Jack Cole Co. v. Ellington

• Decision Date: 28 July 1961
• Citation: 52 Tenn.App. 120,372 S.W.2d 204
• Court: Tennessee Court of Appeals
• Parties: JACK COLE COMPANY v. Buford ELLINGTON, etc., et al.

Page 204

372 S.W.2d 204

52 Tenn.App. 120

JACK COLE COMPANY v. Buford ELLINGTON, etc., et al.

Court of Appeals of Tennessee, Middle Section.

July 28, 1961.

Certiorari Denied by Supreme Court Oct. 20, 1961.

Certiorari to Rehear Denied by Supreme Court Dec. 8, 1961.

Maclin P. Davis, Jr., Waller, Davis & Lansden, Nashville, for petitioner.

George Shuff, General Counsel, Nashville, for Tennessee Public Service Commission.

George F. McCanless, Atty. Gen., Milton P. Rice, David M. Pack, Asst. Attys. Gen., Nashville, for defendant.

SHRIVER, Judge.

Appellant, Jack Cole Company, is an Alabama corporation engaged in the business of transporting freight by motor truck in interstate commerce into and through Tennessee and other states. The case on appeal presents the question whether appellant, an irregular route carrier, was properly assessed for ad valorem taxes by the Public Service Commission of Tennessee under Section 67-901 T.C.A.

The Public Service Commission fixed the assessment at $225,000.00. On appeal to the State Board of Equalization the assessment was reduced by said Board to $192,500.00.

From the assessment so fixed by the State Board of Equalization the appellant sought a review by petition for certiorari filed in the Chancery Court at Nashville which Court, after a hearing, held that the assessment was valid and binding and dismissed the petition for certiorari. From this action of the Court an appeal was perfected to this Court and assignments filed.

Appellant, hereinafter referred to as petitioner, is not qualified or domesticated in Tennessee and its activities in this State are solely in pursuance of interstate commerce. It is an irregular route motor carrier whose trips are not scheduled as to time, route or number.

The record shows that the miles traveled in Tennessee by the trucks of petitioner amount to 17.5 per cent of its total mileage, and 1.6 per cent of its gross operating revenue was derived from interstate business conducted in Tennessee in the year 1958, which is the year involved in the questioned assessment. At that time the total value of the tangible property in its entire system was $4,986,063.00 of which $925.00 was situated in Tennessee, the latter sum being the value of office equipment in Shelby County. Petitioner's trucks used in transporting property in interstate commerce over the roads and highways of Tennessee constituted its only other property in this State.

It is shown that said trucks moved through various counties and municipalities in Tennessee during 1958 but were not habitually or constantly in any county, municipality or taxing district in the State.

Prior to 1959 the properties of petitioner had not been assessed for ad valorem taxes in Tennessee. For the year in question the Public Service Commission assessed petitioner's properties for ad valorem taxes at $225,000.00, as hereinabove stated. The Commission arrived at this figure by the use of a formula under which the average of four factors was used. These factors being (1) one third of the gross operating revenue of the system; (2) its net operating income multiplied by ten; (3) the sum of the value of its capital stock, debts, other than bonded indebtedness, and earned surplus; and (4) the value of its tangible property wherever located. The figure thus arrived at was $4,040,017.00 from which the value of the system's localized property was subtracted to arrive at an indicated distributable value of $2,876,117.00 which value was factored for safety, then multiplied by the percentage of petitioner's revenue miles in Tennessee to obtain the value of its property allocable to this State.

On review by the State Board of Equalization, as hereinabove indicated, said Board, after taking into account the percentage of appellant's gross operating revenue derived in Tennessee, reduced the assessment to $192,500.00.

The Chancellor, in his opinion, pointed out that the constitutional question raised by the petitioner in that Court had been settled by the Court of Appeals in the case of Howard Sober, Inc., v. Frank G. Clement et al., in an unreported opinion written by Judge Hickerson and filed July 29, 1960. Petition for certiorari denied by the Supreme Court March 10th 1961. (Note: The opinion is now submitted for publication along with this opinion in 372 S.W.2d 202.

The Chancellor's opinion then states that the only question left for determination in that Court is whether or not the assessment against petitioner is void on two grounds asserted by said petitioner, to wit: (1) That the assessment is void because the Public Service Commission failed to determine the situs of petitioner's property in Tennessee; and, (2) because there is no substantial evidence to support the assessment.

As hereinabove indicated, the Chancellor held against the petitioner on both of these propositions.

Questions Presented here----

The appellant in his carefully prepared and well written brief asserts that his nine assignments of error present the following five questions:

'(1) Assignments of Error Nos. I, II, III, and IV raise the question whether 67 T.C.A. 901 et seq. authorizes an assessment against petitioner's property, since petitioner has no taxable property within the state except its trucks which are in the state and the taxing units that would collect the tax, in transition, temporarily, and in the ordinary course of interstate commerce.

'(2) Assignment of Error No. V raises the question whether the assessment against petitioner violates the commerce clause of the United States Constitution in that the defendants have applied the assessment to petitioner solely because of its interstate activities and have measured the assessment by the amount of petitioner's interstate activities.

'(3) Assignment of Error No. VI raises the question whether the assessment against petitioner is a denial of due process under the Constitution of the United States and Tennessee because it is an assessment for taxation of property which has no situs in the state or the taxing units that would collect the tax.

'(4) Assignment of Error No. VII raises the question whether the assessment is void because the defendants did not determine and ascertain the situs of petitioner in the state and taxing units which would collect the tax, as required by 67 TCA 901.

'(5) Assignment of Error No. VIII presents the question whether the assessment is invalid because there is no substantial evidence in the record to support it.'

--Conclusions of Law and Fact----

Section 67-901 T.C.A. provides in part as follows:

'All motor carriers, including any such carrier not limited by its certificate, permit or other operating authority from the Tennessee public service commission to any particular highway or highways, road or roads, and/or specific route or routes (which carrier shall be designated and is hereinafter referred to as an 'irregular route motor carrier'), operating within, into and/or through Tennessee and having been issued a permit or certificate of convenience and necessity by said commission shall, by virtue of their operations or right to conduct operations within, into and/or through Tennessee over the public highways of Tennessee, be deemed to have a situs in Tennessee, the same to be determined and ascertained by said commission, and any such carrier shall, as a condition precedent to the granting or exercise of such authority, appoint an agent within the state of Tennessee for the purpose of service of process.'

In the opinion of this Court in Howard Sober, Inc. v. Clement, supra, it was stated that the attack upon the assessment in that case was made on the proposition that the statute is unconstitutional for two reasons: (1...