Converse v. Northern Pac. Ry. Co.

• Citation: 2 F.2d 959
• Decision Date: 11 December 1924
• Docket Number: No. 6604.,6604.
• Parties: CONVERSE et al. v. NORTHERN PAC. RY. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

2 F.2d 959 (1924)

CONVERSE et al. v. NORTHERN PAC. RY. CO. et al.

No. 6604.

Circuit Court of Appeals, Eighth Circuit.

December 11, 1924.

John Thorpe, of Bismarck, N. D. (George F. Shafer and Gordon Cox, both of Bismarck, N. D., on the brief), for appellants.

Charles W. Bunn, of St. Paul, Minn. (M. L. Countryman, of St. Paul, Minn., on the brief), for appellees.

Before STONE and KENYON, Circuit Judges, and FARIS, District Judge.

STONE, Circuit Judge.

This is an appeal by certain taxing officers of the state of North Dakota from a permanent injunction restraining them from collecting income taxes against appellees, the Northern Pacific Railway Company and the Great Northern Railway Company. The taxes in question are those levied for the year 1922.

The sole question involved in this appeal is that of the proper construction of the income statute of North Dakota. This statute was enacted in 1919 (chapter 224, Laws of N. D. 1919) and has been amended in certain details, not here important. The dispute here is over what part of the income of appellee the statute is intended to apply. The contention of the state is that the tax applies to the net income from all business of the complainants which touches the state, including purely intrastate and also that portion of the inter state business which originates in, terminates in or passes through the state. The contention of the railway company is that the tax applies only to the purely intrastate business. The argument, as here presented, hinges upon whether the expression "within the state," as used in sections 10 and 27 of the statute, includes interstate commerce which comes inside the state.

The trial court did not attempt to construe this law as an independent proposition but held that the words "within the state" had been construed by the Supreme Court to mean purely intrastate business when used in a taxing statute very similar to the one now under consideration. Pacific Express Co. v. Seibert, 142 U. S. 339, 12 S. Ct. 250, 35 L. Ed. 1035. We are unable to agree with the trial court that the above phraseology, when used in a taxing statute affecting the business of a carrier crossing the state line, must always be given the meaning which the Supreme Court gave it in the above case. Obviously, the words themselves may mean either purely intrastate business or intra and interstate business which comes within the state. Therefore, whenever such terms are used in a statute, they must be construed in accordance with the intention of the Legislature in enacting the particular statute. Hence, we must construe the meaning of these words as used in this statute.

The state urges that its contention is supported by a consideration (1) of the phraseology of the act; (2) by the purpose of the act; (3) by equitable considerations; (4) by the construction given the act by administrative officers of the state.

I.

We have carefully studied this entire act and have noted every use in the act of the expression "within the state." This expression is found in sections 2, 3, 6, 7, 10, 12, 17 and 27. The expression "without the state" is found in sections 6, 7, 10, 12 and 27. After endeavoring carefully to consider the language of the act as a whole, the particular phraseology of sections 6, 10 and 27, and the above quoted expressions in the connections used in other parts of the act, we are unable to determine the legislative meaning from the language used and are forced to turn to matters outside the act for a solution of the difficulty.

II.

As suggested by counsel for appellants, we think the purpose of the act, as being a revenue measure, should be considered. However, that does not aid appellants. It is the unbroken rule of the federal courts that no property is subject to taxation unless the legislative intent to tax it is clearly made manifest. Smietanka v. Bank, 257 U. S. 602, 606, 42 S. Ct. 223, 66 L. Ed. 391; United States v. Field, 255 U. S. 257, 262, 41 S. Ct. 256, 65 L. Ed. 617, 18 A. L. R. 1461; Gould v. Gould, 245 U. S. 151, 153, 38 S. Ct. 53, 62 L. Ed. 211; Benziger v. United States, 192 U. S. 38, 55, 24 S. Ct. 189, 48 L. Ed. 331; Eidman v. Martinez, 184 U. S. 578, 583, 22 S. Ct. 515, 46 L. Ed. 697; Treat v. White, 181 U. S. 264, 267, 21 S. Ct. 611, 45 L. Ed. 853; American Net & Twine Co. v. Worthington, 141 U. S. 468, 474, 12 S. Ct. 55, 35 L. Ed. 821; Hartranft v. Wiegmann, 121 U. S. 609, 616, 7 S. Ct. 1240, 30 L. Ed. 1012; United States v. Isham, 17 Wall. (84 U. S.) 496, 504, 21 L. Ed. 728; Central R. Co. v. Duffy, 289 F. 354, 359 (3d C. C. A.); Merriam v. United States, 282 F. 851, 855 (2d C. C. A.); Rudolph v. Knox, 280 F. 1007, 1009, 52 App. D. C. 33; Dayton Brass Castings Co. v. Gilligan (C. C. A.) 277 F. 227, 229; Cartier v. Doyle (C. C. A.) 277 F. 150, 152; Rice v. United States, 53 F. 910, 4 C. C. A. 104 (this court); United States v. Wigglesworth, Fed. Cas. No. 16,690 (Justice Story); Powers v. Barney, Fed. Cas. No. 11,361 (Justice Nelson). The courts have been most liberal in construing the constitutional extent of the powers of taxation of the states. With the state practically all-powerful in its selection of the subjects of taxation and the amount of tax which shall be levied, the helplessness of the citizen demands, for his protection, that if the Legislature intends to tax him, it shall at least be required to say so, in clear and unmistakable terms. Therefore, the fact that this is a revenue producing statute, does not help appellants if the meaning of the statute is ambiguous.

III.

Appellants urge that the interstate business should be construed as included in the statute because it would be inequitable to permit it to escape taxation when all other income is...