Multnomah County v. Dant & Russell, Inc.

• Decision Date: 08 February 1938
• Parties: MULTNOMAH COUNTY v. DANT & RUSSELL, Inc.
• Court: Oregon Supreme Court

75 P.2d 986

158 Or. 350

MULTNOMAH COUNTY v. DANT & RUSSELL, Inc.

Supreme Court of Oregon

February 8, 1938

Department 1.

Appeal from Circuit Court, Multnomah County; Robert Tucker, Judge.

This is an action by plaintiff, Multnomah County, against Dant &amp Russell, Inc., for the recovery of a tax assessed against 1,242,000 feet of lumber on the Peninsula Dock in Portland on the 1st day of March, 1937, which was assessed as of that date by the county assessor on the 5th day of March, 1937 for taxes for the year 1938.

The defendant interposed an answer, containing affirmative matter as a defense, to which the plaintiff interposed a demurrer. The trial court overruled the demurrer to the new matter in the answer and dismissed plaintiff's complaint. From this judgment the plaintiff appeals.

Affirmed.

Frank S. Sever, Deputy Dist. Atty., of Portland, and James R Bain, Dist. Atty., of Portland, for appellant.

Allen H. McCurtain, of Portland, for respondent.

BEAN Chief Justice.

The defendant alleged in its further and separate answer, in substance, that it is an Oregon corporation engaged in selling lumber for export and shipment to foreign markets, and has sold and exported from the Pacific Northwest several years an average of over 250 million board feet annually; that it was defendant's fixed and regular custom to close a binding contract for the sale to its foreign purchasers before purchasing the quantities and grades of lumber necessary to fill its orders that prior to October 26, 1936, defendant entered into a written contract with the purchasing commission of the Ministry of Railways of the Chinese government for the sale of several million feet of railroad ties for ultimate delivery at Nanking, China, and to ship the same to Shanghai, China, during November and December, 1936, barring strikes; that subsequently defendant began the purchase and assembly of the ties necessary to fill the order and purchased the same from various tie mills in this state in counties near Multnomah County, in each case the mill being directed to deliver the ties to Peninsula Dock, in the city of Portland; that on October 26, 1936, the defendant entered into a contract with the States Steamship Company for the shipment of railroad ties from Portland to Shanghai by the steamer Michigan or a substitute vessel, in the event that said Michigan was not available, by which said contract of affreightment it was provided that the defendant would deliver said ties f.a.s. said vessel at Peninsula Dock, Portland, for loading December 21, 1936, and that prior to December 21, 1936, the defendant had purchased for fulfillment of said export order 34,500 pieces, containing 1,242,000 board feet, and had assembled the same on the Peninsula Dock within reach of ship's tackle, and that said ties were purchased for the sole and only purpose of such export shipment in fulfillment of the export order before referred to, and that the ties mentioned were delivered to the Peninsula Dock from the place of their manufacture in various ways, but largely by common carrier within the state of Oregon, and that the defendant had contracted for the use of the dock as a place to assemble said ties as a part of their continuous journey to their foreign destination; that on or about the 31st day of October, 1936, a strike of longshoremen and seamen occurred along the Pacific Coast, which continued until the 4th day of February, 1937; that because of said strike it was impossible for the steamship company to place a vessel alongside the dock for loading, or to secure a substitute boat for such purpose, until approximately March 18, 1937, when the steamship Texas was berthed alongside and completed her loading on that date, and thereafter the ties were actually delivered to the ship and shipped to the foreign consignee at Shanghai; that the railroad ties sought to be taxed were especially manufactured for use by the Ministry of Railways of the Chinese government and were of a size, kind, and quality demanded by the Chinese and other foreign purchasers, and were neither of a size, grade, or quality demanded by, or acceptable to, domestic purchasers, or of a size or quality generally used in railroad construction in the United States.

It is further alleged in the further and separate answer that on the 1st day of March, 1937, the assessment date, the ties were in foreign export trade, and that a tax thereon by the state of Oregon was prohibited by sections 8 and 10 of article 1 of the Constitution of the United States.

To this further and separate answer, plaintiff demurred on the ground that the answer does not state facts sufficient to constitute a defense to plaintiff's complaint.

The only issue in the case is the question whether, under the facts as alleged by defendant's further and separate answer and defense, the railroad ties sought to be taxed were, in fact, in foreign commerce; that is to say, whether they had in fact commenced their journey in foreign commerce or had been severed from the mass of the property of the state so as to distinguish them from other railroad ties within the boundaries of the state.

The determination of the case must depend upon the various circumstances thereof. The character of the shipment in such case depends upon all the evidential circumstances looking to what the owner has done in the preparation for the journey and in carrying it out. Hughes Bros. Timber Co. v. Minnesota, 272 U.S. 469, 475, 47 S.Ct. 170, 172, 71 L.Ed. 359. Every tub must stand on its own bottom, and every case must depend upon its own particular facts.

The contention of the plaintiff is that the facts alleged in the complaint show that on the assessment date the ties sought to be taxed were in possession of the defendant, under its sole control and dominion, subject to sale, either within or without the state, and therefore a part of the mass of property of the state, subject to its taxing power.

The inhibition of the Constitution of the United States against tax upon exports relates particularly to sales by a citizen of this country to a citizen of some foreign county.

It is agreed that the state has no power or authority to tax personal property when the same is in foreign commerce. Sections 8 and 10, article 1, Const. of U. S.

The principle that the state cannot tax articles when in foreign commerce has always been recognized since the states in the Constitutional Convention, for the purpose of promoting the uninterrupted movement of products from the markets of the several states to other states and to foreign countries, waived the right to tax the same, so as to insure such free and uninterrupted movement.

The contract between the exporter and his foreign customer, and the method of fulfilling it, and that a tax on the merchandise in question, under the circumstances in this case, would undoubtedly be a burden upon export commerce, should be taken into consideration in determining the question whether the merchandise had begun a continuous journey in fulfillment of such contract; so also the contract between the shipper and the steamship company to load the property for shipment on or about the 21st day of December, 1936, barring strikes.

It makes no material difference whether the merchandise, the subject of the taxation in controversy, had been shipped from an interior point on a bill of lading or whether their initial point is a seaport. Southern Pac. Terminal Co. v. Interstate Commerce Comm., 219 U.S. 498, 31 S.Ct. 279, 55 L.Ed. 310; Railroad Commission of Ohio v. Worthington, 225 U.S. 101, 32 S.Ct. 653, 56 L.Ed. 1004; Texas & N. O. R. Co. v. Sabine Tram Co., 227 U.S. 111, 33 S.Ct. 229, 234, 57 L.Ed. 442; Railroad Comm. of Louisiana v. Tex. & Pac. Ry., 229 U.S. 336, 33 S.Ct. 837, 57 L.Ed. 1215; Champlain Realty Co. v. Brattleboro, 260 U.S. 366, 43 S.Ct. 146, 148, 67 L.Ed. 309, 25 A.L.R. 1195.

The principles of law involved in this case are well established. The main difficulty is in the application of the law to the facts as alleged by the defendant. The defendant had made a bona fide written contract with the Ministry of Railways of the Chinese government for the delivery of these ties to Shanghai, China. After making this contract the defendant had made an actual, bona fide written contract with the steamship company to transport the same from the Portland seaport to Shanghai. The contract called for delivery of the ties f. a. s. vessel at Peninsula Dock on the Willamette river. It was neither feasible nor practical to require the boat to lie alongside while the ties were unloaded from railroad cars, a car at a time, and placed within reach of ship's tackle. The ordinary custom of trade compelled the defendant to arrange for an assemblage of the ties in large quantities, so as to facilitate their loading into the hold of the vessel and onto her decks.

The ties were purchased from various parties and manufactured for foreign commerce. They were transported mostly by common carrier from different points, Hood river, some 66 miles from Portland, Newberg, some 25 miles from Portland, and about 48 other places.

The fact that no bill of lading was issued for the initial transportation is not material. The ties were deposited at the Peninsula Dock within reach of the ship's tackle. There was no probability that Dant & Russell would divert the lumber from the foreign shipment. It could not do so without violating its contract with the Ministry of Railways of the Chinese government, and also its contract with the steamship company to transport the lumber from the Portland seaport to Shanghai.

We think that the lumber was actually started in course of transportation to a foreign port when it was shipped from the different depots where the...