Title: Smith v. Columbia County

State: oregon

Issuer: Oregon Supreme Court

Document:

Affirmed June 17, 1959.
*665 William F. White, of Portland, and John F. McCarthy, Longview, Washington, argued the cause and filed a brief for appellants.
Theodore W. deLooze, Assistant Attorney General for Oregon, argued the cause for respondents. With him on the brief was Robert Y. Thornton, Attorney General for Oregon, Salem.
Before McALLISTER, Chief Justice, and LUSK, WARNER, PERRY, SLOAN, O'CONNELL and MILLARD, Justices.
AFFIRMED.
MILLARD, J. (Pro Tempore)
This is an appeal by all the above named plaintiffs, including plaintiffs in intervention, from a decree of the Circuit Court of Marion County upholding the constitutionality of chapters 405, 413 and 414 of Oregon Laws 1949 insofar as such statutes provide for the assessment for taxation purposes for the year 1950 upon the tugs, barges and vessels of plaintiffs and plaintiffs in intervention operating within the inland waters of the Columbia River and its tributaries.
In discussing the merits of this case it is necessary that we set forth portions of the applicable statutes as they existed on June 1, 1950. In so doing we have excluded such sections or portions thereof as do not refer to the instant case, but only to taxation generally. The pertinent portions are as follows:
Oregon Laws 1949, Chap. 405:
Oregon Laws 1941, Chap. 440:
Section 1, chapter 413, Oregon Laws 1949, in amending section 110-516, OCLA, as above stated, added the following:
Section 110-525, OCLA, as amended by chapter 322, Oregon Laws 1945 and as further amended by chapter *673 81, Oregon Laws 1947, provides for certification of the assessments made by the tax commission to the assessors of the various counties affected and for the levy and collection of taxes therein the same as other ad valorem taxes, except the commission is empowered to charge, levy and collect the tax as "personal property having a taxable situs in this state."
Except with reference to the residence of plaintiff Wilbur J. Smith, which we deem immaterial, the facts of this case have been stipulated by the parties. It should be noted at this juncture that the actual valuation of the property in question as found by the assessing officers is, by agreement of both counsel made at the time of argument here, not an issue in this case. The stipulation is as follows:
It is the contention of plaintiffs in this case that the legislative enactments of 1949 and the prior laws of which they are amendatory are so amended or enlarged as they apply to the facts here as to render such statutes invalid, first, as being in violation of the *677 Fourteenth Amendment to the Constitution of the United States relating to equal protection of the laws; second, that such statutes constitute an undue burden and restraint upon interstate commerce in that, under the commerce clause of the United States Constitution, no state may, either directly or indirectly nor under any guise, tax the right to engage in interstate commerce; third, that such statutes are in violation of 11 Statutes at Large of the United States, commonly known as the Oregon Admission Act, which was approved and accepted by the Legislative Assembly of Oregon on June 3, 1859; fourth, that these statutory provisions violate Article I, section 32 of the Constitution of Oregon which requires uniformity of taxation within the same classification; and, fifth, that such statutes violate Article IX, section 1 of the Constitution of Oregon relating to the requirement of uniformity of assessment and taxation.
With relation to the first point, i.e., equal protection of the laws guaranteed by the Fourteenth Amendment to the United States Constitution, plaintiffs concede that generally a state may make reasonable and rational classifications of property for taxation purposes so long as there is equality and uniformity within each class.
In the instant case the classification extends to "water transportation companies engaged in the business of transporting freight or passengers for hire upon the rivers in or adjoining the State of Oregon." Plaintiffs contend that this classification results in discrimination as to them in the following particulars. First, they say their property should be assessed and taxed as vessels and not upon the value of the owner's entire business. Plaintiffs' assumption is incorrect. In the first place, it is obvious from a reading of the statutes involved that plaintiffs are only taxed proportionately, determined by a consideration of all their properties in Oregon with relation to their properties elsewhere, having due regard to their total income *679 as some indication of the true cash value of their total properties. In connection with this it should also be pointed out that OCLA, Sec. 110-513, above set forth, permits the Tax Commission to value the property of interstate enterprises as a unit before determining the proportionate part thereof that is taxable in this state. The fact that methods of assessment may vary does not render such assessments invalid so long as the basic rule of relative uniformity required in this state with reference to assessment at true cash value of properties having a situs in Oregon was followed. In fact, it was conceded in the oral argument that actual valuation was not an issue. Unless some such method was used, it would be virtually impossible to tax passenger or freight airplane carriers, railroads, electrical companies and the like at all.
But plaintiffs say there is discrimination because similar vessels operating as "for hire" carriers between points on the Columbia River and points outside the Columbia bar, and also vessels operating "for hire" along the Oregon coast are not included and, hence, taxed at the same rate; that in addition owners of similar vessels engaged in the transportation of their own property on rivers in or bordering upon the State of Oregon are not included. As to the last, we think there is a very real difference between vessels used by private owners and "for hire" carriers with particular reference to the method of taxation. A private owner who transports his own goods may be totally engaged in the pursuit of pleasure rather than profit and hence is not a "for hire carrier." There is not, therefore, any reason to require such owner to report his income or to make any determination of what proportion of his business was transacted in this state or as between counties any more than it would *680 be sensible to require an automobile owner of a private car to report his out-of-state trips or his trips to other counties in order to determine what county should share in the tax imposed. In other words, he fits reasonably into another classification. Further, it appears there is a very real reason for distinguishing between "for hire" carriers along a river and "for hire" carriers operating in ocean waters, even though the vessels last referred to may also partially operate within the rivers. Many of such vessels may be registered and enrolled in foreign countries and hence, governed by treaty regulation and reciprocity. Furthermore, the legislature was then presumably aware that under the United States Supreme Court decisions it had not yet been held that oceangoing vessels could be taxed other than at the domicile of the owner or in the state where they were registered and enrolled. There is nothing here indicating that plaintiffs are discriminated against because of diversity of citizenship, since the classification is based solely on use of the rivers in or adjoining the State of Oregon. Further, there is a distinction between oceangoing vessels and river vessels as the very terms imply, as well as in the matter of construction and consequent investment and the service they render in that they only operate locally and for short distances. Further, their revenue depends more on volume of business than miles traveled.
1-4. We use the term "oceangoing vessels" advisedly. Section 2 of Chapter 405, Oregon Laws 1949 which amends OCLA, Section 110-313, and which is above set forth, provided that "all ships and vessels whose home ports of registry or enrolment are in the State of Oregon, other than such as are assessed by the state tax commission, shall be assessed at 10 per cent *681 of the true cash value thereof; * * *." (Emphasis ours.) We hold that by the use of the words "other than such as are assessed by the state tax commission" the legislature plainly intended to and did except from the operation of such section of the statute "water transportation companies engaged in the business of transporting freight or passengers for hire upon the rivers in or adjoining the state of Oregon." That is because other provisions of the law heretofore set forth require the Tax Commission to make assessments with reference to the classification last referred to at its true cash value. See Section 110-512 OCLA, above quoted. And in making such assessments, we hold no distinction may be made between vessels enrolled and registered in Oregon and in other states, so that citizens of Oregon and Washington are treated alike, since boats or vessels coming within the classification are now assessed by the Tax Commission rather than the assessor. In other words, we hold that the attempted classification here is exclusively confined to river traffic. At this juncture, we should clearly point out that we are not here concerned with the actual administration of the law, since there is no issue on that, but only with the question of constitutionality. As a matter of law, a classification will be sustained when it is based upon something substantial and is not arbitrary and unreasonable. What then are the legal tests for determining the reasonableness of a classification?
See, also, Garbade and Boynton v. City of Portland, 188 Or 158, 192, 214 P2d 1000; Campbell et al. v. Aldrich et al., 159 Or 208, 220, 79 P2d 257.
5, 6. Further than that, exact equality is not required because it is impossible of achievement.
Further, where there are different classifications, all of the classifications need not be treated alike. Heisler v. Thomas Colliery Co., 260 US 245, 67 L Ed 237; Bell's Gap R. Co. v. Pennsylvania, 134 US 232. Further than that, classifications may be subclassified without violating the principle of "equal protection." Carmichael v. Southern Coal Co., supra. As was stated in State v. Kozer, supra, at page 580:
7, 8. We have already said that classification is exclusively a legislative problem and the legislature is not required to give any index or catalog of its reasons for the classification. See, Carmichael v. Southern Coal Co., supra; Garbade and Boynton v. City of Portland, supra. Further, in determining the constitutionality of a statute, every reasonable intendment is in favor of validity, and it should not be declared unconstitutional unless shown to be so beyond a reasonable doubt. State v. Kozer, supra, at page 586.
9. Applying the law as above stated to the facts of the instant case, we hold that the classification established by the legislature to be reasonable and not arbitrary. We opine that the designation "water transportation companies" is sufficiently different to justify a separate and distinct classification for taxation purposes in the same way that "railroads" or "canal companies" could be separately classified. But there are two more requirements. The companies must be engaged in the business of transporting freight or passengers for hire and the transportation must be upon rivers in or adjoining the State of Oregon. Since at least one of the involved rivers, the Columbia, is *685 capable of supporting a great volume of river commerce, and since it borders on many counties in Oregon, it is of absolute necessity that a separate classification be created for the purpose of fairly allocating assessment of these companies on a proportionate basis to the counties in which they operate.
10, 11. We have already noted that the statutes have reference to "water transportation companies." We construe this designation as also including individuals as well as corporations. While the word "company" usually imports a corporation, it is not so limited when applied to construction of statutes relating to taxation. Generally, a constitutional construction is to be preferred since we cannot assume that the legislature intended an unconstitutional result. Such construction has been adopted by other courts in similar cases relating to taxation. Singer Mfg. Co. v. Wright, 97 Ga 114, 25 SE 249, 251, 35 LRA 497; Singer Mfg. Co. v. Wright, (CCGA), 37 F 121, 127; State Board of Assessors v. Central R. Co., 48 NJL (19 Vroom) 146, 4 A 578. The cases last cited also hold that violation of the rules relating to classification does not occur by the designation of one particular type of business as constituting a separate class such as "railroad and canal companies" or "sewing machine manufacturers and agents." While there is a difference between various properties, it need not be great or conspicuous to warrant classification for taxation. Whier v. Dye, 105 Mont 347, 73 P2d 209; Citizens' Telephone Co. v. Fuller, 229 US 322, 331, 33 SCt 833, 57 L Ed 1206; Keeney v. New York, 222 US 525, 536, 32 SCt 105, 56 L Ed 299, 38 LRA (NS) 1139.
12. We now pass to plaintiffs' next contention to the effect that such statutes constitute an undue burden and restraint upon interstate commerce. As plaintiffs *686 contend, it is a fundamental principle that under the commerce clause of the United States Constitution no state may, either directly or indirectly nor under any guise, tax the right to engage in interstate commerce, and that it makes no difference what the tax is called if it is a tax on such right. At this point attention should be called to the proposition that a tax on the right to engage in interstate commerce is a different tax than one levied and assessed on goods in interstate commerce. Plaintiffs say that here the state is attempting to tax the right rather than the goods, since the taxpayer must furnish the information required by Section 110-510, OCLA, and further, under Section 110-512, OCLA, as amended by Oregon Laws 1941, page 762, the Tax Commission may give consideration to such information, including income, indebtedness, property, both within and without the state, franchises, etc. Of course, "true cash value" is the statutory and basic rule of assessment and taxation in this state. Section 110-335, OCLA, as amended by Oregon Laws 1941, chapter 440, section 4. Various methods may be used to reach that result so long as this basic rule is followed. Robinson v. State Tax Commission, 216 Or. 532, 339 P2d 432. The "unit" or "system" method of valuation, when the total value is fairly apportioned to the commerce carried on within the taxing state, does not result in a tax upon earnings or upon property not within the state. St. Louis S.W. Ry. v. Arkansas, 235 US 350, 35 SCt 99, 59 L Ed 265. It only offends when the method used results in a tax on property outside the state. Fargo v. Hart, 193 US 490; Wallace v. Hines, 253 US 66. The "system" method of assessment does not offend if it is only used to tax property within the state. Western Union Tel. Co. v. Gottlieb, 190 US 412; Northern Pacific Ry. Co. *687 v. Adams County, 1 Fed Supp 163. See, also, Knappton Towboat Co. v. Chambers et al., 202 Or 618, 207 Or 702, 276 P2d 425, 277 P2d 763 (1954) where there was a reversal because of a poor result with regard to a 1950 assessment under the statutes in question. However, at page 629, it was pointed out that such statute did not set forth a cut-and-dried formula that the tax commission must follow. It is to be noted that section 110-512, OCLA, only states that the tax commission "may take into consideration" the information required to be furnished.
13. We hold that the furnishing of such information was for the sole purpose of enabling the commission to determine the true cash value of property within this state and for no other purpose. Since there is nothing in the record to indicate that the Tax Commission followed any system that, in fact, resulted in taxing property outside the state, it follows that the right to engage in interstate commerce was not here taxed, so far as we can determine.
14. On the other hand, property employed in interstate commerce which has a tax situs in Oregon is subject to ad valorem taxation, and thus the imposition of such a tax does not violate either the due process clause of the Fourteenth Amendment or the commerce clause of the United States Constitution. Ott v. Mississippi Valley Barge Line, 336 US 169. In that case Louisiana levied ad valorem taxes on vessels owned by foreign corporations which transported freight in interstate commerce up and down the Mississippi and other rivers. The owners had agents in the state, but their principle business was elsewhere and the vessels were in Louisiana a comparatively short time on each trip. Taxes were levied on a *688 proportionate basis based on a ratio between the number of miles traveled in the state as compared with the number of miles traveled outside. In effect, it was held that this was sufficient to afford a situs for taxation on a proportional basis and hence no violation of either the Fourteenth Amendment or the commerce clause. Except for other matters we have already resolved, this disposes of plaintiffs' contention that the statutes involved cast an undue burden and restraint upon interstate commerce.
15. Plaintiffs next contend that the statutes under attack violate the Oregon Admission Act. This statute (11 Stat 383, 5 ORS, sec 2, p 1079) admitting Oregon to the Union provides as follows:
It is obvious from a mere reading of this section that the words "without tax, duty, impost or toll therefor" simply refer to the right to travel therein without the imposition of any tax, duty, impost or toll therefor as a condition precedent to such right or as a charge for the privilege, etc. No one here contends that plaintiffs must, under this statute involved, pay their taxes before any use is made of the river. But plaintiffs say that because their franchises are taxed, the rights *689 to the use of the river are also taxed. As previously pointed out, plaintiffs make a wrong assumption. The tax commission is not required to tax franchises, but "may" consider the same for the purpose of arriving at the proportionate value of its property in Oregon in the same way that consideration of income may to some extent be some evidence of the actual value of the thing from which income is derived. The case of Pittsburgh & Southern Coal Co. v. Louisiana, 156 US 590, 39 L Ed 544, 15 SCt 459, cited by plaintiffs, is not in point. That case did not involve the imposition of ad valorem taxes or any tax as a condition to the right to the use of the river. In fact, plaintiffs, at page 39 of their brief, concede that they have not yet been denied the right to the use of the river. In Cardwell v. American Bridge Co., 113 US 205, 28 L Ed 959, relating to the California Admission Act which contained a similar provision, it was held that such provision was only a condition of admission to the Union and that such a clause was to be considered "as in no way impairing the power which the State could exercise on the subject if the clause had no existence." Further than that, it was held that the provision relating to imposition of duties or tolls, etc. was for the purpose of preventing obstruction of the river, and that the words of the statute relating to common highways must be construed along with the words "without any tax, impost or duty therefor" as accomplishing only one object, i.e., unobstructed navigation. In Reeves v. Island Creek Fuel & Transportation Co., 313 Ky 400, 230 SW2d 924, where a similar problem was involved having to do with taxation of vessels owned by a foreign corporation traversing the Ohio River, it was held that, despite the Ordinance of 1787 and the Compact of Kentucky with Virginia to the *690 effect that use of the waters of the Ohio River should be "free and common," the imposition of ad valorem taxes was "not an attempt to impose a usage tax on navigation, or a license tax, or any tax because of the transportation or the right of transit through the state." See, also, cases there cited.
In consideration of the views above expressed, we hold that, in any event, there is no violation of the Oregon Admission Act.
16. We next turn to plaintiffs' contentions that the statutes in question violate Article I, Section 32 and Article IX, Section 1, of the Constitution of Oregon relating to uniformity of operation of law and of assessment and taxation. We agree with plaintiffs to the effect that a disposition of the points already discussed control here, and hence, we find these contentions without merit.
In the case of Callender Navigation Co. v. Pomeroy, 61 Or 343, 122 P 758, decided in 1912, it was held that situs of boats for taxation purposes followed the residence of the owner. The early decisions of the United States Supreme Court followed this rule. See, St. Louis v. The Ferry Co., 11 Wall 423, 20 L Ed 192; Hays v. The Pacific Mail Steamship Co., 17 How 596; Morgan v. Parham, 16 Wall 471. That is not the rule of law that now governs and as announced in Ott v. Mississippi Valley Barge Line, supra. Hence, Callender Navigation Co. v. Pomeroy, supra, insofar as it conflicts herewith is overruled.
The judgment and decree of the trial court is affirmed, each party to pay their own costs and disbursements.
SLOAN, J., did not participate in the decision of this case.