposed on ownership or its exercise — they cannot be dissociated from the persons from whose relationships they are derived. These are not in any sense fictions. They are indisputable realities."
Therefore, the broad expressions with reference to the power and jurisdiction to tax contained in cases relative to intangibles, such as State Tax Comm. v. Aldrich,
It appears to me that it would be very unfortunate to extend to tangible property theories which have been applied to intangibles only. The Supreme Court has not done so. Should the habitual *413
use and flight of airplanes over the various jurisdictions be held to subject all the taxpayer's planes — not only a proper proportionate share of them — to double or multiple taxation on their full value, it would not only be unjust but would create a situation so burdensome to the airlines as materially to handicap their development and extention, so vital to the national interest. It would likewise be unfortunate for those states imposing the tax on the full value and would doubtless in the end result in congressional authorization of the incorporation of airlines under national law and control of taxation. See Mr. Justice Jackson's dissent, concurred in by Mr. Justice Roberts, in State Tax Comm. v. Aldrich,
The problem of taxation of airplanes engaged in scheduled aerial transportation is one of first impression. Airplanes span the continent in a few hours, passing over many jurisdictions in the course of a day's flight. A plane may be in any one state but one or two hours out of the 24, or even only part of an hour. In its very nature, aerial transport is largely interstate. If the operations of an airline were confined to the protection of any single state and to the benefits and opportunities conferred by the laws of that state, such a line would be of little importance in the vast field of air transport. If defendant's operations were confined to the state of Minnesota, doubtless two or three planes would answer its needs. Its ownership of the large number of planes here sought to be taxed is necessitated by its operations in interstate commerce, where it habitually and regularly subjects itself to the protection of other jurisdictions and receives the benefits afforded by the laws of other states, to whose sovereignty it becomes subject, except as it falls within the control of the federal government. In that regard there is no distinction between the benefit and protection afforded by Minnesota and that afforded by Illinois, Wisconsin, North Dakota, Montana, Idaho, or Washington. If the protection and benefit extended by state sovereignty *414 to these aircraft justifies a tax on the full value of all of them because they are continually traversing the air across this state and because at times they all come within its boundaries, then every state traversed by the air route may tax the whole number that flies over such state on the full value. If the tax imposed by Minnesota on the full value of all the planes used by defendant is sustained, it becomes not only a tax imposed for the protection afforded by Minnesota but a tax burdening the entire service of these planes throughout their route. In reality it assesses their owner as if its protection covered the planes throughout their route. Thus, it assesses for protection it does not furnish and which it has no power to furnish.
"The power of taxation, indispensable to the existence of every civilized government, is exercised upon the assumption of an equivalent rendered to the taxpayer in protection of his person and property." Union Refrigerator Transit Co. v. Kentucky,
I am in full accord with the view that the law as applied to steamships where the sovereignty of the flag follows the ship throughout the voyage does not apply to airplanes flying scheduled flights over land. Logically, planes are more like fleets of railroad cars being operated in interstate traffic.
Johnson Oil Ref. Co. v. Oklahoma ex rel. Mitchell,
"The basis of the jurisdiction is the habitual employment ofthe property within the State. By virtue of that employment the property should bear its fair share of the burdens of taxation to which other property within the State is subject. When afleet of cars is habitually employed in several States — theindividual cars constantly running in and out of each State —it cannot be said that any one of the States is entitled to taxthe entire number of cars regardless of their use in the otherStates." (Italics supplied.)
True, the Chief Justice, speaking for the court, also said (
"Appellant had its domicile in Illinois, and that State had jurisdiction to tax appellant's personal property which had not acquired an actual situs elsewhere. 'The State of origin remains the permanent situs of the property notwithstanding its occasional excursions to foreign parts.' "
True enough, assuming that the property had acquired asitus in the domiciliary state, but the statement was obviously not intended to apply if it had not. Union Refrigerator Transit Co. v. Kentucky,
As illustrated by the Johnson Oil Co. case, thesitus in the other states for tax purposes may be proportionate only. It need not be such a situs as would confer jurisdiction to tax the full value of all cars which come into the state even when they come in habitual use. It may be a jurisdiction to tax a fair proportion as determined by average presence or other fair method of apportioning the tax. It might, in the case of aircraft, be based upon miles or hours flown in the state in proportion to those flown elsewhere.
I cannot find that the Johnson Oil Co. case has been overruled or qualified insofar as tangible property is concerned, nor do I think it is in conflict with the previous case of People ex rel. N.Y. C. H. R. R. Co. v. Miller,
"In the present case, however, it does not appear thatany specific cars or any average of cars was so continuously in any other State as to be taxable there. The absences relied anwere not in the course of travel upon fixed routes but randomexcursions of casually chosen cars, determined by the varyingorders of particular shippers and the arbitrary convenience ofother roads." (Italics supplied.)
Whatever the actual facts as to car routings may have been, the court in that case viewed the record as showing only "random excursions of casually chosen cars" outside the state. The case was decided on that assumption. That situation is not present in *417
the case at bar. Here we have air transport planes continuously and habitually used on scheduled flights over fixed routes, much more extensive than through Minnesota, over at least six other states, where they have acquired a situs for proportionate taxation by virtue of the protection and benefit of those jurisdictions, which subjects them to taxation in those states. American Refrigerator Transit Co. v. Hall,
While neither state nor national constitution contains a specific prohibition against double or multiple taxation as such, obviously the imposition of such a tax may under certain circumstances offend some provision of the fundamental law. Reed v. Bjornson,
There is no question but that Minnesota may tax its proportionate share of the airplanes here involved; but, as said in Johnson Oil Ref. Co. v. Oklahoma ex rel. Mitchell,
Whether a proportionate tax should be imposed on the theory of miles or hours flown within the state as compared to the total mileage or hours flown, or upon the basis of average number of planes present in the state under normal operating conditions, having in mind that during most of the time, as was the case with the cars in the Johnson Oil Co. case, most of the planes are outside the state, is probably not a problem for this court to determine. It should not, however, distinguish this case from the Johnson Oil Co. case. That the planes come into the state every day or nearly every day does not distinguish it. They are out of the state on flights over other jurisdictions a large proportion of the time. The only difference from the Johnson Oil Co. case is that planes move faster and more frequently than cars. The principle is the same. What this court should say is that the tax may only be imposed by Minnesota upon its proportionate share figured on some reasonable basis, which, primarily, the taxing authorities should first determine.
To summarize:
*4191. We have a case of a specific tax on tangible personal property, viz., aircraft.
2. Such property is not subject to the rules applied to intangibles.
3. By habitual use and employment on fixed schedules in flights over other states, the aircraft have acquired a situs for proportionate taxation in those states.
4. That situs must be taken into consideration in determining Minnesota's constitutional power to tax, regardless of the domicile or principal place of business of the taxpayer.
5. Minnesota may tax only proportionate part of the value of the property arrived at on some reasonable basis primarily to be fixed by the taxing authorities.
I think the judgment should be reversed.
Dissenting Opinion
I concur in the dissent of Mr. Justice Loring.
Dissenting Opinion
I concur in the views of Mr. Justice Loring.
