Garrett Freightlines, Inc. v. Montana R. R. and Public Service Commission

• Decision Date: 10 April 1973
• Docket Number: No. 12246,12246
• Citation: 507 P.2d 1040,161 Mont. 482
• Parties: GARRETT FREIGHTLINES, INC., Plaintiff and Respondent, v. The MONTANA RAILROAD AND PUBLIC SERVICE COMMISSION et al., Defendants and Appellants.
• Court: Montana Supreme Court

Page 1040

507 P.2d 1040

161 Mont. 482

GARRETT FREIGHTLINES, INC., Plaintiff and Respondent, v. The MONTANA RAILROAD AND PUBLIC SERVICE COMMISSION et al Defendants and Appellants.

No. 12246.

Supreme Court of Montana.

Submitted Jan. 25, 1973.

Decided March 15, 1973.

Rehearing Denied April 10, 1973.

William E. O'Leary, John P. Atkins (argued), Helena, for defendants and appellants.

Bolkovatz & Romine, Walter H. Bolkovatz (argued), William Romine (argued), Helena, for plaintiff and respondent.

JAMES T. HARRISON, Chief Justice.

Plaintiff-respodnent Garrett Freightlines, Inc., hereinafter designated Garrett, is a common carrier of general commodities engaged in both intrastate and interstate commerce, operating pursuant to authority granted by the Interstate Commerce Commission and the Public Service Commission of the State of Montana.

Garrett brought this action in the district court of the first judicial district, in and for the county of Lewis and Clark, seeking a declaratory judgment that sections 8-101 and 8-127, R.C.M.1947, are unconstitutional and for the issuance of a permanent injunction enjoining the Public Service Commission from exacting the gross revenue fee from Garrett under section 8-127, R.C.M.1947. The Public Service Commission, hereinafter designated Commission, filed a motion to dismiss on the grounds that the complaint failed to state a claim upon which relief could be granted. The district court dismissed the complaint. On appeal to this Court the judgment was ordered vacated and the cause was remanded with directions to obtain further information pertinent to the issues. See Garrett Frt. Lines v. Mont. Ry. Comm'n, 153 Mont. 380, 457 P.2d 469.

After the filing of answers to interrogatories by both parties, the cause came to trial on September 20, 1971. After both parties submitted evidence through oral testimony and exhibits, the court, sitting without a jury, entered its findings of fact, conclusions of law and judgment in favor of plaintiff. This appeal followed.

The statutory provisions herein involved are section 8-101(h), R.C.M.1947, which exempts from the operation of the Montana Motor Carrier Act:

'* * * motor vehicles used in carrying property consisting of agricultural commodities (not including manufactured products thereof), if such motor vehicles are not used in carrying any other property, or passengers, for compensation, * * * (and) the transportation of property by motor vehicle within any city, town, or village with a population * * * of less than five hundred (500) persons, or within the commercial areas thereof as determined by the board * * *.'

The Montana Motor Carrier Act in section 8-127, R.C.M.1947, provides:

'In addition to all other licenses, fees and taxes imposed upon motor vehicles in this state and in consideration of the use of the highways of this state, every motor carrier holding a certificate of public convenience and necessity * * * shall * * * file with the board * * * a statement showing the gross operating revenue of such carrier for the preceding three (3) months of operation, or portion thereof, and shall pay to the board a fee of five hundred seventy-five thousandths (.575) of one (1) per cent of the amount of such gross operating revenue * * * and in the event that such carrier operates in interstate commerce, the gross operating revenue of such carrier within this state shall be deemed to be all the revenue received from business beginning and ending within this state, and a proportion based upon the proportion of the mileage within this state to the entire mileage over which the business is done of revenue on all business passing through, into or out of this state * * *.' (Emphasis added).

On March 1, 1968 Garrett filed with the Commission its quarterly report of gross operating revenue, together with its check for $5,830.17, representing the amount due the State of Montana for the preceding quarter in accordance with section 8-127, R.C.M.1947. By way of letter accompanying the gross revenue report and check Garrett advised the Commission that such payment was being made under protest pursuant to sections 84-4501 and 84-4502, R.C.M.1947.

Garrett has continued to remit its quarterly report of gross operating revenue to the Commission since the original protest date. Both parties stipulated on July 21, 1968:

'* * * all future payments made under protest of the gross revenue tax, hereinafter to become due and paid by Plaintiff before final determination of Plaintiff's cause of action, shall become part of, and be included in, Plaintiff's complaint dated April 29, 1968, and that it will not be necessary for Plaintiff to file a separate action for the recovery of such future payment.'

In its complaint, Garrett has alleged that Chapter 1 of Title 8, R.C.M.1947, has deprived it of due process and equal protection of the law inviolation of Art. III, Sec. 27 of the Montana Constitution and the Fourteenth Amendment to the Constitution of the United States; and also, that said statutes are in violation of the Commerce Clause.

The district court made findings and conclusions to the effect that the allegations of Garrett were correct and entered judgment thereon. While the district court dealt with many matters raised by Garrett we do not find it necessary to discuss all of them since the cause can be disposed of by deciding whether the revenue collected by the Public Service Commission under section 8-127, R.C.M.1947, constitutes an unconstitutional levy under Article III, Sec. 27, of the Montana Constitution and the Fourteenth Amendment of the Constitution of the United States in that said levy denies Garrett uniformity of taxation, is discriminatory, confiscatory, prohibitive, arbitrary, and is a tax on the privilege of doing business.

Secondly, whether the formula used to compute the revenue due the State of Montana under section 8-127, R.C.M.1947, is arbitrary, unreasonable, indefinite, and lacks precision.

In regard to the first issue, this Court finds that the revenue collected by the Public Service Commission under section 8-127, R.C.M.1947, constitutes an unconstitutional levy under Article III, Sec. 27, of the Montana Constitution and the Fourteenth Amendment of the Constitution of the United States in that said levy denies Garrett uniformity of taxation, is discriminatory, confiscatory, prohibitive, arbitrary, and is a tax on the privilege of doing business.

Section 8-127, R.C.M.1947, does not include private carriers for payment of the gross revenue tax when carrying their own commodities upon the highways of the State of Montana. Section 8-101(h), R.C.M.1947, exempts from all provisions of the Motor Carrier Act motor vehicles used in carrying property consisting of ordinary livestock or agricultural commodities, supplies and materials for construction and maintenance of highways, supplies and materials for logging and mining operations, and for the transportation of newspapers, newspaper supplements, periodicals and magazines. This Court holds, and the district court so found, that these exemptions and exclusions deprived Garrett of the right of uniformity in taxation, discriminating against Garrett in the company's interstate operation, being arbitrary classifications, lacking any reasonable basis for determination, and being unreasonably discriminating between Garrett and the exempt motor vehicles.

This Court in the case of Hayes v. Smith, 58 Mont. 306, 314, 192 P. 615, 617, set the formula for classification as follows:

'The authority of the state to make a proper classification of property for the purpose of taxation is settled beyond controversy in this jurisdiction. (Citation omitted). But a proper classification implies that there exist real differences as between the subjects constituting the different classes, and excludes the idea of arbitrary selection.'

On the subject of classification in State v. Sunburst Refining Co., 73 Mont. 68, 235 P. 428, this Court held that the classification must be reasonable, in that it must be based upon substantial distinctions which really make one class different from another. In State ex rel. Griffin v. Greene, 104 Mont. 460, 67 P.2d 995, 111 A.L.R. 770, this Court held that arbitrary and unreasonable classifications are not permissible.

The record here discloses that the chain store operations with their large warehouses, which have come into being in recent years, have received the advantage of the exclusion of private carriers from paying the gross revenue tax. These business concerns have acquired their own vehicles and accomplished their own hauling without paying any tax, resulting in an unreasonable discrimination in favor of such carriers, since the plaintiff cannot be competitive in price because of the gross revenue tax.

Also the record shows that section 8-127, R.C.M.1947 is discriminatory in that railroads haul freight into their stations by train which then must be delivered by common carrier on Montana highways. The wholly owned trucking subsidiaries of the railroads make these deliveries. There is no statute or board rule regulating the agreement between the railroads and their wholly owned trucking subsidiaries as to the charge or allocation of revenue made between the trucking subsidiary to the parent railroad. The trucking subsidiary only has to pay a gross revenue tax on the amount it charges the railroad for its services, whether such amount is fair and competitive to other common carriers or not. There being no rules or regulations or a law providing for the amount of such charges, the situation results in a discrimination against Garrett, a common carrier, in favor of railroad trucking subsidiaries who are also holders of certificates of public convenience and necessity.

Counsel for the Public Service Commission capably and extensively argue that the revenue collected under section 8-127, R.C.M.1947, is not an unconstitutional levy under Article III,...