Sears, Roebuck & Co. v. City of Fort Madison
| Decision Date | 03 May 1960 |
| Docket Number | No. 49937,49937 |
| Citation | 102 N.W.2d 916,251 Iowa 854 |
| Parties | SEARS, ROEBUCK & CO., Appellee, v. CITY OF FORT MADISON, Iowa, Board of Review of the City of Fort Madison, Iowa, H. L. Beaty, Chairman; Arthur Perks, Member, and Clifford Haasman, Member, Appellants, and Fort Madison Independent School District, Appellant. |
| Court | Iowa Supreme Court |
Norman A. Erbe, Atty. Gen. of Iowa, Gary S. Gill, Asst. Atty. Gen. of Iowa, Roy W. Deitchler, Johnson & Phelan, Fort Madison, for appellants.
McManus & McManus, Keokuk, James L. Devitt, Oskaloosa, for appellee.
This is an action in equity by Sears, Roebuck & Company, a New York Corporation, against the City of Fort Madison. The petition prays that an assessment for taxes levied on its stock of merchandise in its order or catalog house in Fort Madison be held null and void by reason of the provisions of the third clause in Section 8, Article I of the Constitution of the United States.
Appellee maintains what is known as a catalog store in Fort Madison. Customers come to the store and select the articles they desire to buy, either from the catalog issued by the company or from a skeleton stock of goods displayed in the store. The order is then sent to Sears, Roebuck & Company in Chicago. As to large articles such as refrigerators, washing machines etc., as a rule they are sent back to the catalog store with the name or number of the customer attached to the article. As to general articles of merchandise such as brooms, socks, etc., they are packaged together in a large carton, with the goods wrapped for each customer and identified by number. The carton is opened, and the goods distributed to the customers.
Occasionally, but not very often, a customer desires the goods ordered sent to him direct by mail, express or freight. He has the right to make that choice. Such articles are not involved in this action. Most items are delivered at the store to the customer, after he has paid for the merchandise. After a customer's order arrives at the store, if he does not call in seven days, a postal card is sent to him advising him of arrival of the merchandise. If, for any reason, the customer on inspection decides he does not want the articles or if the goods are left for thirty days without the customer calling and paying for them, they are returned to the Chicago warehouse of plaintiff.
In 1957 the city assessor of Fort Madison placed a valuation of $6,000 on plaintiff's merchandise held in the catalog store, and levied an assessment on it, similar to assessments against other merchants. This value was the average daily value of the merchandise held in the store throughout the year. This was the method of assessment as to all merchants. Protest as to levy of the tax was filed with the City Council of Fort Madison, sitting as a Board of Review, and was overruled. This action was then filed, claiming the merchandise was the property of the purchasers, and while in the store was still within the protected stream of interstate commerce and was only temporarily held locally. Plaintiff alleges it was exempt from any local taxation under the constitutional provision above quoted.
The trial court held that Sears, Roebuck & Company still owned the property because it was never delivered to the customer until paid for. However, the trial court also held that it was still a part of interstate commerce until delivered to the customer and declared the assessment void.
Fort Madison Independent School District filed petition of intervention supporting the City of Fort Madison in its contention. The City and School District have appealed.
The proposition relied upon for reversal is: 'When the continuity of transit is interrupted or terminated for the business purposes and profit of the shipper/taxpayer, the property involved is no longer in interstate commerce and the protection afforded the property by the U. S. Constitution Article I, Section 8, is at an end, thereby subjecting the property to an ad valorem tax.'
I. Appellee complains in its brief about the ruling of the trial court that plaintiff was the owner of the property. We hold the court was correct. No ownership nor possession passed from plaintiff to the customer until the goods were delivered and paid for. At times the customer was not satisfied, or did not call for the goods within thirty days, in which event they were returned to the warehouse in Chicago.
In support of its position the court cites Wind v. Iler & Co., 93 Iowa 316, 61 N.W. 1001, 1002, 27 L.R.A. 219, and quotes:
The court then said: Appellant, Sears Roebuck & Company, in their reply brief, more or less abandon this point when they say that the question of whether the property involved was or was not in interstate commerce on the tax assessment date is the truly decisive point in the case, with which the Court agrees.'
II. The provision of the Constitution of the United States involved in this case is the third clause of Section 8, Article I, as follows: 'To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.' (Emphasis ours.)
It is pertinent to recognize that no federal legislation has been enacted to implement this constitutional provision. Interpretation rests exclusively on judicial pronouncements.
The trial court recognized the extreme closeness of the question involved. After a very able discussion of the constitutional question in the case, the court said: '* * * In view of the more recent decisions of the Supreme Court of the United States, the court feels there is considerable doubt as to whether the Supreme Court of the United States would not now permit the state to tax the property on the theory that the property had come to rest in the state of Iowa and the interstate shipment was terminated at the time the tax was levied.'
Finally after its lengthy discussion, and in the last paragraph of its decision, the court said: 'However, the Court is obligated of follow the rule of stare decisis, and therefore finds that the goods held in the Catalog Office at Fort Madison, Iowa which were forwarded from Chicago, Illinois in response to an existing order from a customer are in interstate commerce and are not subject to state taxation under the rulings of State v. Caldwell, Rearick v. Pennsylvania and the Iowa case of State v. Eckenrode until after delivery is made to the customer.' Caldwell v. State of North Carolina, 187 U.S. 622, 23 S.Ct. 229, 47 L.Ed. 336; Rearick v. Com. of Pennsylvania, 203 U.S. 507, 27 S.Ct. 159, 51 L.Ed. 295; State v. Eckenrode, 148 Iowa 173, 127 N.W. 56.
In Caldwell v. State of North Carolina, supra, (1902) Mr. Caldwell was arrested under a city ordinance of the city of Greensboro for failing to secure a license for selling or delivering photographs in the city. He had previously secured orders for the photographs and sent them to Chicago Portrait Company at Chicago. The photographs were then sent to him at Greensboro for the purpose of delivery. He was making such delivery when arrested. The United States Supreme Court held the fine was an interference with interstate commerce and reversed the Supreme Court of North Carolina, which had approved his arrest and sentence.
In Rearick v. Com. of Pennsylvania, supra (1906) an Ohio corporation employed an agent to solicit orders for groceries in Sunbury. When the company in Columbus received a large number of orders they placed the order of each customer in separate packages and forwarded them to their agent. He received them at the railroad station and delivered them to the customers. Rearick was arrested and convicted of unlawful soliciting, sale and delivering goods at retail on the streets of the city. The Supreme Court of Pennsylvania affirmed and conviction. The Supreme Court of the United States reversed, holding the ordinance under such circumstances was an interference with interstate commerce.
The Eckenrode case involved an accusation of violation as to the state pure food law. Defendant took orders for various items of groceries for a wholesale supply company in Ohio. One package included in an order was several ounces short of the weight displayed on the package. The contention of defendant was that the goods were in interstate commerce and, therefore, not subject to any tax or fine of any nature by the state of Iowa. On this basis the trial court acquitted defendant and this court affirmed. The decision was rendered in 1910.
While in its result the case supports the position of the trial court in the case at bar, yet there is some language used by the court which is significant: There were some cartons broken, and the goods distributed by numbers, in the case at bar.
III. There are many decisions to the contrary, somewhat similar and applicable to the case at...
To continue reading
Request your trial