Fruit Growers Express Co. v. Brett

• Decision Date: 13 May 1933
• Docket Number: 7042.
• Citation: 22 P.2d 171,94 Mont. 281
• Parties: FRUIT GROWERS EXPRESS CO. v. BRETT, State Treasurer.
• Court: Montana Supreme Court

22 P.2d 171

94 Mont. 281

FRUIT GROWERS EXPRESS CO. v. BRETT, State Treasurer.

No. 7042.

Supreme Court of Montana

May 13, 1933

Appeal from District Court, Lewis and Clark County; A. J. Horsky Judge.

Action by the Fruit Growers Express Company against James J. Brett State Treasurer, substituted for F. E. Williams, formerly State Treasurer. From a judgment in favor of the plaintiff the defendant appeals.

Affirmed.

L. A. Foot, former Atty. Gen., and S. R. Foot, former Asst. Atty. Gen., and Raymond T. Nagle, Atty. Gen., and Jeremiah J. Lynch, Asst. Atty. Gen., for appellant.

Gunn, Rasch, Hall & Gunn, of Helena, for respondent.

MATTHEWS Justice.

The Attorney General has appealed, on behalf of the state treasurer, from a judgment entered on the pleadings in an action instituted by the Fruit Growers Express Company, a Delaware corporation, against F. E. Williams, treasurer of the state of Montana, for the recovery of certain taxes paid under protest. On the hearing before this court James J. Brett, the present state treasurer, was substituted for F. E. Williams, retired. The pleadings consist of the complaint and answer.

A. By paragraphs 1 to 5, inclusive, the complaint alleges the following facts: The plaintiff is a "Freight Line Company" within the definition of such a company contained in section 2097 of the Revised Codes of 1921. Prior to June 1, 1931, the state board of equalization ascertained and determined the total gross earnings of the plaintiff from the operation of its cars in Montana, "as hereinafter stated," to be $341,605.30, which was taken and deemed to be "the value for taxation of the cars of this plaintiff having a situs for taxation in this state for the year 1930," and thereupon levied and assessed a tax of 5 per cent. of such gross earnings and valuation, amounting to the sum of $17,080.27, "as authorized and required by section 2101 of the Revised Codes of Montana as amended by section 2 of Chapter 185 of the Laws *** of 1925 and again amended by section 1 of Chapter 75 of the Laws of *** 1931." The board duly notified the plaintiff of its action and plaintiff filed its written protest challenging the board's authority on constitutional grounds, a copy of the notice being made a part of the complaint. On November 20, 1931, the plaintiff, deeming the tax unlawful, paid the amount under protest, a copy of the notice of protest being attached to and made a part of the complaint. These allegations were admitted by the answer.

B. Paragraph 8 of the complaint alleges that "the average number of cars of this plaintiff within the State of Montana each day during the year 1930 did not exceed 234 cars, the true cash value of which was not to exceed $1,000 per car." The answer declares that the defendant "has no knowledge or information sufficient to form a belief" as to the number of cars; denies the allegation as to value, and alleges that "the true cash value of the same for taxation purposes was $4,000 each."

C. With reference to the following allegations the answer alleges "defendant has not sufficient knowledge or information upon which to form a belief and therefore denies the same."

"This plaintiff is not and never has been a common carrier, and its business during the year 1930 consisted wholly in the furnishing and supplying of its refrigerator cars and protective service for the carriage and transportation over railroads throughout the United States of perishable freight and *** compensation of two cents per mile for the distance each car, whether loaded or empty, was *** hauled," the total compensation received for 1930 being taken by the state board as the gross earnings of the company. That all of the cars so furnished were "transported through and across said state, from and into other states, or from points within to points without said state, and constituted interstate commerce."

D. The following allegations are denied:

That the plaintiff has not now and never had office, place of business, agent, or representative in the state, and, in 1930, had no property in the state except the cars moving in interstate commerce.

That the gross earnings mentioned have no relation whatever to the full cash value of the average number of cars in the state daily and are grossly in excess of such cash value, by reason of which the taxation attacked deprives plaintiff of property without due process of law.

That the taxation and the act under which the state levied it violate the Fourteenth Amendment, attempt to regulate interstate commerce, and therefore violate section 8 of article 1 of the Federal Constitution.

That the act violates section 1 of article 12 of the Constitution of Montana, which requires a "just valuation" of all property for taxation.

That the act violates the Fourteenth Amendment and section 11 of article 12 of our Constitution in that it does not provide for a uniform rate on all property of like character, and fixes the rate at 100 per cent., whereas the cars of other companies are taxed on the 40 per cent. basis.

That the act violates section 9 of article 12 of our Constitution in that the rate prescribed is grossly in excess of the maximum for state purposes.

On submission of the matter the truth of the allegations set forth under the head C above was conceded, and under the issue raised as to the constitutionality of the act, and as the provision attacked clearly provides for the determination of the gross earnings of the company and not the full cash value of the cars employed in Montana, the denial of the allegation as to value and the only affirmative allegation of the answer, under head D above, become immaterial.

All material allegations of fact are, therefore, admitted and the denials go only to the conclusions of the pleader and the allegations of the legal propositions contended for, and present but questions of law properly determinable on motion for judgment on the pleadings; the Attorney General makes no contention to the contrary.

Freight Line Companies are defined as those "engaged in the business of operating cars, or *** furnishing or leasing cars, not otherwise listed for taxation in Montana, for the transportation of freight *** over any railway *** lines not *** owned, leased, or operated by such company." (Section 2097, Rev. Codes 1921.) "For the purpose of taxation, all cars used exclusively within this state, or used partially within and without this state" are deemed to have a situs in the state. (Section 2098, Id.) Every such company is required to make an annual report to the state board of equalization, showing, among other things, "the total gross earnings received from all sources from the operation of such freight line company within this state for the year next preceding the first day of April." (Sec. 2099, Id.) The date is changed to January 1st by section 1, chapter 185, Laws of 1925. The "total gross earnings" shall be construed to mean "all earnings on business beginning and ending within the state, and a proportion, based upon the proportion of mileage over which said business is done, of all earnings on all interstate business passing through or into or out of this state." (Section 2100, Id.)

The "total gross earnings" of each freight line company, when ascertained and determined by the state board of equalization, "shall be deemed and considered as the assessed value" for taxation of all cars operated, furnished, or leased by the company under consideration, and, having thus fixed and determined the "valuation" of the company's "property," the board is required to "levy and assess" against "such property" a tax of 5 per cent. of such "valuation." Section 2101, Rev. Codes 1921, amended by section 2 of chapter 185, Laws of 1925, and section 1 of chapter 75, Laws of 1931. By the amendment of 1925 this "property" was placed in class 7, and in 1931 it was transferred to class 1. (Sections 1999, 2000, Rev. Codes 1921.)

Plaintiff and defendant agree that the tax in question is a property tax and that the statute challenged provides for the imposition of such tax and not a license tax. This is in conformity with the holding of the Supreme Court of Minnesota declaring that a "gross earnings tax" is a "system by which the amount of tax upon the property is determined *** a tax upon the property, and not upon the corporation" (State v. Northwestern Telephone Exchange Co., 107 Minn. 390, 120 N.W. 534, 538); it is not a tax on the earnings of the corporation nor on its right to engage in business in the state, but is a tax on its property within the state (State v. United States Express Co., 114 Minn. 346, 131 N.W. 489, 37 L. R. A. (N. S.) 1127).

In the first case cited the court declared the "gross earnings tax law" was not intended to change the character of the tax, but was intended to "change the method of computation," i. e., to require computation on the basis of the earnings of the property in lieu of computation on the basis of the value of such property; in the second case the court approved this "method of computation" and held that the statute, as construed with reference to express companies, did not violate the commerce clause of the Federal Constitution and did not violate the uniformity clause of the State Constitution. The federal question involved in the latter case was submitted to the Supreme Court of the United States on writ of error and, adopting the state court's decision as to what classes of earnings were included in the computation, Mr. Justice Day, speaking for the court, held that the statute did not violate the commerce clause of the Federal Constitution. 223 U.S. 335, 32 S.Ct. 211, 56 L.Ed. 459.

Thus it will be seen that a statute providing for a property tax based on the...