Memphis Natural Gas Co v. Beeler

• Decision Date: 30 March 1942
• Docket Number: No. 499,499
• Citation: 86 L.Ed. 1090,315 U.S. 649,62 S.Ct. 857
• Parties: MEMPHIS NATURAL GAS CO. v. BEELER, Attorney General of State of Tennessee, et al
• Court: U.S. Supreme Court

315 U.S. 649

62 S.Ct. 857

86 L.Ed. 1090

MEMPHIS NATURAL GAS CO.

v BEELER, Attorney General of State of Tennessee, et al.

No. 499.

Argued March 6, 1942.

Decided March 30, 1942.

Messrs. Walter P. Armstrong, of Memphis, Tenn., and Thomas A. McEachern, Jr., of New York City, for appellant.

Messrs. Whitworth Stokes and Lewis S. Pope, both of Nashville, Tenn., for appellees.

Mr. Chief Justice STONE delivered the opinion of the Court.

The question for decision is whether a tax laid pursuant to §§ 1316—1318 of the Tennessee Code of 1932 upon the Memphis Natural Gas Company's net income derived from sales of natural gas in Tennessee, during the years 1932 to 1935, violates the commerce clause, Const. U.S. art. 1, § 8, cl. 3.

The case comes here by appeal from a judgment of the Supreme Court of Tennessee, which sustained the tax and reversed a decree of the Tennessee chancery court enjoining its collection. Appellant contends that the case is properly an appeal, under section 237(a) of the Judicial Code as amended, 28 U.S.C. § 344(a), 28 U.S.C.A. § 344(a), because the validity of the Tennessee statute as applied to the facts of this case has been drawn in question. Cf. Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 42 S.Ct. 106, 66 L.Ed. 239. But appellant's bill of complaint, filed in the chancery court, alleged only that the assessment of the tax and the threatened levy violated its rights under the commerce clause. Our decisions have long since established that an attack upon a tax assessment or levy, on the ground that it infringes a taxpayer's federal rights, privileges or immunities, will not sustain an appeal under section 237(a). Jett Bros. Distilling Co. v. City of Carrollton, 252 U.S. 1, 40 S.Ct. 255, 64 L.Ed. 421; Miller v. Board of Com'rs of City and County of Denver, 290 U.S. 586, 54 S.Ct. 78, 78 L.Ed. 518; Baltimore National Bank v. State Tax Commission of Maryland, 296 U.S. 538, 56 S.Ct. 125, 80 L.Ed. 382; Irvine v. Spaeth, 314 U.S. 575, 62 S.Ct. 117, 86 L.Ed. —- decided October 13, 1941. It is not enough that an appellant could have launched his attack upon the validity of the statute itself as applied; if he has failed to do so we are without jurisdiction over the appeal. The Judicial Code was intended to restrict our obligatory appellate jurisdiction to a narrow class of cases, and to foreclose an appeal as of right whenever the prescribed conditions have not been rigorously fulfilled.

It is true that when this case reached the Supreme Court of Tennessee the appellant included in its brief, which has been certified as part of the record here, a statement of its legal position which might serve as a challenge to the validity of the statute. But appellant has failed to establish that under Tennessee practice such a contention can be availed of if advanced for the first time in the appellate court, cf. Pennsylvania R. Co. v. Illinois Brick Co., 297 U.S. 447, 462, 463, 56 S.Ct. 556, 561, 80 L.Ed. 796; Jacobi v. Alabama, 187 U.S. 133, 135, 136, 23 S.Ct. 48, 49, 47 L.Ed. 106; Mutual Life Ins. Co. v. McGrew, 188 U.S. 291, 23 S.Ct. 375, 47 L.Ed. 480, 63 L.R.A. 33, and appellant's burden is to show affirmatively that we have jurisdiction. Chicago, Indianapolis, etc., Ry. Co. v. McGuire, 196 U.S. 128, 132, 25 S.Ct. 200, 201, 49 L.Ed. 413; cf. Lynch v. People of New York, 293 U.S. 52, 54, 55, 55 S.Ct. 16, 17, 79 L.Ed. 191; Enriquez v. Enriquez (No. 2), 222 U.S. 127, 130, 32 S.Ct. 64, 65, 56 L.Ed. 124; Brady v. Terminal Railroad Ass'n, 302 U.S. 678, 58 S.Ct. 134, 82 L.Ed. 523.

The first opinion rendered by the Supreme Court of Tennessee made no mention of any federal question, and in a supplemental opinion, the court stated only that 'the claim of federally protected right was decided adversely to complainant'. Since it does not appear that the validity of the statute was either drawn in question or passed upon in the trial court or deemed by the state supreme court to be in issue, we must dismiss the appeal for want of jurisdiction. Treating the papers on which the appeal was allowed as a petition for writ of certiorari, as required by section 237(c) of the Judicial Code as amended, 28 U.S.C. § 344(c), 28 U.S.C.A. § 344(c), certiorari is granted and we proceed to consider the merits of the case.

Taxpayer, a Delaware corporation, was engaged during the period in question in the business of purchasing natural gas in Louisiana and transporting it through its pipeline to points in Tennessee where it delivered the gas into the pipelines of two distributing companies—Memphis Power & Light Co. and West Tennessee Power & Light Co.—which sold the gas to local consumers. Taxpayer sells some of its gas in other states, but in Tennessee it sells from 1 to 2% of its output to the West Tennessee Power & Light Co. and delivers 80% or more to the Memphis company. That company distributes it to consumers under a contract with taxpayer which the Supreme Court of Tennessee has found to be a joint undertaking of the two companies whereby taxpayer furnishes gas from its pipeline, the Memphis company furnishes facilities and service for distribution and sale to consumers, and the proceeds of the sale, after deduction of specified costs and expenses, are divided between the two companies.

Taxpayer is licensed by the State of Tennessee to do business there. It maintains a statutory office in Delaware and a stock transfer office in New York City, but conducts no business at either. It manages its business from its office in Memphis, Tennessee, where it keeps its accounts, provides for the payroll of employees on its line in Tennessee and other states, and prepares and sends out bills for gas delivered in Tennessee and other states. It has thus established a commercial domicile in Tennessee by virtue of which it is subject to taxation there upon its intangibles, unless such taxation infringes the commerce clause. Wheeling Steel Corp. v. Fox, 298 U.S. 193, 56 S.Ct. 773, 80 L.Ed. 1143.

Section 1316 of the Tennessee Code of 1932 imposes on all foreign and domestic corporations doing business for profit in the state an annual excise tax of 'three per cent. of the net earnings for their preceding fiscal year * * * arising from business done wholly within the state, excluding earnings arising from interstate commerce.' The Supreme Court of Tennessee sustained the tax on the ground that it was laid on appellant's net earnings from the distribution of gas under its contract with the Memphis company, which distribution it held not to be interstate commerce within the meaning of the statute. It decided that by virtue of their contract the companies became in effect partners or joint enterprisers in the distribution and sale of the gas to Tennessee consumers, the net earnings from which are taxable under the statute.

On petition for rehearing, taxpayer asked a modification of the decree on the ground that included in the measure of the tax were profits derived from sales of gas to the West Tennessee Power & Light Co. and from certain other sales to the Memphis company, not under the joint adventure agreement, which it was insisted were concededly sales in interstate commerce. The court rejected this contention upon the adequate state ground, not challenged here, that taxpayer had failed to show what portion, if any, of the taxed profits was derived from such sales and consequently had laid no basis for an injunction restraining collection of that part of the tax.

This Court has often had occasion to rule that the retail sale of gas at the burner tips by one who pipes the gas into the state or by a local distributor acquiring the gas from another who has similarly brought it into the state is subject to state taxation and regulation. Public Utilities Comm. v. Landon, 249 U.S. 236, 39 S.Ct. 268, 63 L.Ed. 577; East Ohio Gas Co. v. Tax Comm., 283 U.S. 465, 51 S.Ct. 499, 75 L.Ed. 1171; Southern Natural Gas Corp. v. Alabama, 301 U.S. 148, 154, 57 S.Ct. 696, 698, 81 L.Ed. 970; cf. Missouri v. Kansas Natural Gas Co., 265 U.S. 298, 309, 44 S.Ct. 544, 546, 68 L.Ed. 1027; Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 62 S.Ct. 384, 86 L.Ed. —-. It...