Source: https://caselaw.findlaw.com/us-supreme-court/202/409.html
Timestamp: 2019-04-23 23:10:02+00:00

Document:
It is further averred that, although the tie company had offices in various cities of Illinois situated on the Ohio river, as also offices in the cities of Paducah and Fulton, in the state of Kentucky, and Duval's Bluff, in the state of Arkansas, it had such offices in Kentucky for convenience, and its principal office was averred to be in the state of Illinois, of which state it was a citizen.
Claiming the right, under the commerce clause of the Constitution of the United States, to trade at the ports of the different states without molestation by the state of Kentucky, the company averred that the imposition and the collection of taxes in question would operate an unlawful interference with the right of the company to trade or engage in interstate commerce as it had heretofore been accustomed to do.
A demurrer was filed to the answer on the ground that it [202 U.S. 409, 412] did not state facts sufficient to constitute a defense. The county court overruled the demurrer, and, plaintiff declining to plead further, the court dismissed 'the plaintiff's statement and action.' The case was then taken by appeal to the circuit court of McCracken county. As part of the record from the county court, the defendant filed in the circuit court a petition and bond for removal of the cause to a Federal court, upon the ground of diversity of citizenship. On the trial of the case, before action taken on a demurrer which had been refiled to the answer, the court overruled and dismissed the petition for removal, and the defendant excepted. The demurrer to the answer was overruled, and, the plaintiff declining to plead further, a judgment of dismissal was entered. The cause was then appealed to the court of appeals of Kentucky. That court held that the demurrer should have been sustained, and the judgment in favor of the company was reversed. 25 Ky. L. Rep. 1068, 77 S. W. 686. A petition for rehearing was denied for reasons stated in an opinion. 25 Ky. L. Rep. 2061, 79 S. W. 290.
'Separation of Findings of Facts from Conclusions of Law.
'That the defendant was, at the time specified in the pleadings, the sole owner of the following-described property, named in the petition, to wit: Steamers Russel Lord, Pavonia, Inver- [202 U.S. 409, 413] ness, and barges; that the same were of the value as follows, as set out in the statement: Russel Lord, $13,000; Pavonia, $10,000; Inverness, $2, 500; barges, $10,000; that the defendant had enrolled said steamboats at Paducah, Kentucky, with the name 'Paducah' painted on the stern of said vessels; that the defendant was a corporation legally incorporated under the laws of the state of Illinois.
A motion to set aside the judgment and for a new trial having been made and overruled, the cause was again appealed to the courts of appeals of Kentucky. That court affirmed the judgment of the circuit court upon the authority of its previous opinion, and the case was then brought to this court.
Messrs. Charles E. Kremer and James Campbell for plaintiff in error.
[202 U.S. 409, 416] Messrs. N. B. Hays, Charles H. Morris, J. H. Ralston, and Taylor & Lucas for defendant in error.
As, in the argument, counsel for plaintiff in error has not discussed the alleged error in overruling the motion to remove, we treat that question as waived and pass to the merits.
Notwithstanding, by the demurrer to the answer, it was conceded that the tie company was the owner of the alleged taxable property, that it was an Illinois corporation, and that its main office was in Chicago, that it had paid taxes in Illinois upon such property, that the property was employed in interstate commerce between ports of different states, including the state of Illinois, that its steamboats were enrolled at Paducah, Kentucky, for convenience, Kentucky being the place of residence of one of its managing officers, and that its boats touched Paducah only temporarily, never receiving or discharging cargo at that port, the court of appeals of Kentucky held that the property in question was subject to the taxing power of the state of Kentucky. The existence of power in the state to tax the property in question was rested solely upon the proposition that, as the steamboats were enrolled at Paducah, and the name 'Paducah' was painted upon their sterns, it was to be conclusively presumed that the home port of the vessels was at Paducah, and that such home port was the situs of the property for taxation. The barges were brought within the principle announced, because they were treated as mere accessories of the steamboats. While, in the opinion, the steamboats were regarded as operated under a registry, the fact is they were engaged in the coastwise trade under an enrolment and license. But this is immaterial, since vessels, in order to be enrolled, must possess the qualifications and fulfil the requirements necessary for registration.
The general rule has long been settled as to vessels plying between the ports of different states, engaged in the coastwise trade, that the domicil of the owner is the situs of a vessel for the purpose of taxation, wholly irrespective of the place of enrolment, subject, however, to the exception that where a vessel engaged in interstate commerce has acquired an actual situs in a state other than the place of the domicil of the owner, it may there be taxed because within the jurisdiction of the taxing authority.
In Hays v. Pacific Mail S. S. Co. 17 How. 596, 15 L. ed. 254, vessels were registered in New York, where the owner resided. The vessels were employed in commerce on the Pacific ocean between San Francisco and Panama, and the question was whether the vessels were subject to taxation in California. It was decided that they were not, as they had not become incorporated into the property of California so as to have an actual situs in that state, and it was declared that the vessels were properly taxable at the domicil of their owner.
'The boats were enrolled at the city of St. Louis, but that throws no light upon the subject of our inquiry. The act of 1789, 2 (1 Stat. at L. 55, chap. 11), and the act of 1792, 3 (1 Stat. at L. 288, chap.1), require every vessel to be registered in the district to which she belongs, and the 4th section of the former act, and the 3d section of the latter, declares that her home port shall be that at or near which her owner resides. The solution of the question where her home port is, when it arises, depends wholly upon the locality of her owner's residence, and not upon the place of her enrolment. 3 Kent. Com. 133, 170; Hill v. The Golden Gate, Newberry, Adm. 308, Fed. Cas. No. 6,492; Dudlg v. The Superior, Newberry, Adm. 181, Fed. Cas. No. 4,115; Jordan v. Young, 38 Me. 276.
In Morgan v. Parham, 16 Wall. 471, 21 L. ed. 303, a vessel originally registered in New York had been engaged for years in the coastwise trade between Mobile and New Orleans and was enrolled at Mobile. It was decided that the boat could not be taxed in Alabama.
In Wheeling, P. & C. Transp. Co. v. Wheeling, 99 U.S. 273 , 25 L. ed. 412, vessels engaged in commerce between ports of different states were held taxable at the domicil of the owner.
'Appellee had a right to cause its boats to be registered at Paducah, although that was not the place nearest to the port where it resided, and it fully complied with the law regulating the subject by painting the words 'of Paducah, Kentucky,' on the stern thereof; and, by the amendment of 1884, Paducah became the home port of the vessels so registered and marked.
It is at once apparent that this line of reasoning, whilst it [202 U.S. 409, 425] asserts the principle of actual situs, and expounds the act of 1884 as making that the exclusive rule to test the power to tax, at once causes the act to destroy the very principle which it was assumed the act upheld. This is the inevitable consequence of the conclusion reached by the court below, that the act of 1884 endowed the owner of a vessel with the power, simply by the painting a name of a place upon his vessel, to make such place the situs for taxation, although it might be neither the actual situs of the property nor the residence of the owner.
Clearly this section does not essentially change the prior general law respecting enrolment, as it simply enlarges the power of an owner in regard to painting on the stern of his vessel the name of the place from which he may desire to hail her. The prior provisions as to enrolment clearly exacted that the owner, as an incident to enrolment, should mark upon his vessel the name of the place of enrolment; in other words, compelled the owner to hail his vessel from the place of enrolment, although he might be domiciled elsewhere. Now, [202 U.S. 409, 426] as the settled rule at the time of the passage of this act was that enrolment, and consequent marking of the stern of the vessel with the name of the place of enrolment, was not the criterion by which to determine the power of taxation, it is impossible to conceive that Congress intended, by merely conferring a privilege to select the name of a place other than the port of enrolment to be marked upon a vessel, to overthrow the settled rules in regard to taxation of such property which existed at the time of the passage of the act of 1884. To give to the statute the construction adopted by the court below would be simply to hold that its purpose was to endow the owner with the faculty of arbitrarily selecting a place for the taxation of his vessel in defiance of the law of domicil, and in disregard of the principle of actual situs, since, by the statute, the owner was given the right to paint either the name of the place where the vessel was built, where enrolled, or where one of the owners resided. And this demonstrates the misconception of the construction given to the act of 1884 by the court below, since the court declared that the whole effect of the act was to endow the owner of vessels with the power to select, by marking on the stern, a place 'in the field of operations,' which should be the place of taxation. But no such limitation as the field of operations can be implied from the language of the statute, and, therefore, if the construction adopted were upheld, the unlimited right of the owner to arbitrarily frustrate the taxing laws of the state where he was rightfully subject to taxation would result.
Mr. Frye. The next amendment I am authorized to offer is a section in reference to the painting of the name of the ship on the stern. Not very important that must appear to Senators. Many of our shipowners in the state of Maine think more of that than they do of the rest of this bill. This man who owns a ship looks upon her as his wife or his children; he loves his ship; and, under the law as it stands to-day, he is required to paint on the stern the name, it may be that of his wife or of his daughter, and the port to which she belongs. For seventy-five years the port to which she belonged was construed to be the place where she was owned, and if a man built a ship in Surry, and she was owned there, he painted in the stern the 'May Ann, from Surry, Maine.' In 1875 a sharp Treasury official discovered that it was a violation of the law. He reported to the Secretary of the Treasury, and the Secretary issued an order that all those ships must bear the name of the port of entry, regardless of where they were built or owned. They are building vessels, home vessels, owned at home, owned in families, in many instances by the blacksmith, the carpenter, the captain, and the mate. Their vessels they wish to name after one of the family and the home, the place where she is owned and built; and yet, under the construction of the Treasury Department, she may be the 'Julia Ann,' from Machias, her port of entry, but actually built and owned a hundred miles from there. Take Bath and Richmond, on the Kennebec river,-Bath, the greatest ship-building city in the United States to-day of wooden ships; her rival, Richmond, is 15 miles above. The men who build their ships in Richmond regard it as about as serious a wrong as can be imposed upon them by law to compel them [202 U.S. 409, 428] to put a ship built there and owned there under the name of bath, her port of entry, and Bath would fully reciprocate under like circumstances. I take it that no Senator will object to that provision.
Mr. Hale. Just there let me ask my colleague, was not the reason for the ruling of the Secretary of the Treasury that the technical view was taken of the word 'port,' and it was concluded there could be nothing but the port of entry, thereby taking away this privilege from the men who built the ship?
Mr. Frye. I so understand it.
And, without debate, the amendment was adopted, and subsequently, with other amendments, was incorporated as part of the bill which came from the House of Representatives, relating to the same general subject as the bill which was under consideration in the Senate. Ib. pp. 3869, 3973, 5440.
The suggestion that, because the vessels were enrolled at Paducah, the owner was estopped from disputing that they had a situs for taxation there, is but to contend that the place of enrolment was per se controlling, in disregard of the repeated rulings of this court to the contrary.
The judgment of the Court of Appeals of Kentucky must be reversed and the cause remanded for further proceedings not inconsistent with this opinion.

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