Western Live Stock v. Bureau of Revenue

Decision Date22 February 1937
Docket NumberNo. 4210.,4210.
PartiesWESTERN LIVE STOCKv.BUREAU OF REVENUE et al.
CourtNew Mexico Supreme Court

OPINION TEXT STARTS HERE

Appeal from District Court, Santa Fé County; M. A. Otero, Jr., Judge.

Action by Western Live Stock, a partnership composed of Frazier Biggs and another, against the Bureau of Revenue and another. From a judgment for plaintiffs, defendants appeal.

Reversed and remanded, with directions.

Supreme Court of New Mexico was controlled by decisions of Supreme Court of United States on such matters as whether tax imposed unconstitutional burden on interstate commerce. U.S.C.A. Const. Art. 1, § 8, cl. 3.

Frank H. Patton, Atty. Gen., for appellants.

D. A. Macpherson, Jr., of Albuquerque, for appellees.

SADLER, Justice.

The plaintiffs (appellees) sued in the district court of Santa Fé county to recover taxes in the sum of $80.27, paid under protest, imposed by the provisions of chapter 7 of N.M.Session Laws of 1934 (Special Session), based upon the receipts arising from certain advertising. Section 314 of the act extends authority to seek recovery by suit of taxes so paid on conditions therein named.

Judgment was rendered against defendants following their refusal to plead further upon entry of the trial court's order overruling a demurrer interposed by them to plaintiffs' amended complaint, hereinafter referred to as the complaint. They prosecute this appeal to secure a correction of the judgment claimed to be erroneous.

The essential facts, as disclosed by the complaint, are these. The plaintiffs are partners operating under the firm name of Western Live Stock. Their business is the publication of a trade journal or magazine at Albuquerque, N. M., known as “Western Live Stock.” It has a general circulation in New Mexico and other states. It is circulated by means of the United States mails, motortrucks, railroads, and express.

One of plaintiffs' sources of revenue is, of course, advertising. The magazine receives and publishes, under contracts, advertisements of products which are manufactured elsewhere than in New Mexico, such products to be sold, shipped, and transported from the manufacturer to the customer. These foreign advertisements are obtained by plaintiff both through personal solicitation and through what are known as advertising agencies, located in states other than New Mexico. Some of these advertising contracts are made between plaintiffs and the manufacturer, located in a foreign state, while others, as stated, are made between the plaintiffs and an advertising agency, such advertising agency having a different and a separate contract with the manufacturer, and in such cases all dealings in connection therewith are between the plaintiffs and the agency.

In the preparation of the advertisements for insertion in the plaintiffs' magazine, certain advertising cuts, mats, material, information, intelligence, and copy are sent to plaintiffs by said foreign advertisers, and plaintiffs receive compensation pursuant to the contract to carry the advertising from such foreign advertisers, and the receipts arising from such advertising contracts form the measure of the tax imposed in its application to plaintiffs.

This advertising is naturally designed to promote the sale of the advertised products. The advertising contracts so made with residents of other states require an interchange of correspondence between the advertiser and plaintiffs, contemplate the forwarding prior to publication of plats, cuts, mats, engravings, copy, and information from outside the state to plaintiffs within the state, as aforesaid, and the circulation and distribution of such magazines to subscribers and purchasers in New Mexico and other states.

The challenge to the act laid as a basis of recovery is, briefly, that the act, in the respect sought to be enforced against plaintiffs, violates section 8 of article 1 of the Constitution of the United States, known as the “Commerce Clause,” by placing an unconstitutional burden on interstate commerce. The gist of the demurrer, likewise in brief, is that under the facts pleaded it does not.

The tax assailed is imposed by section 201 of said chapter 7, Special Session Laws of 1934, reading as follows: “There is hereby levied, and shall be collected by the Tax Commission, privilege taxes, measured by the amount or volume of business done, against the persons, on account of their business activities, engaging, or continuing, within the State of New Mexico, in any business as herein defined, and in the amounts determined by the application of rates against gross receipts, as follows:”

As applicable to plaintiffs the measure of the tax is prescribed by subparagraph I of section 201, reading: “At an amount equal to two per cent of the gross receipts of any person engaging or continuing in any of the following businesses: *** publication of newspapers and magazines (but the gross receipts of the business of publishing newspapers or magazines shall include only the amounts received for the sale of advertising space).”

[1] The plaintiffs chiefly rest their argument supporting correctness of the trial court's ruling on the demurrer on certain state and federal cases, to wit: Post Printing & Publishing Co. v. Brewster (U.S.D.C.) 246 F. 321; State v. Salt Lake Tribune Pub. Co., 68 Utah, 187, 249 P. 474, 48 A.L.R. 553; Little v. Smith, 124 Kan. 237, 257 P. 959, 57 A.L.R. 100; International Text-Book Co. v. Pigg, 217 U.S. 91, 30 S.Ct. 481, 54 L.Ed. 678, 27 L.R.A. (N.S.) 493, 18 Ann.Cas. 1103; Indiana Farmer's Guide Pub. Co. v. Prairie Farmer Pub. Co., 293 U.S. 268, 55 S.Ct. 182, 184, 79 L.Ed. 356, and the case of Fisher's Blend Station v. Tax Commission, 297 U.S. 650, 56 S.Ct. 608, 80 L.Ed. 956, decided March 30, 1936.

A careful analysis of these cases in the light of what is said in Blumenstock Brothers Advertising Agency v. Curtis Publishing Company, 252 U.S. 436, 40 S. Ct. 385, 387, 64 L.Ed. 649, and in Paul v. Virginia, 8 Wall. 168, 19 L.Ed. 357, and in other cases cited and relied upon in the Blumenstock Case, fails to persuade us that the advertising contracts themselves, although made between citizens of different states, are transactions in interstate commerce. That they are not so is the first point relied upon by the defendants for reversal. We rule the point in their favor. Indeed, the mere contracts are not commerce at all, neither intrastate nor interstate; no more so than contracts of insurance, and they have been held to be neither. New York Life Insurance Co. v. Deer Lodge County, 231 U.S. 495, 34 S. Ct. 167, 58 L.Ed. 332. Cf. Graniteville Mfg. Co. v. Query et al. (D.C.) 44 F.(2d) 64.

The Blumenstock Case, supra, was a suit by plaintiff, a Missouri corporation, against the defendant, a Pennsylvania corporation, to recover treble damages under the Sherman Anti-Trust Act (15 U.S.C.A. §§ 1-7, 15 note). Section 2 of said act (15 U.S. C.A. § 2) rendered unlawful any monopoly or attempt to monopolize any part of the trade or commerce among the several states. Section 7 of the same act (15 U.S.C.A. § 15 note) authorized the recovery of treble damages sustained by any person in his business or property by reason of anything forbidden or declared unlawful by the act. Sustaining the contention that the petition failed to state a cause of action, the court said:

“Commerce, as defined in the often quoted definition of Chief Justice Marshall, in Gibbons v. Ogden, 9 Wheat. 1, 189, 6 L.Ed. 23 [68] is not traffic alone; it is intercourse; ‘it describes the commercial intercourse between nations and parts of nations in all its branches, and is regulated by prescribing rules for carrying on that intercourse.’

“In the present case, treating the allegations of the complaint as true, the subject-matter dealt with was the making of contracts for the insertion of advertising matter in certain periodicals belonging to the defendant. It may be conceded that the circulation and distribution of such publications throughout the country would amount to interstate commerce, but the circulation of these periodicals did not depend upon or have any direct relation to the advertising contracts which the plaintiff offered and the defendant refused to receive except upon the terms stated in the declaration. The advertising contracts did not involve any movement of goods or merchandise in interstate commerce, or any transmission of intelligence in such commerce.”

The plaintiffs seek to distinguish this case by pointing out that in it the court was dealing with the case of a refusal to contract while here is presented the case of completed contracts. We see no point to the attempted distinction.

[2] The opinions in Post Printing & Publishing Co. v. Brewster, supra, by the late Judge Pollock of the United States District Court in Kansas, State v. Salt Lake Tribune Pub. Co., supra, by the Supreme Court of Utah, and Little v. Smith, supra, by the Supreme Court of Kansas, carefully appraised, simply hold that state legislation which directly burdens an instrumentality of interstate commence-the publication and interstate circulation of newspapers as it happened to be in those cases-is unconstitutional. Each case involved a penal statute prohibiting the advertising of cigarettes. Fundamentally, the decisions rest upon the interstate character of the business of the newspapers involved. That the publication and interstate circulation of newspapers is interstate commerce may not be questioned. Blumenstock Brothers Adv. Agency v. Curtis Pub. Co., supra; Konecky v. Jewish Press (C.C.A. 8th Ct.) 288 F. 179. But this fact alone does not draw all incidents of such a business within the protection of the interstate commerce clause of the Federal Constitution.

Expressions are to be found in some, if not all, of the three opinions first cited in the paragraph next above reflecting the idea that the advertising contracts themselves are transactions in interstate commerce. This view is...

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12 cases
  • Western Live Stock v. Bureau of Revenue
    • United States
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    ...8, cl. 3. The trial court overruled a demurrer to the complaint and gave judgment for appellants, which the Supreme Court reversed. 41 N.M. 141, 65 P.2d 863. Appellants refusing to plead further, the district court gave judgment for the appellees, which the Supreme Court affirmed. 41 N.M. 2......
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