J. B. Simpson, Inc. v. O'Hara

• Decision Date: 02 September 1936
• Docket Number: No. 86,June Term.,86
• Citation: 268 N.W. 809,277 Mich. 55
• Court: Michigan Supreme Court
• Parties: J. B. SIMPSON, Inc., v. O'HARA et al.

277 Mich. 55

268 N.W. 809

J. B. SIMPSON, Inc.,

v.O'HARA et al.

No. 86, June Term.

Supreme Court of Michigan.

Sept. 2, 1936.

Action by J. B. Simpson, Inc., against John J. O'Hara and others, as members of the State Board of Tax Administration, and others. Judgment for plaintiff, and defendants appeal.

Affirmed.

Appeal from Circuit Court, Wayne County; Thomas J. Murphy, Judge.

Argued before the Entire Bench except BUTZEL, POTTER, and TOY, JJ.

David H. Crowley, Atty. Gen., and Edmund E. Shepherd and Arthur T. Iverson, Asst. Attys. Gen., for appellants.

Butzel, Levin & Winston, of Detroit (Chris M. Youngjohn, of Detroit, of counsel), for appellee.

BUSHNELL, Justice.

This appeal involves the interpretation by the state board of tax administration of the provisions of the General Sales Tax Act (Act No. 167, Public Acts 1933, Mason's Supp.1935, § 3663-1 et seq.) as applied to the solicitation of orders in state of Michigan by plaintiff, an Illinois corporation.

Plaintiff manufactures men's clothing at Chicago, where its principal office and plant is located. It is admitted to do a men's tailoring business in this state, and maintains a branch office in Detroit, where samples of cloth and clothing are displayed and the orders taken by its salesmen are occumulated and forwarded to the home office. Suits are only made in Chicago upon individual orders and according to the customers' measurements and then only after the signed order is accepted. Upon its completion the garment may be sent direct to the customer, or with others to Detroit for delivery from the company's branch office.

All orders are in writing and contain the following conditions: ‘This order is subject to acceptance at our main office at Chicago, Illinois, and is not subject to countermand after such acceptance. Merchandise will be shipped from Chicago, Illinois, and title shall pass to purchaser immediately upon delivery to the carrier.’ It is specified that the balance of the purchase price is to be paid upon delivery.

All merchandise is shipped in a fully completed condition except that minor alterationsare made at the seller's expense, either by a tailor of the customer's selection or by bushelmen employed by it at the Detroit office. Funds received by the Detroit office are deposited locally but are only subject to checks drawn at Chicago. Credit is not extended to customers.

After adoption of the retail sales tax in this state, the question arose as to whether the foregoing transactions constituted interstate or intrastate commerce. The state board of tax administration, evidently preferring a judicial determination of the matter, resolved the doubt in favor of the state. Plaintiff paid the computed sales tax under protest and brought this action for its recovery.

The trial court, applying the following authorities, held that the sales made by plaintiff were not subject to local taxation and entered judgment in the agreed sum of $9,113.13: Welton v. Missouri, 91 U.S. 275, 23 L.Ed. 347;Caldwell v. North Carolina, 187 U.S. 622, 23 S.Ct. 229, 47 L.Ed. 336;Stewart v. Michigan, 232 U.S. 665, 34 S.Ct. 476, 58 L.Ed. 786; Sonneborn Bros. v. Cureton, 262 U.S. 506, 43 S.Ct. 643, 67 L.Ed. 1095; and Uniform Sales Act, § 19, rule 4, being Comp.Laws 1929, § 9458.

The General Sales Tax Act contains its own definition of a sale at retail. See Boyer-Campbell Co. v. Fry, 271 Mich. 282, at page 284, 260 N.W. 165, 98 A.L.R. 827. The essential words of the definition, so far as the instant case is concerned, are: ‘Any transaction by which is transferred for consideration the ownership of tangible personal property.’

Where and when is the ownership of clothing ordered from plaintiff transferred to its customers?

The Uniform Sales Act, supra, provides:

‘Rule 4. (1) Where there is a contract to sell unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passed to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.

‘(2) Where, in pursuance of a contract to sell, the seller delivers the goods to the buyer, or to a carrier or other bailee, whether named by the buyer or not, for the purpose of transmission to or holding for the buyer, he is presumed to have unconditionally appropriated the goods to the contract, except in the cases provided for in the next rule and in section twenty (20). [The exceptions are where the seller is required to pay transportation on the goods and where there is a reservation of possession on property when goods are shipped.] This presumption is applicable, although by the terms of the contract, the buyer is to pay the price before receiving delivery of the goods, and the goods are marked with the words ‘collect on delivery’ or their equivalents.'

‘The authorities as well as the provisions of the Uniform Sales Act are to the effect that the question of when title to property passes is one of intention to be ascertained from the terms of the contract and from the circumstances of the case.’ Cadillac Mach. Co. v. Mitchell-Diggins Iron Co., 205 Mich. 107, 171 N.W. 479, 484.

The orders are taken in Michigan and forwarded to Illinois for acceptance. If accepted, they are filled with the understanding that title passes to the purchaser immediately upon delivery of the goods to the carrier. The sale is not completed until the order is accepted, and, if not accepted, there is no sale.

Both by the language of the statute and the terms of the order, the parties contemplate that the title to the clothing passes in the state of Illinois when delivery is made to the carrier at Chicago. Such a sale is not made in Michigan but in Illinois, and, being interstate commerce, cannot be taxed by the state of Michigan.

The authorities...