Union Tank Line Co. v. WrightUnion Tank Line Co. v. Wright
- Reporters:
- , , ,
- Before:
- McReynolds
Lead Opinion
delivered the opinion of the court.
This cause requires us to consider the power of a State to lay and collect taxes upon instrumentalities of interstate commerce which move both within and without its jurisdiction.
Union Tank. Line — plaintiff in' error — an equipment company incorporated in New Jersey which has never carried on business or had an office in Georgia, owns twelve thousand tank cars suitable for transporting oil over railroads and rents them to shippers at agreed rates, based on size and capacity. The roads over which they move also pay therefor stipulated compensation. Under definite contract certain of these cars were furnished to the Standard Oil Company of Kentucky and all of those which came into Georgia were bеing operated by the Oil Company under such agreement. They were not permanently within that State but passed “in and out.”
Name of company................. Union Tank Line
Value of real estate owned by company in or out of Georgia.. ....... None
Number of miles of R. R. lines in Georgia over which . . cars are run. ........................... 6976.5
Total value of . . cars and . . other personal property [in Ga. & elsewhere]...................... $10,518,333.16
Value franchise [in Georgia]........ No franchise
Total number of miles R. R. lines . over which . . cars are run [in Ga. & elsewhere]............ 251,999
Total value of property taxable in Georgia....................... $47,310.00
Union Tank Line Company had ah average of 57 tank cars in Georgia during 1913 which at a value of $830 per car equals. . ............ $47,310.00
' Defendant in error expressly admitted that the aveiage number of cars in Georgia during 1913 was fifty-seven, the value of each being $830 — total $47,310; that the owner had paid into the state treasury as taxes the full amount required on such valuation and during that year had no other property in the State. Acting upon information contained in return above quoted, the Comptroller General assessed the Tank Line’s property for 1913 at $291,196, its franchise at $27,685; and demanded payment. In explanation of this action he wrote to'it as ollows:
“As to the return filed, you have furnished the data desired, but have made an error in the application of same.After giving the mileage for the Company everywhere*278 and for Georgia, you then go ahead and assign 57 tank cars for this State and value them at $830 each, making the total for Georgia $47,310. This is an incorrect method. If you were to be allowed to merely assign so many cars to the State for taxation there would be no need for the. mileage figures to be furnished. The valuation to be assigned to Georgia must" be in the same proportion to the valuation for the entire company, as the mileagfe in Georgia bears to the entire mileage everywhere. . . .. Or to work it out by percentage instead of proportion: 6,976.5 the Georgia mileage, is 2.76846 per cent, of 251,999, the entire mileage. Georgia is therefore entitled to 2.76846 per cent, of the entire valuation. This per cent, of $10,518,333 is $291,195.84, or the. same sum arrived at by proportion, if we call the 84 cents an even dollar. ... A franchise' value should also be returned. And whatever the valuation you place on the franchise for the entire country, 2.76846 per cent, of same must be assigned to Georgia. Thus, if you should value your franchise at $1,000,000, the franchise value to be assigned to Georgia would be $27,685.” .
“The valuation for Georgia was determined by taking 2.76846 per cent, of the valuation you gave for the entire company, exclusive of franchise. The 2.76846 per cent, is the ratio the Georgia mileage bears to the entire mileage, as explained in a previous letter. The franchise value was obtained by placing your franchise for the entire country at an even million dollars and giving Georgia 2.76846 per cent, thereof.”
Thereupon, plaintiff in error instituted this proceeding in Fulton County Superior Court alleging invalidity of the assessment, that to enforce the tax would violate the Fourteenth Amendment, and asked appropriate relief. The cause was tried upon pleadings and agreed statement of facts. Among other things, the parties stipulated:
“On April 7, 1914, when the defendant entered an as*279 sessment in his office of property and franchise of the plaintiff as shown hereinbefore, he had no other information for any of the years 1907 to 1914 inclusive than was-contained in the said return filed by the plaintiff on March 16, 1914, and embraced in this statement and which was refused by the defendant, and did not know what cars, defendant had had in Georgia during any of said named years nor did he ascertain the value of such cars, but his action was taken on such information herein-before shown; and that the assessment so entered by the defendant in his office against the plaintiff’s property during sаid period for each of said years embraces the valuation of about three' hundred cars in excess of what the plaintiff actually had in the State of Georgia, during said years of the approximate value of $250,000.00 each year; and that the true value of a tank car is about eight hundred and thirty ($830.00) dollars per car.'
“That for the year 1914 the assessment entered against plaintiff by defendant covered the value of at least three hundred and fifty cars in excess of the number of cars plaintiff actually , had in-the State of Georgia for the time said tax was assessed.
“That defendant in entering said assessment never, xmdertook to ascertain the actual property-of plaintiff’s, located in the State^ of-Georgia during the said years оr to assess its property at its real value for taxation, otherwise ■ than by simply ascertaining the percentage of its entire, property shown by the ratio of the railroad traversed by its equipment in Georgia and the railroad mileage traversed by its equipment everywhere as shown by its said return filed on March 16, 1914.”
The trial court adjudged the assessment good as to both franchise and physical property. The Supreme Court held no taxable franchise existed, but that the physical property had been assessed as required by statutes not in conflict with either state or Federal Constitution. 143
A State may not tax property belonging' to a foreign corporation which has never come within its borders— to do so under any formula would violate the due process clause of the Fourteenth Amendment. In so far, however, as movables are regularly and habitually used and employed therein, they may be taxed by the State according to their fair value along with other property subject to its jurisdiction, although devoted to interstate commerce. While the valuation must be just it need, not be limited to mere worth of the articles considered separately but may include as well "the intangible value due to what we have called the organic relation of the property in the State to the whole system.” How to appraise them fairly when the tangibles constitute part of a going concern operating in many States often presents grave difficulties;. and absolute accuracy is generally impossible. We have accordingly sustained methods of appraisement producing results approximately correct — for example, the mileage basis in cаse of a telegraph company (Western Union Telegraph Co. v. Massachusetts), and the average amount of property habitually brought in and carried out by a car company (American Refrigerator Transit Co. v. Hall). But if the plan pursued is arbitrary and the consequent valuation grossly excessive it must be condemned because of conflict with the commerce clause or the Fourteenth Amendment or both. Western Union Telegraph Co. v. Massachusetts,
In the present case the Comptroller General made no effort to assess according to real value or otherwise than upon the ratio which miles of railroad in Georgia over which the cars moved bore to total mileage so traversed in all States. Real values — the essential aim — of property within a State cannot be ascertained with even approximate aсcuracy by such process; the rule adopted has no necessary relation thereto. During a year two or three cars might pass over every mile of railroad in one State while hundreds constantly employed in another moved over lines of less total length. Fifty-seven was the average number of cars within Georgia during 1913 and each had a "true”.value of $830. Thus the total there subject to taxation amounted to $47,310 — the challenged assessment specified $291,196.
We think plaintiff in error’s property was appraised according to an arbitrary method which produced results wholly unreasonable and that, to permit enforcement of the proposed tax would deprive it of property without due process of law and also unduly burden interstate commerce.
Pullman's Palace Car Co. v. Pennsylvania, supra, relied on by defendant in error, contains the following passage which seems to uphold the Georgia rule — "The mode which the State of Pennsylvania adopted, to ascertain the proportion of the company’s property upon which it should be taxed in that State, was by taking as a basis of assessment such proportion of the capital stock of the company as the number of miles over which it ran cars within the State bore- to the whole number of miles, in that and other States, over which its cars were run. This was a just and equitable method of assessment; and, if
Reference to the original'record upon which that case came here will aid in understanding the exact issues presented. Pennsylvania demanded taxes of the Pullman Company, an Illinois corporation, for the years 1870 to 1880, upon such portion of its capital stock as total miles of railroad in Pennsylvania over which its cars moved bore to like total in all States. No statute prescribed the method of valuation; it had been adopted by executive officers. The Court of Common.Pleas declared: "On the facts defendant claims that no part of its capital stock is invested in this State. The argument is that its cars are personal property, and, as they are not permanently located in this State, but pass into, through, and out of it, this personal property has no taxable situs in Pennsylvania, and could not be taxed specifically in any given locality; and therefore, it is contended, as the tax on capital stock is a tax on the property in which the capital is invested, the latter cannot be taxed. . . . We hold, therefore, that the proportion of the capital stock of the defendant invested and used in Pennsylvania is taxable under these' acts, and that the amoxrnt of the tax may be properly ascertained by taking as a basis the proportion which the number of miles operated by defendant in this State hears to the whole nximber of miles operated by it, without regard to the question where any particular car or cars were used; . . . The defendant is liable to tax on the proportion of its capital stock invested in this State,
In 1870 the Pullman Company’s capital stock amounted to three million dollars, in 1880 it had grown to six million; all cars actually owned by the company (leased ones not included) during 1871, numbered 241, and in 1880, 472, their total value being $4,334,000, and $8,588,000 respectively; one hundred cars were operated within Pennsylvania during each of the eleven years; total miles of track everywhere passed over by the company cars dining 1880 amounted to 57,099, within Pennsylvania 5,127, and these figures adéquately represent the proportion for other years: total tax held due for thé eleven years amounted to $16,321.89. While the record does not disclose the precise valuations upon which taxes were computed, enough does appear to show that they were far below (perhaps not one-third) the actual worth of a hundred cаrs..
The company demanded completé exemption upon the ground that its cars were moving in interstate commerce
In other opinions of this court cited below to support the conclusion there reached we upheld the power of a State to tax property actually within its jurisdiction upon a fair valuation considered as part of a going concern — they give no sanction to arbitrary and inflated valuations. Taxes must follow realities, not' mere deductions from inadequate or irrelevant data.
In Fargo v. Hart, supra, we condemned an assessment ostensibly proportioned to mileage where property without the' State and unnecessary -to the Express Company’s actual business had been included; and we pointed out that under no formula can a State tax things wholly beyond its jurisdiction.
The same' considerations which establish invalidity of the assessment of plaintiff in error’s property for 1913 aрply to like ones made by the Comptroller General for - all other years in question.
Judgment of the court below must be reversed and the cause remanded for further proceedings not inconsistent with this opinion.
Reversed and remanded.
Notes
Civil Code of Georgia.
Sec. 989. “Each non-resident person or company whose sleeping-cars are run'in' this State shall be taxed as follows: Ascertain the whole number of miles of ráilroad over which such sleeping-cars are run, and ascertain the entire value of all sleeping-cars of such person or company, then tax such sleeping-cars at the regular tax rate imposed upon the property of this State in the same proportion to the entire value of 'sftсh sleeping-cars that the length of lines in this State over which such cars are run bears to the length of lines of all railroads over which such sleeping-cars are run. The returns shall be made to the comptroller-general by the president, general agent, or person in control of such cars in this State. The comptroller-general shall frame such questions as will elicit the information sought, and answers thereto shall be made under- oath. If the officers above referred to in the control of said sleeping-cars shall fail or refuse to answer, under oath, the questions so propounded, the comptroller-general shall obtain the information from such sources as he may, and he shall assess a double tax on -such'. sleeping-cars. If the tаxes herein provided for are not paid, the comptroller-general shall issue executions against the owners of such cars, which may be levied‘by the sheriff of any county of this'State upon the sleeping-car or cars of the owner who has failed to pay the taxes.”
. Sec. 990. “Any person or persons, copartnership, company or corporation wherever organized or incorporated, whose principal business is furnishing or leasing any kind of railroad cars except dining, buffet, chair, parlor, palace, or sleeping-cars, or in whom the legal title in any such cars is vested, but which are operated, or-leased, or hired to be operated on any railroads in this State, shall be deemed an equipmеnt company. Every such company shall be required to make returns to the comptroller-general under - the same laws of force in reference to the rolling stock owned by the railroads making returns in this State, and the assessment- of taxes thereon shall be levied and the taxes col-
Sec. 1031. “Railroad companies operating railroads lying partly in this State and partly in other States shall be taxed as to the rolling stock thereof and other personal property appurtenant thereto, and which is not permanently located in any of the States through which rsaid railroads pass, on so much of the whole value of rolling stock аnd personal property as is proportional to the length of the railroad in this State, without regard to the location of the head office of such railroad companies.”
Dissenting Opinion
dissenting.
During the period in controversy the Union Tank Line, plaintiff in error, a New Jersey corporation, was the owner of many tank cars, aggregating in value more than $10,000,000, and was engaged in the business of renting them out to be employed in transporting oil and similar fluids over railroads throughout the United States extending to more than 250,000 miles. In the course of its business it made a contract with the Standard Oil Company of Kentucky to furnish to that corporation cars for use in the transportation of oils and like fluids from depots at Savannah, Georgia, and Jacksonville, Florida. • The oils were brought to those depots chiefly in vessels by sea, and were shipped thence in the Tank Line cars to various destinations within and without the State of Georgia; plaintiff in error being compensated in part by rentals paid by the Standard Oil Company, based on size and capacity of cars, and in part by payments received from the railroad companies over whose lines the cars were run; those companies, in lieu of providing their own tank cars, paying to plaintiff in error three-fourths of a cent per mile per car for the car movements.
Under the provisions of the Georgia statutes (Civil Code, §§ 989, 990,1031), property taxes were imposed upon plaintiff in error by reason of the habitual use and employment of its rolling stock within that State, based upon a valuation not limited to the value of the tank cars as separate chattels, but considering their value as a part of the entire system of cars owned and operated by plaintiff in error, arid regarding these as a part of the equipment of the railroads over which they ran. Thus, it appearing from a return made by the Tank Line to the Comptroller General for the year 1913 that the number of miles of railroad lines in Georgia over which ifs cars
The Supreme Court of Georgia sustained the tax on the authority of numerous decisions of this court, cited for the purpose. 143 Georgia, 765; 146 Georgia, 489. This court reverses the judgment, and holds the taxing law unconstitutional, upon reasoning to which I am unable to yield assent.
In my opinion the Georgia system of taxing movable propеrty of this character when habitually employed in the State, and the decision of the state Supreme Court sustaining the particular taxes in question, are based upon a correct view of the powers of the State under the Federal Constitution, and are in entire harmony with principles laid down in authoritative decisions of this court which have remained unchallenged for more than a quarter of a century. Western Union Telegraph Co. v. Massachusetts,
The opinion- of this court recognizes that plaintiff in error, because its tank cars are regularly and habitually used and employed in the State of Georgia, is taxable according to their fair value along with other property subject to the jurisdiction of the State, although they are devoted to interstate commerce; that while the valuation must be just it need not be limited to the mere value of the cars considered separately, but may include also the
It is because of difficulties such as these that so many of the States have resorted to track mileage — readily ascertained and little subject to change — as an equitable method of ascertaining the proportionate value taxable by a single State, out of the aggregate value of the movables of an equipment company that does business in several States.
This method was very clearly sustained by this court in Pullman's Palace Car Co. v. Pennsylvania,
The Pullman Company was a corporation of the State of Illinois, having its principal office in Chicago, and its business was to furnish sleeping coaches and parlor and dining cars to various railroad companies for use as a part of the equipment of passenger-trains running in interstate commerce; the railroad companies collecting the usual passenger fares and the Pullman Company separate charges for seats and berths. The company was subjected by the State of Pennsylvania to a tax upon a part of its capital stock bearing the same proportion to the whole as the number of miles of railroad over'which its cars were run in Pennsylvania bore to the wholе number of miles in that and other States over which they were run. The Pullman Company objected to the taxation of any part of its capital stock by the State of Pennsylvania by rea-, son of its running its .cam through that State in the course of their employment in interstate transportation of pas-. sengers; and it is obvious that unless the tax was Sustainable as being in substance and'’effect a tax upon property of the company no greater than that which the State had a right to impose it- was-invalid- because amounting in its effect to a burden upon interstate commerce. It was from this point of view that'the court tested and sustained the tax, as the following excerpts from the opinion will show. After declaring that the legislative power of every Stаte extends to all property within its borders; that for purposes of taxation personal property may be separated from its owner and the owmer taxed on account of it at the place where it is located, although he is not a citizen or resident of the State which imposes it; and that there is nothing in the Constitution or laws of the United- States to prevent a State from taxing personal property employed in interstate or foreign .commerce
“The mode which the State of Pennsylvania adopted, to ascertain the proportion of the company’s property upon which it should be taxed in that State, was by taking as a basis of assessment such proportion of the capital stock of the company as the number of miles over which it ran cars within the State bore to the whole number of miles, in that and other States, over which its cars were run. This was a just and equitable method of assessment; and, if it were adopted by all the States through which these cars ran, the company would be assessed upon the whole value of its capital stock, and no more. [Italics mine.] The validity of this mode of apportioning such a tax is sustained by several decisions of this court,” etc.
It was upon this decision, among others, that the Supreme Court of Georgia relied as authority for its judgment. I cannot agree that any .part of what I have quoted — least of all the italicized clause which relates to the apportionment of the tax according to track mileage— was obiter dictum or unnecessary for the decision. It was necessary — certainly so this court deemed it — that the disputed tax be vindicated as a property tax in order to relieve it from the' criticism that it was an unwarranted interference with interstate commerce; and it could not be sustained as a property tax unless the method of apportionment was fair and equitable. The authority of the case cannot properly be overthrown by showing, even if it could be shown, that the court might have reached the same result upon some other ground than that which in truth it adopted as the basis of its decision. And it séems to me that a considered judgment of this court'upon a constitutional question affecting the taxing powers of the States, long acted- upon as a guide to state legislation upon this important and difficult matter, ought not tq be
The decision referred to, Pullman’s Palace Car Co. v. Pennsylvania, supra, has always been regarded as a leading case, and cited with uniform approval in repeated decisions of this court: not only upon the point that property employed in interstate commerce, and in the ordinary use of it situate sometimes within and sometimes without a State, is subject to state taxation without regard to the place of the owner’s domicile; but also and especially in support of the proposition that the mileage basis of apportionment as between the different States may be resorted to in order to determine what tax each State shall lay upon rolling stock used upon interstate railroads, just as it often is. resorted to in apportioning the tax. upon a railroad as between different taxing districts in the same State.
The reasoning of the case upon the point now in controversy has never heretofore been regarded as obiter dictum. On the contrary, it was cited in support of the mileage basis of apportionment for the taxation of a railroad in Pittsburgh, &c. Ry. Co. v. Backus,
I can see nothing arbitrary or unreasonable in the general rule of mileage apportionment adopted by the State of Georgia, upon the authority of these repeated- decisions of this court, for the taxation of railroad cars and other equipment habitually operated on lines extending within and without the State, and hence am convinced that the statute is not repugnant to the Fedеral Constitution. If, fqr any reason that does not appear, the rule operated unfairly in this particular case, and imposed an unjust and inequitable burden of taxation upon plaintiff in error,. it was incumbent upon plaintiff in error to show this by calling for an arbitration upon the. question of true value, as permitted by the Georgia statutes (Civil Code, §§ 1045-1046, 1050-1054), or by some appropriate proceeding for relief against the excessive part of. the taxes. Having failed to do this although properly notified, it cannot in justice be heard to say that the valuation of its property, made according to a statutory rule that in its general application is just and reasonable, is in the particular case so excessive as to amount to a deprivation of property without due process of law, or an undue burden upon interstate commerce.