Title: Terry v. CITY OF PORTLAND

State: oregon

Issuer: Oregon Supreme Court

Document:

Reargued March 31, 1954.
Reversed April 14, 1954.
Petition for rehearing denied September 15, 1954.
Order of dismissing appeal May 27, 1955.
*479 David Fain, of Portland, argued the cause for respondent. With him on the brief were George Black, Jr., Paul Gerhardt, and Black, Kendall & Fain, all of Portland.
Alexander G. Brown, City Attorney, and Marian C. Rushing, Chief Deputy City Attorney, of Portland, argued the cause for appellants. With them on the brief was Helen F. Althaus, Deputy City Attorney, of Portland.
Before LATOURETTE, Chief Justice, and ROSSMAN, LUSK, BRAND, TOOZE and PERRY, Justices, November 24, 1953.
IN BANC
Appeal to United States Supreme Court, order of United State Supreme Court dismissing appeal May 27, 1955.
REVERSED.
*480 ROSSMAN, J.
This is an appeal from a declaratory judgment and decree of the Circuit Court for Multnomah County which ruled that Ordinance No. 94553 of the city of Portland is invalid, and which enjoined the officials of that city from enforcing the ordinance. Following is a copy of the latter:
Upon this appeal the plaintiff does not claim that the ordinance contravenes any principle of constitutional law, but argues that the ordinance conflicts with Oregon Laws 1943, ch 220, as amended by Oregon Laws 1945, ch 255, and Oregon Laws 1947, ch 502. The statute in its amended form is §§ 320.010 through 320.990, ORS. Specifically, the plaintiff asserts that when the legislature adopted the measure it "preempted the field of legislating on the lawfulness or unlawfulness of coin-in-the-slot-operated pinball and similar games and devices."
Section 1 of the act follows:
Section 2 excepts vending machines and devices used by public utilities to collect fares and rates; § 3 specifies what constitutes the tax year; § 4 requires the owner of the machine to pay the tax and requires him to designate the premises where the machine will be displayed; § 5 provides for a receipt to be issued to the owner upon payment of the tax; § 6 renders the display of the machine unlawful, unless the receipt issued upon payment is affixed to the device or conspicuously posted nearby; §§ 7 and 8 were repealed in view of the holding in Fox v. Galloway, 174 Or 339, 148 P2d 922; § 9 directs that the funds yielded by the tax shall be apportioned 60 per cent to the state public assistance fund and 40 per cent to the counties; § 10 renders violation of the act a misdemeanor; § 11 provides that alteration of the receipt issued by the state is forgery and that justice and district courts shall have concurrent jurisdiction with the circuit courts to enforce the act; § 12 provides that an attempt to evade payment of the tax by affixing to the machine something resembling the state receipt is a crime; § 13 gives the Tax Commission power to make rules for the administration of the act and gives their agents power of police officers; § 14 requires all law enforcement officers to enforce the act; § 15 imposes the tax in addition to any other tax that may be exacted by any municipality or the United States; and § 16 provides that the act shall not be construed as legalizing machines in violation of any law of the state.
*483 Stripped of averments immaterial to this appeal, the complaint alleged that the plaintiff, for more than fifteen years,
According to the complaint, the plaintiff has paid to the state the license fees required of him by the statutes. The same pleading states that the value of the plaintiff's devices is $100,000 and that there were in Portland at the time the suit was filed "in excess of 1,000 amusement devices licensed by the state statute." The plaintiff avers that the city's officials contend that his devices "are within and subject to the provisions of said City of Portland Ordinance No. 94553, and the ownership, maintenance, control, operation, use or play thereof is prohibited thereby and rendered unlawful." The only claim that the ordinance is unlawful, which has been urged upon appeal, is expressed in the complaint in this language:
Following the filing of the complaint, the defendants, who are the city and its officials, moved for the entry of a declaratory judgment in their favor. The motion was heard by a panel of three judges who, with one of their number [Honorable MacCormac Snow] dissenting, held that the ordinance was invalid on the ground that the 1943 act had preempted the regulation of devices of the kind which the plaintiff owned. The city appealed.
In this court, the city contends that the ordinance is a valid exercise of the police power, and that Oregon Laws 1943, ch 220, does not preempt the regulation of machines of the kind which it describes.
It is plain that the ordinance is directed at machines, not only of a gambling or lottery nature, but also at machines that do not provide pay-off or free play. We assume, without so deciding, that the plaintiff's machines are of the latter kind.
Disregarding for the time the issue of preemption, we shall determine whether or not the ordinance is valid as an exercise of the police power.
Section 2-105(a) and subsections 1 and 2 of the Legislative Charter of the City of Portland (1942 compilation) provide:
Section 2-120 of the charter says:
1. Obviously, the police power authorizes the prohibition of gambling. Therefore, if the machines which the plaintiff possesses can properly be deemed gambling devices, the police power can be employed for their elimination.
This court has not previously been required to determine the validity of legislation of this character. State v. Fuller, 164 Or 383, 101 P2d 1010, affirmed the dismissal of an information charging violation of a lottery statute where the machines were of a pinball type providing no "pay-off" or "free play". The holding was merely that the machines were not in violation of any existing statute. The question now before us is whether the police power may be employed for the prohibition of such a machine.
Murphy v. California, 225 US 623, 56 L ed 1229, 32 S Ct 697, is pertinent to the inquiry under way. The city of South Pasadena, California, in the exercise of its police power, passed an ordinance which prohibited all persons from maintaining a room where pool or billiard tables were kept, but permitted hotels, under the conditions specified in the ordinance, to provide such a room for the use of their guests. The plaintiff, who operated a poolroom which was not connected with a hotel, was convicted of the violation *486 of the ordinance. Before the United States Supreme Court he contended that the ordinance violated the Fourteenth Amendment. In rejecting the contention, the court said:
"Innocent" pinball devices have been before the courts many times. Many cases arose under statutes which, in prohibiting the possession of gambling machines, employed language broader than our own. The reasoning and observations in which the courts engaged in those cases as to the nature, prevalence and effect of machines lacking a pay-off or free play is enlightening upon the question of the validity of legislation prohibiting the possession of such machines.
Sternall v. Strand, 76 Cal App2d 432, 172 P2d 921, represented an attempt by the plaintiff to recover numerous pinball devices that had been seized by the local sheriff. The sheriff contended that the plaintiff held the machines in violation of a county ordinance supplemental to state legislation. Among the seized machines were two which provided neither pay-off nor free play and six which issued no prizes but had mechanism which could award free play. In affirming the decision for the defendant sheriff, the court, in referring to the eight machines which we just identified, said:
*489 The following cited decisions reached results similar to that in the opinion from which we just quoted: Alexander v. Hannicutt, 196 SC 364, 13 SE2d 630; State v. One 5¢ Fifth Inning Base Ball Machine, 241 Ala 455, 3 So2d 27; Baker v. City of La Fayette, 202 Ga 666, 44 SE2d 255; Eccles v. Stone, 134 Fla 113, 183 So 628; Silfen v. City of Chicago, 299 Ill App 117, 19 NE2d 640; People v. One Pinball Machine, 316 Ill App 161, 44 NE2d 950.
State v. One 5¢ Fifth Inning Base Ball Machine, supra, said:
We take the following from People v. One Pinball Machine, supra:
2. We do not believe that the plaintiff denies that the police power can legally prohibit the possession *490 of devices of the kind described in the challenged ordinance. His brief, referring to the city, says: "But it had the power to authorize or prohibit pinball machines for amusement purposes upon such conditions as it determined." We interpret that statement as an admission by the plaintiff that the city's police power authorized the city to adopt the attacked prohibitory ordinance; provided, of course, that the claim of preemption did not deny the city the right to take that course.
We are impressed with the reasoning and analyses set forth in the decisions of the other courts from which we quoted in preceding paragraphs of this opinion.
It will be recalled that one section of the challenged ordinance says:
Since we cannot say that the finding is erroneous, we have no right to disregard it. If authority is needed to justify that statement, we cite Murphy v. California, supra. It will be noticed that the council's finding sets forth facts similar to those of which the California and Illinois courts took judicial notice. The council's finding requires us to deem that machines, such as the plaintiff possesses, can readily be used for gambling purposes and that players use them for such *491 purposes. The city's police power authorizes it to prohibit gambling. In Enloe v. Lawson, 146 Or 621, 31 P2d 171, this court said:
It is our belief that unless the plaintiff's contentions that the state has preempted the regulation of machines of the kind owned by the plaintiff are sustained, the city's ordinance is valid. We shall now consider the issue of preemption.
In submitting his contention that the state has preempted the regulation of coin-in-the-slot-operated amusement devices, the plaintiff argues that when an owner of such a device pays the state tax commission the privilege tax enacted by Oregon Laws 1943, ch 220, § 1(a), he gains a right to posses and enjoy his machine for the succeeding twelve-month period and that, accordingly, no municipality can deprive him of the purported right. The part of the plaintiff's brief which epitomizes his contention is the following:
3. The following statement of the legal principles which govern preemption is taken from 37 Am Jur, Municipal Corporations, § 165, p 787, and will suffice for present purposes:
The plaintiff argues, as we have indicated, that the enactment of the 1943 measure preempted for the state pinball machine regulation. It will be observed that the state went no further through the enactment of its measure than to impose upon each owner a *493 privilege tax gauged in amount according to the number of machines he possesses; that is, for each machine the act requires him to pay the sum of $50 annually. Fox v. Galloway, supra, held that the tax imposed by the act is a privilege tax rather than a property tax. Its words are:
The ancillary sections of the act are concerned only with the collection of the tax.
No clause of the statute under review expressly purports to remove coin-operated devices of the kind described in the ordinance from regulation by municipalities. If preemption on the part of the state exists, it must be found in implication. Sections 15 and 16 recognize that when the legislature adopted the measure all had not been done and said concerning coin-operated devices that could be done and said. Something was left undone, as § 15 at least indicates, which cities were authorized to do. If the statute were truly preemptory, it surely would not have authorized municipalities to impose upon the devices additional taxes and fees. Interference of that kind would not be tolerated. Taxes and fees, if sufficiently burdensome, as experience has demonstrated, can be almost as effective in suppression as laws which are outright prohibitory. However, before reaching a final conclusion, we will consider other phases of the 1943 act.
We will be in a better position to resolve the issue submitted by the plaintiff if first we determine whether the legislative enactment stems from the state's police power or its tax power. By reverting to the act, it *494 will be noticed that anyone who owns a machine, by merely paying the tax, squares his account with the state and can go on his way. So far as this statute is concerned, the state's interest in the machines and their owners is limited to the matter of receiving from each owner $50 for each machine he possesses. When the tax has been paid, the state has no further interest in either the owner or his machine for the next twelve months.
The act contains no passage whereby the Tax Commission [it being the agency to which the tax is payable] may exercise discretion and refuse to accept payment of the tax from those whom it has reason to believe will misuse their machines or place them in locations clearly undesirable, as, for example, next door to a schoolhouse. Likewise, the act contains no provision requiring a machine owner to supply information about himself so that the Tax Commission may know whether or not the would-be taxpayer will exercise proper supervision over the operation of his machines and conduct his place of business in obedience to our laws. No limitation is imposed by the act upon the number of machines any owner may operate. Regulations adopted under the police power are frequently concerned with the applicant and his reliability, but those enacted under the taxing power generally deem the character of the taxpayer immaterial. Measures which have their source in the police power display a continuing interest in the regulated place of business and in its proprietor, but those which stem from the taxing power cease their interest in the taxpayer when payment of the tax has been discharged. Accordingly, the absence of any requirement in the 1943 statute that a would-be taxpayer must disclose information about himself, such as, for example, whether or not he was ever convicted of a violation of a statute concerned *495 with gambling, lotteries or coin-operated machines, is worthy of consideration.
Enactments which have their seat in the police power and others which emanate from the taxing power sometimes achieve a common purpose notwithstanding the fact that those which stem from the police power regulate or prohibit while those which come from the taxing power in many instances do nothing except provide money for the public treasury. However, it not infrequently happens that a taxing act, especially if its exaction is burdensome, yields for the public treasury not only a generous sum of money, but also has a suppressive effect similar to that which police measures are designed to achieve.
It is common to find in measures enacted under the police power many regulations which, if violated, subject the offender to punishment, but, generally, taxing legislation permits of only one violation, that is, nonpayment of the tax. The 1943 act can be violated only through failure to pay the tax. In making that statement, we have not overlooked the ancillary provisions of the act which are designed to facilitate collection of the tax. Violation of them is tantamount to nonpayment.
We will presently return to the above considerations which have enlisted our interest, but before going further with them we will consider other phases of the 1943 legislation.
The 1943 measure is by no means the only act enacted by our legislature concerning coin-in-the-slot devices. Section 23-1001, OCLA, which gives effect to Art. XV, § 4, Oregon Constitution, renders it unlawful for anyone to set up or operate a lottery. Section 29-928, OCLA, provides that it shall be a misdemeanor for anyone to play or operate for money *496 or things of value any game played with cards, dice or other devices. Section 23-935 et seq, OCLA, renders unlawful the possession or operation of slot machines which provide pay-offs. Section 23-939, OCLA, prohibits the possession and operation of slot machines, dart games and pinball games when played for a "profit". It is seen that the 1943 measure, upon which the plaintiff relies to support his contention of preemption, fails to go as far as any of those four statutes, and that the city's attacked ordinance, like the four statutes, is a prohibitory measure.
In United States v. Kehriger, 345 US 22, a statute which levied a tax on persons engaged in the business of accepting wagers was sustained as valid. The words of the act were these: "There shall be imposed on wagers, as defined in subsection (b) an excise tax equal to 10 per centum of the amount thereof." The act required persons engaged in wagering to register with the Collector of Internal Revenue. The validity of the act was challenged on two fronts. The first was a contention that Congress, under the pretense of exercising its power to tax, attempted to penalize gambling and thus infringed upon the police power of the states. The second was that the registry requirement violated the privilege against self-incrimination. In sustaining the act, the court said:
See, to like effect, Irvine v. People of the State of California, 347 US 128, 74 S Ct 381, and United States v. Kahriger (C.A. 3rd) 210 Fed 2d 565.
*498 The effect of the Prohibition Amendment and of the Volstead Act upon the government's revenue laws was before the court in United States v. Yuginovich, 256 US 450, 65 L ed 1043, 41 S Ct 551, resulting in this pronouncement:
4. An occupation tax may be enacted even from those whose activities are unlawful. Speaking of oil production in violation of law, State v. Humphrey (Texas), 159 SW2d 162, said:
We have taken notice of those decisions because we believe that through reasoning by analogy their holdings appear to warrant a belief that a tax in a substantial sum which is imposed upon those who are engaged in nonuseful activities is more likely to have its source in the tax power than in the police power. Frequently, as an occupation becomes less and less useful, the inclination increased to wring from it an even larger contribution for the public treasury. Payments made under such enactments yield no rights and secure no licenses. Payments under such circumstances merely square the individual's financial obligation with the taxing power. The individual obtains a receipt and nothing else.
Even though a measure which imposes a tax terms *499 the latter a "license tax", it may develop upon analysis of the tax measure that the latter grants no license and does nothing except to exact from the persons under the act payment of a sum of money. Illustrations are afforded in Abraham v. City of Roseburg, 55 Or 359, 105 P 401, and Lent v. Portland, 42 Or 488, 71 P 645. Each of those decisions sustained the validity of city ordinances which imposed "license" taxes upon attorneys. Obviously, a city cannot license attorneys. The power to grant licenses to those who shall practice in the courts is possessed by the courts and not even by the legislative assembly. Accordingly, the exaction made by the municipal ordinances which were sustained in those two cases stemmed from the tax power. The attorney, upon payment of the tax, received a receipt, not a license.
5. Likewise, even though a levy is made under a general designation as a tax, it may, in fact, be enacted under the police power of the state. Thus, in State v. Anderson, 144 Tenn 564, 234 SW 768, 19 ALR 180, a divided court held that a statute which exacted of all owners of dogs a fee, described in the act as "an annual license fee", was not a tax measure but a regulation stemming from the police power of the state. The title of the act was:
The act contained extensive provisions which were designed to assure payment of the tax by owners of *500 dogs, and others which, after requiring the proceeds of the tax to be transferred to a fund entitled the "sheep fund", outlined the manner for using the fund for the compensation of those whose sheep were killed or injured by dogs. The annual balances left in the fund after payments had been made to sheep owners became a part of the school fund. The majority of the court, in holding that the act was a police measure, said:
We believe that it is a matter of common knowledge that even a small tax upon dogs quickly clears the streets of the animals which the lawmaker deems worthless, homeless, predatory or likely to be afflicted with hydrophobia. Thus, a tax upon dogs can readily accomplish police purposes. Upon the other hand, as common knowledge suggests, a tax upon dogs would yield for the public treasury an insignificant sum of money, for dogs are the subject of ownership only to a limited degree. It is thus apparent that a tax upon dogs can easily be identified as a measure emanating from the police power. In contrast to the effectiveness of a tax upon dogs, a tax in the same amount, or even in a larger sum, levied upon gamblers might have no perceptible effect in reducing their number.
*501 The title of the 1943 act [being the measure upon which the plaintiff relies to establish his contention of preemption] follows:
It will be observed that the title gives no hint of a purpose to regulate or suppress.
In Cooley, Taxation, 4th ed, § 1784, it is said:
*502 State v. Murphy, 90 Conn 663, 98 Atl 343, says:
The following is taken from 33 Am Jur, Licenses, § 3, p. 326:
6. Previous paragraphs of this opinion took notice of the fact that when the owner of a machine pays his tax, the state can ask him no questions except those related to the collection of the tax. No official is authorized to make discriminations among those who shall be permitted to pay the tax and the places where the machines may be installed. The statute which, the plaintiff argues, preempts the regulation of these devices, displays no interest in the fitness of anyone to have a machine which, as we have seen, readily adapts itself to illegal uses. Likewise, the act imposes upon an owner no restriction as to the place where he may place his machine for operation or the number he may install. All that the state wants from owners is the amount of the tax. When owners pay the tax, the state issues to them no paper in the form of a license, but hands them a document entitled "receipt". Clearly, the words of the act afford no indication that the measure's purpose is to regulate, unless the amount of the annual fee makes an intimation of that kind. We are aware of no reason for inferring that the *504 legislature fixed the fee in the amount of $50 as a means of reducing the number of machines. The latter are employed for commercial purposes and evidently yield for their owners a profit. In that respect they are unlike dogs which are often kept for the pleasure of children. Evidently when the legislature fixed $50 as the amount of the tax, it must have had good reason for believing that the tax would yield to the state a substantial return, for § 9 of the act, as amended by Oregon Laws 1945, ch 255, says:
The complaint shows that the surplus yielded by the act is large, for it alleges that if the validity of the ordinance is sustained, the old age assistance fund will be deprived of "material and substantial amounts of money per annum" and that the purposes of the state will be frustrated. Accordingly, we have no basis for inferring that the $50 annual exaction is sufficiently large to reduce the number of machines, but, to the contrary, have reason for believing that it has been set in an amount which is intended to yield the largest possible return. Those circumstances, of course, indicate that the enactment was made under the tax, and not under the police power of the state.
We believe that Fox v. Galloway, supra, deemed that the 1943 measure was enacted under the tax power of the state. We think that the following, taken from the decision, so holds:
More in like vein could be quoted from that decision, but we believe that enough has been taken to indicate that the principal authority upon which the plaintiff relies held that the source of the 1943 act was in the state's power to tax.
We are convinced that the legislative enactment which, the plaintiff argues, preempts the regulation of the devices described in the challenged ordinance is a tax measure and not one enacted under the police power of the state.
7, 8. A law enacted solely in the exercise of the power to tax, manifestly, does not regulate and, therefore, it cannot preempt regulation. Likewise, a measure enacted solely as a taxation act does not legalize the possession of the object which it taxes of the exercise of the privilege upon which it lays its burden: Enloe v. Lawson, 146 Or 621, 31 P2d 171; License Tax Cases, supra; United States v. Yuginovich, supra; United States v. Sullivan, 274 US 259, 71 L ed 1037, 47 S Ct 607, 51 ALR 1020; Mitchell v. City of Birmingham, 222 Ala 389, 133 So 13; Miller v. Memphis, 181 Tenn 15, 178 SW2d 382, 511 ALR 1172. Accordingly, nothing in the 1943 act prevented the city from adopting its ordinance.
*507 It is reasonable to infer that when the challenged ordinance is enforced, the state's revenue will be diminished. Although, when it adopted the 1943 measure, the legislature must have foreseen loss of revenue through the enactment by cities of ordinances such as the one challenged in this proceeding, it took no means to prevent such a course. The fact that the ordinance will deprive the state of revenue does not render the ordinance invalid: Billig v. State, 157 Md 185, 145 Atl 492; Schlesinger v. City of Atlanta, 161 Ga 148, 129 SE 861; Miller v. Memphis, supra.
9. The above, we believe, disposes of all the attacks which the plaintiff has made upon the ordinance. We have not mentioned all of the numerous authorities cited in the encyclopedic briefs filed by the parties. To have done so and to have analyzed herein all of the authorities cited in the lengthy briefs would have given this decision proportions comparable to the briefs. However, we have bestowed careful attention upon all contentions advanced by the parties and upon the many authorities which the tireless industry of their counsel found in the libraries. Obviously, the wisdom of the attacked ordinance, or its lack of it, is a matter foreign to our concern. We have expressed no views upon that subject.
It follows from the above that, in our belief, the challenged ordinance is valid. The decree of the circuit court is reversed. Costs and disbursements will not be allowed.
LATOURETTE, C.J., specially concurring.
The sole question to be determined in this case is whether or not the city of Portland has authority under the police power to prohibit ownership, use, play, etc., of coin-in-the-slot amusement devices in view of the legislative enactment known as ch 220, Oregon Laws 1943, relating to privilege taxes on such devices.
*508 It is agreed that under the Portland City Charter the city has such a right in the exercise of its police power in the absence of state legislation preventing it. It is also agreed that if ch 220, Oregon Laws 1943, is police power legislation, then there would be a conflict between the state law and the ordinance, and the ordinance would be invalid. Counsel for plaintiff, in a colloquy between the court and him, makes the following concession:
The issue narrows down then to whether the 1943 act is a revenue raising or police power measure.
It is sometimes difficult to determine what is or is not police power legislation. Concerning this matter, a broad definition is quoted from Professor Tucker in Stettler v. O'Hara, 69 Or 519, 531, 139 P 743, LRA 1917C 944, as follows:
The basic distinction between revenue and police power legislation is well pointed out by Mr. Justice *509 BRAND in Starker v. Scott, 183 Or 10, 15, 190 P2d 532, wherein he said:
The opinion quotes with approval 1 Cooley, Taxation, 4 ed, § 27, as follows:
*510 It is my opinion that ch 220, Oregon Laws 1943, is a revenue raising measure rather than one under the police power for regulation, in that the primary purpose of the act is to raise revenue for old age assistance, the act directing that 60 per cent of the moneys raised shall be credited to the public assistance fund of the state and 40 per cent to the counties. I can find nothing in the act of a regulatory nature other than that which is incidental to the main purpose of raising revenue.
Plaintiff places much stress on Fox v. Galloway, 174 Or 339, 148 P2d 922, wherein we said:
And from this he deduces that plaintiff has the unlimited right to operate or display his devices.
Counsel's analysis of the Fox v. Galloway case is clearly erroneous. The question there was whether or not ch 220, Oregon Laws 1943, taxed the amusement devices as property (an ad valorem tax) in which connection we said to thus hold would give "rise to a serious question as to the constitutionality of the act." We there held that the tax was not a property but a privilege tax, and so it is. It is well settled that such a tax may be imposed for raising revenue. Lyons v. City of Portland, 115 Or 533, 536, 235 P 691; Elsner Bros. v. Hawkins, 113 Va 47, 73 SE 479; Billig v. State, 157 Md 185, 145 A 492; Commonwealth v. Ellis, 158 Mass 555, 33 NE 651; 51 Am Jur 46, Taxation, § 13.
*511 In the absence of legislation on the part of the city in the exercise of its police power, owners of such devices under the Fox case would obviously have a right to operate or display them. The question of the police power of the city was not before us in that case.
It cannot be doubted that the state may preempt the field by expressly prohibiting a municipality from legislating on the matter, even though the measure were a revenue measure. However, the state, in the law under consideration, has not expressly reserved to itself such power.
The city of Portland, under its charter, has broad powers with reference to the matter in controversy: It may ignore the subject entirely; it may impose an additional privilege or occupation tax for revenue purposes; it may license and regulate, or prohibit entirely under the police power, which it did.