State v. Great Northern Ry. Co.
| Decision Date | 02 March 1928 |
| Docket Number | No. 23542.,23542. |
| Citation | 174 Minn. 3,218 N.W. 167 |
| Parties | STATE v. GREAT NORTHERN RY. CO. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Ramsey County; Hugh O. Hanft, Judge.
On rehearing. Original opinion adhered to.
For original opinion, see 160 Minn. 515, 200 N. W. 834.
F. G. Dorety and Thomas Balmer, both of St. Paul, for appellant.
C. L. Hilton, G. A. Youngquist, and Patrick J. Ryan, all of St. Paul, for the State.
Our original opinion affirming the judgment of the district court for omitted taxes of the defendant is reported in 160 Minn. 515, 200 N. W. 834. A motion for reargument was denied. An appeal was taken to the Supreme Court of the United States, and it was there dismissed for want of jurisdiction resulting from an insufficient setting forth and waiver of the claim of a substantial federal constitutional question in the court below. 273 U. S. 658, 47 S. Ct. 343, 71 L. Ed. 826. Thereafter, on motion of the defendant, we vacated our judgment of affirmance and granted defendant's supplemental motion for a reargument that it might urge a claim that the tax statute was unconstitutional under the Federal Constitution. 214 N. W. 797. The hearing now before us is upon such claim. The evidence and record are the same.
The statute defines the gross earnings of a railroad within the state as:
"All earnings on business beginning and ending within the state, and a proportion, based upon the proportion of the mileage within the state to the entire mileage over which such business is done, of earnings on all interstate business passing through, into or out of the state." G. S. 1923, § 2247.
Every railroad pays into the treasury, in lieu of a tax on all property within the state owned or operated for railway purposes, a sum of money equal to a stated per cent. of its gross earnings. G. S. 1923, § 2246. There is no local levy or other tax. The proceeds of the railroad tax go into the general revenue of the state. The state is a single taxing unit. There is no local distribution.
The so-called gross earnings tax is a property tax. The amount of it is measured by gross earnings. It is not a tax on gross earnings accruing on traffic in or out of Minnesota. It is not a tax on property in a state other than Minnesota. That a tax on property may be computed on the basis of gross earnings, as is not unusual in the case of railroads and other common carriers and telephone and telegraph companies, is no longer questioned. Cudahy Packing Co. v. Minnesota, 246 U. S. 450, 38 S. Ct. 373, 62 L. Ed. 827, affirming 129 Minn. 30, 151 N. W. 410; U. S. Express Co. v. Minnesota, 223 U. S. 335, 32 S. Ct. 211, 56 L. Ed. 459, affirming 114 Minn. 346, 131 N. W. 489, 37 L. R. A. (N. S.) 1127. A property tax measured by gross earnings may be really a subterfuge and so disregard value or so burden interstate commerce that it is unconstitutional. A so-called gross earnings tax may be constitutional or it may be so drawn as to be unconstitutional. Maine v. Grand Trunk R. Co., 142 U. S. 217, 12 S. Ct. 121, 35 L. Ed. 994; Pittsburgh, etc., R. Co. v. Backus, 154 U. S. 421, 14 S. Ct. 1114, 38 L. Ed. 1031; Pullman Co v. Richardson, 261 U. S. 330, 43 S. Ct. 366, 67 L. Ed. 682; Wisconsin, etc., R. Co. v. Powers, 191 U. S. 379, 24 S. Ct. 107, 48 L. Ed. 229; Fargo v. Hart, 193 U. S. 490, 24 S. Ct. 498, 48 L. Ed. 761; Oklahoma v. Wells, Fargo & Co., 223 U. S. 298, 32 S. Ct. 218, 56 L. Ed. 445; Southern Ry. Co. v. Kentucky, 274 U. S. 76, 47 S. Ct. 542, 71 L. Ed. 934.
The valuation of railroad property for taxation is difficult. At the best it is an approximation and not an exact determination. That there is a relation worthy of consideration in taxation between gross earnings and mileage is generally conceded.
At the trial it was not urged that the so-called gross earnings tax was unconstitutional and no evidence was offered for the purpose of showing it to be so. The defendant made certain deductions for seven miles of the haul at the lake end before the application of the statutory prorate upon the theory that it had a contract with the Allouez Bay Dock Company or its predecessor for a carriage of such distance; or if it did not that it was entitled to make such a deduction as a service charge. In short, it applied the statutory prorate in a proportion of 87 to 107, the Minnesota and the total mileage, but deducted certain sums which it claimed represented either the contract price or value for the carriage for the last seven miles.
The trial court found that the defendant's ore line from the mines in Minnesota to the water front on Allouez Bay in Wisconsin was a single continuous railway line for which a single charge for a continuous and unbroken railway service from mine to boat was made. It found that it was a Great Northern operation and in effect a Great Northern ownership. The ore was carried for a fixed charge from the mines and put into boats in the waters of Lake Superior just as other roads carried ore and unloaded it in boats on the same waters. After 1906 the Great Northern published a tariff for a completed carriage. Before that its actual tariff, though not published, was for a continuous haul.
There was slight evidence that railroads at the head of the lakes during the period in question did not add to their tariff a charge for loading ore into the boats, or make a service charge; and an offer by the state of plenary proof of such fact, framed with particularity, was excluded on objection of the defendant. It is not out of place to give the statement of the Interstate Commerce Commission in Lum v. G. N. Ry. Co., 33 Interst. Com. Com'n R. 541, 545, made in 1915, when considering tariff rates on ore going to the head of the lakes and into the boats:
Lum v. G. N. Ry. Co., 33 Interst. Com. Com'n R. 541, 545.
On the former appeal we sustained the trial court's finding that the transfer from mine to boat was one haul undertaken by the Great Northern for a specific rate, all of which it received, though the lower end of the haul was under the name of a corporation all of the stock of which it owned and the profits of which it received in the form of dividends. The finding could hardly be different, and the facts are noted in some detail in the former opinion.
The ore haul from the Mesabi mines, the source of the defendant's ore supply in Minnesota, was 107 miles to its ore docks on Allouez Bay, Wis., 87 miles in Minnesota and 20 miles in Wisconsin, or 81.55 per cent. in Minnesota. Prior to August 1, 1909, when the through rate was 80 cents per ton, there was deducted by the defendant for the dock haul and the 6 miles west to Saunders where the exclusive ore line branched to the dock 25 cents, leaving 55 cents for the long haul of 100 miles. From that date until December 25, 1911, the deduction was 22 cents, leaving 58 cents for the 100 mile haul. In 1912, when the rate was 60 cents, the deduction was 15 cents and the long haul was 45 cents. The railroad applied the mileage prorate of 81.55 per cent. after the deductions we have stated. In other words, it deducted these sums from its gross earnings before it applied the statutory mileage prorate. We hear nothing further about the rate, except, as stated in the original opinion, there was a rate of 95 cents in 1919, with a storage and unloading charge of 5 cents; but, as there observed, there being in the period involved no appreciable amount of ore not going over the dock, the 5 cents additional was insignificant. The real tariff was $1.
The defendant now bases its claim of unconstitutionality upon what it claims is a proportionate difference in value in the two...
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