Source: https://supreme.justia.com/cases/federal/us/117/34/
Timestamp: 2019-04-19 02:29:22+00:00

Document:
owned by a corporation of Kentucky and leased by it for transportation purposes to Tennessee railroad corporations, the latter receiving the transit fare and the former the compensation for the sleeping accommodations.
"All property shall be taxed according to its value, that value to be ascertained in such manner as the legislature shall direct, so that taxes shall be equal and uniform throughout the state. No one species of property from which a tax may be collected shall be taxed higher than any other species of property of the same value. But the legislature shall have power to tax merchants, peddlers, and privileges in such manner as they may from time to time direct."
"That the running and using of sleeping cars or coaches on railroads in Tennessee, not owned by the railroads upon which they are run or used, is declared to be a privilege, and the companies owning and running or using said cars or coaches are required to report, on or before the 1st day of May of each year, to the comptroller the number of cars so used by them in this state, and they shall be required to pay to the comptroller by the 1st of July following $50 for each and every of said cars or coaches used or as run over said roads, and if the said privilege tax herein assessed be not paid as aforesaid, the comptroller shall enforce the payment of the same by distress warrant."
money under protest, and it was paid into the state treasury with notice to the comptroller that it was paid under protest, and the company, within the time prescribed by the statute and in August, 1881, brought an action at law against the comptroller to recover the $5,700, in the Circuit Court of the United States for the Middle district of Tennessee.
"This indenture, made this 19th day of June, A.D. 1872, between the Louisville and Nashville Railroad Company, the party of the first part, and the Pullman Southern Car Company, of the second part:"
"Whereas the said party of the second part is now engaged in the business of manufacturing railway cars, known as drawing room and sleeping cars, under certain patents belonging to them, and of hiring the same to railroad companies and receiving therefor income and revenue by the sale to passengers of seats and berths and accommodations therein, and whereas the said party of the first part is desirous of availing itself of the use on and over its lines of road of the cars constructed under the sleeping and drawing room car patents now the property of said second party, and also of connections by means of said cars with other lines of railroad, whereon said cars are now operated by said second party,"
"Now this contract witnesseth that the said party of the second part, in consideration of the covenants and agreements of the party of the first part, hereinafter mentioned to be by them kept and performed, hereby agrees with the said party of the first part that they will furnish drawing room cars and sleeping cars to be used by said party for the transportation of passengers, sufficient to meet the requirements of travel on and over their line of railroad, and on and over all lines of railroad which they now control or may hereafter control, by ownership, lease, or otherwise, the said cars so furnished to be satisfactory to the general superintendent of the first party."
"2d. The said party of the second part agrees that they will keep the carpets, upholstery, and bedding of each of the said cars in good order and repair, and renew and improve the same, when necessary at their own expense excepting repairs and removals made necessary by accident or casualty, it being understood that the said first party shall repair all damages to said cars of every kind occasioned by accident or casualty during the continuance of this agreement. "
"3d. The said party of the second part hereby agrees at their own expense and cost to furnish one or more employees, as may be needful, upon each of said cars, whose duties shall be to collect fares for the accommodations furnished in said cars, and generally to wait upon passengers therein and provide for their comfort."
"4th. The said party of the first part hereby agrees that the general officers of said second party and the employees named in article third of this agreement shall be entitled to free passage over the lines of the first party when they are on duty for the second party."
"5th. The party of the second part hereby agrees that the general officers of the first party shall be entitled to free passes in any of the cars furnished by said second party under this agreement."
"6th. It is hereby mutually agreed that the said employees of the second party named in article third of this agreement shall be governed by and subject to the rules and regulations of the said first party, which are or may be adopted from time to time for the government of their own employees and, in the event of any liability arising against said first party for personal injury, death, or otherwise of any employees of said second party, it is hereby distinctly understood and agreed that the said first party shall be liable only to the same extent they would be if the person injured was an employee in fact of said first party, and for all liability in excess thereof shall be indemnified and paid by said second party."
order and repair, including renewals of worn-out parts, and all things appertaining to said cars, necessary to keep them in first-class condition, except such as are provided for in article second of this agreement."
"8th. The party of the first part agrees to furnish said party of the second part at convenient points room and conveniences for airing and storing bedding."
"9th. The said party of the first part further agrees that the said party of the second part shall be entitled to collect from each and every person occupying said cars such sums for said occupancy as may be usual on competing lines furnishing equal accommodations, and that such rules and regulations shall be agreed upon as will most favor the renting of seats and couches in said cars."
"10th. The party of the first part hereby agrees to permit the party of the second part to place their tickets for seats and couches for sale in such of the railroad ticket offices as may be desired by said second party, and such services shall be performed by and as part of the general duties of the ticket agents, and without charge to the party of the second part, proceeds of such sales to be at the risk of said second party."
"11th. The party of the first part hereby agrees that said second party shall have the exclusive right, for a term of fifteen years from the date hereof, to furnish for the use of the first party drawing room or parlor cars and sleeping cars, including reclining chair cars, on all the passenger trains of said first party, and over their entire lines of railroad, and on all railroads which they may control, or may hereafter control, by ownership, lease, or otherwise, and also on all passenger trains on which they may, by virtue of contracts or running arrangements with other roads, have the right to use such cars, and that they will not contract with any other parties to run said class of cars on or over said lines of road during said period of fifteen years."
use of any of said cars which may be used by said second party upon the lines of said first party under this arrangement, it being the meaning and intent of this article that the said second party shall secure said first party against all manner of expenditures which may be incurred by said first party in consequence of any litigation connected with alleged infringements of patent rights for the interior arrangements of said cars, and that they will pay off and discharge all judgments obtained at any time against said first party on account of such infringements."
"12th. It is mutually agreed between the parties hereto that in case either of said parties shall at any time hereafter fail to keep and perform any of the covenants herein contained to be by them respectively kept and performed, then and in that case, after written notice shall have been given to the defaulting party thereto of the default complained of, if the said defaulting party shall refuse or neglect to make good, keep, and perform such unfulfilled covenants and conditions of this agreement within a reasonable time after such notice, the other party shall be at liberty to declare this contract ended, and no longer in force."
(with the exception of two sleeping cars running between Nashville and Memphis) were used in transporting passengers from other states into or across Tennessee and from points in Tennessee to points in other states; that the same cars also transported passengers from points in Tennessee to other points in that state whenever they properly applied for such transportation, but the number of such passengers bore an inconsiderable proportion to the other passengers transported in those cars; that those cars ran into, out of, or across, Tennessee, making such stops as the trains to which they are attached made; that in the case of passengers traveling across Tennessee or from points out of it to points in it, their sleeping car tickets were purchased and paid for before they entered Tennessee, but in the case of passengers from points in Tennessee to points in other states, or in Tennessee, the tickets were purchased and paid for in Tennessee; that the railroad companies of Tennessee with whom such contracts were made were duly chartered by that state or organized or operated under its laws, with power to transport passengers for hire; that they were taxed by that state on the value of their roads, rolling stock, and other tangible property, and also on the value of their franchises; that from March 16, 1877, to the present time, the Memphis and Charleston Railroad Company, and the East Tennessee, Virginia and Georgia Railroad Company, both of them Tennessee corporations, have owned sleeping cars which they have run and used during that time as sleeping cars upon their respective roads, and they have not been required by the state to pay any tax for running or using said sleeping cars upon their roads except insofar as such a tax may have been included in the tax assessed on the value of their franchises, and that the thirty-eight cars before mentioned included the two cars run between Nashville and Memphis.
that the court found the issue joined in favor of the plaintiff. It then set forth the material facts contained in the agreed statement, and awarded a judgment for $5,400, for the taxes on the thirty-six cars, and for $1,089.90 interest, and for costs, assigning as a reason that the state had no power to impose a privilege tax on the plaintiff for running or using the thirty-six cars in the state, the tax being a regulation of commerce between the states, and therefore a violation of the Constitution of the United States. To reverse this judgment the defendant has sued out a writ of error.
not measured by value, but was an arbitrary charge. What was done by the plaintiff was taxed as a privilege, it being assumed by the state authorities that the legislature had the power, under the Constitution of Tennessee, to enact the 6th section of the act of 1877, and that the plaintiff had done what that section declared to be a privilege. By the decisions of the Supreme Court of Tennessee, cited in the opinion of the circuit court on the demurrer, it is held that the legislature may declare the right to carry on any business or occupation to be a privilege, to be purchased from the state on such conditions as the statute law may prescribe, and that it is illegal to carry on such business without complying with those conditions. In this case, the payment of the tax imposed was a condition prescribed, without complying with which what was done by the plaintiff was made illegal. The tax was imposed as a condition precedent to the right of the plaintiff to run and use the thirty-six sleeping cars owned by it, as it ran and used them on railroads in Tennessee. The privilege tax is held by the Supreme Court of Tennessee to be a license tax, for the privilege of doing the thing for which the tax is imposed, it being unlawful to do the thing without paying the tax. What was done by the plaintiff in this case, in connection with the use of the thirty-six cars, if wholly a branch of interstate commerce, was made by the State of Tennessee unlawful unless the tax should be paid, and, to the extent of the tax, a burden was placed on such commerce, and, upon principle, the tax, if lawful, might equally well have been large enough to practically stop altogether the particular species of commerce.
passengers and provide for their comfort. Those employees were governed by the rules adopted by the railroad company to govern its own employees, and the railroad company was liable for personal injury to, or the death of, any such employee of the plaintiff to the same extent only as if such employee was in fact an employee of the railroad company, and the latter was indemnified by the plaintiff for all liability in excess thereof. The railroad company carried free on its line such employees of the plaintiff and its general officers when on duty for it, and the plaintiff carried free in the cars it so furnished the general officers of the railroad company. In consideration of the use of such cars, the railroad company hauled them on the passenger trains on its line in such manner as best accommodated passengers desiring to use the cars, and furnished at its own expense fuel for them and materials for the lights, and washed and cleaned them, and kept them in good order and repair, including renewals of worn-out parts, and all things appertaining to them necessary to keep them in first class condition, with the exceptions before specified in regard to carpets, upholstery and bedding, and furnished room and conveniences for airing and storing bedding. The plaintiff collected from every person occupying the car compensation for its accommodations in seats and couches. The railroad company permitted the plaintiff to place its tickets for seats and couches on sale in the ticket offices of the railroad company, the sale to be a part of the general duties of the ticket agents of the latter, and to be without charge to the plaintiff, but the proceeds of sales to be at its risk. The contract was made an exclusive on for fifteen years, and the plaintiff agreed to protect the railroad company against all liability for the infringement of any patent in the construction and use of the cars, and there was a provision for the termination of the contract by either party on a breach of it by the other.
with the cars as it would with cars owned by itself. It hauled them, furnished fuel and materials for lights, washed and cleansed them, kept them in repair, renewed worn-out parts, repaired all damages to them by accident or casualty, and even repaired and renewed carpets, upholstery, and bedding damaged or destroyed by accident or casualty, all at its own expense and without charge to the plaintiff, leaving to the plaintiff only to make good the ordinary wear and tear of the sitting and sleeping conveniences, and allowing it to have the compensation for such conveniences, and furnishing it free of charge with all facilities for selling seats and couches.
The tax was a unit with the privilege of the transit of the passenger and all its accessories. No distinction was made in the tax between the right of transit, as a branch of commerce between the states, and the sleeping and other conveniences which appertained to a transit in the car. The tax was really one on the right of transit, though laid wholly on the owner of the car. So too the service rendered to the passenger was a unit. The car was equally a vehicle of transit as if it had been a car owned by the railroad company and the special conveniences or comforts furnished to the passenger had been furnished by the railroad company itself. As such vehicle of transit, the car, so far as it was engaged in interstate commerce, was not taxable by the State of Tennessee, because the plaintiff had no domicile in Tennessee and was not subject to its jurisdiction for purposes of taxation, and the cars had no situs within the state for purposes of taxation, and the plaintiff carried on no business within the state, in the sense in which the carrying on of business in a state is taxable by way of license or privilege.
"We regard the additional accommodation afforded by the sleeping carriages as differing in no essential particular from the superior accommodation afforded by a second-class carriage over a third, or by a first-class carriage over both. If the company issued tickets to all passengers alike at the price charged to passengers traveling in third-class carriages, and then issued tickets at corresponding prices to those desiring to travel in a higher class of carriage, it could hardly be contended that duty would not be payable upon the prices paid for such second ticket. The passenger who is content to travel in a third-class or second-class carriage in the day might well desire to travel in a carriage of a higher class by night, and in like manner a passenger ordinarily traveling by day in a first-class carriage might desire the additional accommodation at night of a sleeping carriage. No separate charge is made in the present case. The charge, though written on a separate ticket, is, in our opinion, part of one charge for the conveyance of the passenger in a particular way, and is therefore a part of the charge for the conveyance of a passenger received and charged for such conveyance."
That case is in harmony with the views before taken in regard to the present case. The fare paid by the interstate passenger to the railroad company, and that paid to the plaintiff, added together, were merely a charge for his conveyance in a particular way, and there was really but one charge for the transit, though the total amount paid was divided among two recipients.
The service was a single one of interstate transit, with certain accommodations for comfort, and what was paid to the plaintiff was part of a charge for the conveyance of the passenger.
"was a regulation of commerce, a tax imposed upon the transportation of goods from one state to another over the high seas, in conflict with the freedom of transit of goods and persons between one state and another which is within the rule laid down in Crandall v. Nevada, 6 Wall. 35, and with the authority of Congress to regulate commerce among the states."
In the State Freight Tax Case, 15 Wall. 232, 82 U. S. 281, it was said that a state cannot tax persons for passing through or out of it; that interstate transportation of passengers is beyond the reach of a state legislature, and that a tax upon it amounts to a tax upon the passengers transported.
In Railroad Co. v. Maryland, 21 Wall. 456, 88 U. S. 472, MR. JUSTICE BRADLEY, in speaking for the Court, said that a state cannot impose a tax or duty on the movements or operations of commerce between the states, because it would be a regulation of such commerce "in a manner which is essential to the rights of all, and therefore requiring the exclusive legislation of Congress," being "a tax because of the transportation," and "therefore virtually a tax on the transportation."
The decisions in the various cases in this Court on the subject of a tax by a state on the bringing in of passengers from foreign countries, and which are collected and commented on by MR. JUSTICE MILLER, in delivering the opinion of this Court in the Head Money Cases, 112 U. S. 580, 112 U. S. 591, show it to be a settled matter that to tax the transit of passengers from foreign countries or between the states is to regulate commerce.
"While it is conceded that the property in a state belonging to a foreign corporation engaged in foreign or interstate commerce may be taxed equally with like property of a domestic corporation engaged in that business, we are clear that a tax or other burden imposed on the property of either corporation because it is used to carry on that commerce, or upon the transportation of persons or property, or for the navigation of the public waters over which the transportation is made, is invalid and void as an interference with and an obstruction of the power of Congress in the regulation of such commerce."
"We have also repeatedly held that so long as Congress does not pass any law to regulate commerce among the several states, it thereby indicates its will that such commerce shall be free and untrammeled."
See Welton v. Missouri, 91 U. S. 275, 91 U. S. 282; Machine Co. v. Gage, 100 U. S. 676, 100 U. S. 678; County of Mobile v. Kimball, 102 U. S. 691, 102 U. S. 697; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196, 114 U. S. 204; Brown v. Houston, 114 U. S. 622, 114 U. S. 631, where the cases on that point are collected.
It is urged that the decision of the circuit court in this case was inconsistent with the rulings in Osborne v. Mobile, 16 Wall. 479, and in Wiggins Ferry Co. v. East St. Louis, 107 U. S. 365. It becomes necessary, therefore, to examine those cases.
"that the state could not constitutionally impose and collect a tax upon the tonnage of freight taken up within its limits and carried beyond them, or taken up beyond its limits and brought within them -- that is to say, in other words, upon interstate transportation -- because it was in effect a restriction upon interstate commerce, which by the Constitution was designed to be entirely free."
The tax on the Georgia Express Company was upheld as a tax "upon a business carried on within the City of Mobile." Osborne was a local agent, personally subject to the taxing jurisdiction of the state, as representing his principal, and the tax was on the general business he carried on, and the subject of the tax was not, as here, the act of interstate transportation. In Osborne v. Mobile, the court drew the distinction between the case before it and the State Freight Tax Case. The present case falls within the latter.
and had no domicile in Tennessee, and the sleeping cars in question, as before said, had not any situs in Tennessee for the purposes of taxation.
The question involved in this case was before the Court of Chancery of Tennessee in Pullman Southern Car Co. v. Gaines, 3 Tenn.Ch. 587, on the same facts, as to the privilege tax for 1877. That court held (and it is stated that the Supreme Court of Tennessee, on appeal, affirmed its ruling) that this privilege tax, as to such of the cars as passed and repassed through the state and did not abide in it, was not amenable to the objection that it interfered with interstate commerce. The view taken was that the property of the foreign corporation used in Tennessee could be taxed as property or by an excise on its use, and that the tax in this case was not directly on the object of commerce, or directly aimed at commerce. We have given to the views set forth by the Tennessee Chancery Court the consideration due to the judgments of that tribunal, but are unable to concur in its conclusion.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.