Source: https://supreme.justia.com/cases/federal/us/224/362/
Timestamp: 2019-04-23 14:49:02+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 224 › Gromer v. Standard Dredging Co.
Quaere whether § 12 of the Act of Legislative Assembly of Porto Rico of March 8, 1906, providing that an injunction may issue to prevent collection of illegal tolls, applies to the District Court of the United States for Porto Rico.
Even though the bill might not be sustained because complainant has an adequate remedy or because the court has not power to issue an injunction, the court prefers, in this case, to rest its decision on the fact that the bill should be dismissed upon the merits.
Under § 13 of the Foraker Act of April 12, 1900, 31 Stat. 77, c.191, and the Act of July 1, 1902, 32 Stat. 731, c. 1383, the Territory of Porto Rico has jurisdiction for taxing purposes over the harbors and navigable waters surrounding Porto Rico.
The purpose of the Foraker Act was to give local self-government to Porto Rico, conferring an autonomy similar to that of the states and territories, reserving to the United States rights to the harbor areas and navigable waters for the purpose of exercising the usual national control and jurisdiction over commerce and navigation.
While the United States can reserve control over such places as it sees fit within a territory to which it gives autonomy, it does not reserve any such places unless it is so expressed in the act.
Property which has acquired a situs within the jurisdiction of the Territory of Porto Rico is not exempt from taxation by the territory simply because it is exclusively used by the owner for carrying out a contract with the government.
Where jurisdiction to tax property exists, the validity of the tax cannot be determined by an inquiry as to the extent to which the property may be benefited.
In this case, there is nothing in the record to show that the property taxed had not acquired a situs in Porto Rico or that takes it out of the rule that tangible personal property is subject to taxation by the state or territory in which it is, no matter where the domicile of the owner may be.
The facts, which involve the power of Porto Rico to tax machinery and vessels in the harbor of San Juan engaged in work in pursuance of a contract with the United States, are stated in the opinion.
The question in the case is the power of Porto Rico to tax certain machinery and boats which, at the time of the levy of the taxes, were in the harbor of San Juan, engaged in dredging work, in pursuance of a contract of the Standard Dredging Company with the United States government.
The dredging company filed a bill to enjoin the appellant, Treasurer of Porto Rico, from enforcing the tax. Appellant demurred to the bill for insufficiency and want of equity, which was overruled. He declined to answer, and the injunction which had been granted was made perpetual. This appeal was then taken.
company entered into a contract with the United States government to dredge certain portions of the harbor of San Juan and the channel leading from the ocean to the harbor area. Prior to that date, for use in connection with its operations under the contract, it brought to the harbor one dredge, one tugboat, two scows for dumping material to be removed, one coal scow, and one launch. The boats and machinery are its property and have been constantly used by it in the performance of its contract, and were not used in connection with any other business or operations, and were at all times within the harbor where the operations under the contract were carried on. The dredging company has neither conducted nor carried on any other business in Porto Rico or the waters adjacent thereto except its operations under the contract.
"have levied an embargo on part of said property . . . and are threatening to foreclose the same and to sell the property for the purpose of enforcing the collection of the said alleged tax."
of the contract with the United States and within the harbor area.
It is alleged that the company is without any remedy at law, and an injunction is therefore prayed.
"injunction may be issued to prevent the illegal levying of any tax, duty, or toll, or for the illegal collection thereof, or against any proceeding to enforce such collection . . ."
does not apply to the District Court of the United States for Porto Rico. We, however, pass the contention, as we prefer to rest our decision on the merits.
The bill of the dredging company, and its contentions here, are based on two propositions: (1) the property was not within the jurisdiction of Porto Rico, but was within the harbor area reserved by the United States; (2) the property was being used "within the harbor area" in the performance of a contract with the United States, and therefore not subject to taxation for insular purposes.
To sustain the first proposition, § 13 of the Foraker Act (April 12, 1900, 31 Stat. 80, c. 191) is relied on, and the Act of Congress of July 1, 1902 (32 Stat. 731, c. 1383).
navigable waters, is hereby placed under the control of the government established by this act, to be administered for the benefit of the people of Porto Rico, and the legislative assembly hereby created shall have authority, subject to the limitations imposed upon all its acts, to legislate with respect to all such matters, as it may deem advisable."
"And all the public lands and buildings, not including harbor areas and navigable streams and bodies of water, and the submerged lands underlying the same, owned by the United States in said island, and not so reserved,"
"shall apply to the island of Porto Rico and to the adjacent islands and waters of the islands lying east of the seventy-fourth meridian of longitude west of Greenwich, which were ceded to the United States by the government of Spain by treaty entered into on the tenth day of December, eighteen hundred and ninety-eight eight, and the name Porto Rico, as used in this Act, shall be held to include not only the island of that name, but all the adjacent islands, as aforesaid."
United States over Porto Rican waters came up for consideration and was referred by the Secretary of War to the Attorney General for determination. The elements in the question were the River and Harbor Act of 1899 (March 3, 1899, 30 Stat. 1121, c. 425) and the Act of April 12, 1900, "temporarily to provide revenues and a civil government for Porto Rico, and for other purposes." 31 Stat. 77, 80. Section 14 of the latter act provided, with certain exceptions, that the statutory laws of the United States not locally inapplicable should have the same force and effect in Porto Rico as in the United States. Section 13 provided that certain harbor property which at the time of the cession, belonged, under the laws of Spain, to the various harbor works boards of Porto Rico, "but not including harbor areas or navigable waters," should be "placed under the control of the government established by this act, and to be administered for the benefit of the people of Porto Rico." The legislative assembly created by the act was given authority "to legislate with respect to all such matters" as it might deem advisable, and this authority was extended to all matters of a legislative character not locally inapplicable. It was further provided that all laws should be referred to Congress, which reserved the power to annul the same.
The River and Harbor Act of 1899 (30 Stat. 1151, c. 425), prohibited unauthorized obstructions to navigation in any of the waters of the United States, and provided for control by the Secretary of War of wharves and similar structures in ports and other waters of the United States.
power under the license to rebuild the wharf, which had been destroyed by fire, continued as against the control of the Executive Council of Porto Rico. Commenting on the provisions of the River and Harbor Act and the acts in regard to Porto Rico, it was said that Congress, since the ratification of the treaty with Spain, has nowhere indicated that Porto Rican waters are not to be regarded as waters of the United States, nor directed that the authority of the Secretary of War, under the River and Harbor Act of 1899, shall not extend to the Porto Rican waters.
"On the contrary, Congress has used language in the Porto Rican Act, as, for instance, in § 13, which clearly contemplates national jurisdiction over those waters as waters of the United States."
23 Op.Atty.Gen. 551. In other words, the jurisdiction of the United States over those waters was the jurisdiction that the United States had over all other navigable waters, an exercise of which the River and Harbor Act was an example.
"that Congress committed to local control, subject to the expressed limitation upon the local legislative power, the administration of certain public property and utilities, including 'harbor shores, docks, slips, and reclaimed lands,' but excluding 'harbor areas or navigable waters.'"
"that the general government retains title to, possession of, and control over certain other public property, of which fortifications and their appurtenances are specified, and also reserves for its own administration the usual national powers over lights, buoys, and other matters affecting navigation or 'works undertaken by the United States.' And it was said, further:"
waters of Porto Rico as well as those of any state or any other territory of the United States."
"the government of the United States, by reason of these grants . . . to . . . Porto Rico, is now in the same position with reference to the island government, as well as to private owners, as it would be in a similar case affecting a State of the United States."
From this principle it was concluded that the United States could not appropriate the islands of Culebra for a naval base, they being within the limits described in § 1 of the Act of April 12, 1900. And § 1 of that act is identical with § 1 of the Foraker Act, and its provisions for "harbor areas and navigable waters" are the same as in the Foraker Act. The views of the Attorney General therefore are expressly applicable, for the language of the Act of April 12, 1900, which determined them, was repeated in the Foraker Act, which we are now called upon to consider.
The distinction made between local control of property and the exercise of government is a substantial one, and is illustrated in cases. Shively v. Bowlby, 152 U. S. 30; Thomas v. Gay, 169 U. S. 264; Ft. Leavenworth R. Co. v. Lowe, 114 U. S. 525, 114 U. S. 542; Western Union Telegraph Co. v. Chiles, 214 U. S. 278; Reynolds v. People, 1 Colo. 181; Scott v. United States, 1 Wyo. 40; Territory v. Burgess, 8 Mont. 57.
We have seen that, by § 1 of the Foraker Act, all of its provisions are made applicable to a certain defined area, and that the name Porto Rico "shall be held to include not only the island of that name, but all adjacent islands and waters, of the islands." The governmental powers conferred upon Porto Rico must be coextensive with that area, subject to the reservation that all laws passed shall not be in conflict with the laws of the United States, and the power of enacting such laws is conferred upon the legislative assembly. There is precaution against abuse.
They must be reported to Congress, which has the power to annul them.
The purpose of the act is to give local self-government, conferring an autonomy similar to that of the states and territories, reserving to the United States rights to the harbor areas and navigable waters for the purpose of exercising the usual national control and jurisdiction over commerce and navigation.
The United States could have reserved government control and exercised it as it does in instances, by the consent of the states, over certain places in the states devoted to the governmental service of the United States. We do not think, as we have said, that the United States has done so, and that it has not is the view of the executive department of the government, as expressed through the Attorney General. The War Department entertained the same view as to military reservations in Porto Rico, and also as to such reservations in the Philippine Islands.
"such land or other property as shall be designated by the President of the United States for military and other reservations of the government of the United States."
"the relation of Congress to all territorial legislation is similar [certain organic acts of the states being cited], and thus it may be said that the exercise of local jurisdiction for ordinary municipal purposes over a reservation in a territory is valid until and unless disapproved by Congress."
"subject to any lien or burden of taxation while being employed in the performance of its said contract with the United States of America and within the said harbor area."
"the basic and underlying principle which must control in the determination of the case is as to the extent of the control or jurisdiction of the insular government over the harbor of San Juan, and in this connection, as to whether or not property situated entirely within the harbor area, engaged in operations connected with the lands underlying such harbor area, could receive any benefit from the expenditure from moneys raised by the insular government from taxation."
the extent it may be benefited. Thomas v. Gay, 162 U. S. 264; Wagoner v. Evans, 170 U. S. 588.
It, however, may be said that the property was only temporarily in the waters of Porto Rico, and that its situs was at the domicil of the dredging company.
The fact is not alleged, and no other fact which removed the property from the application of the rule that tangible personal property is subject to taxation by the state in which it is, no matter where the domicil of the owner may be. Old Dominion Steamship Co. v. Virginia, 198 U. S. 299, 198 U. S. 305.
The allegation is that, prior to the first of April, 1908, the property was brought to and within the harbor of San Juan. The date is that of the assessment and levy of the tax, but whence the property had been brought, or how long it had been in the harbor before the levy of the tax, is not averred, nor was it necessary for the purpose of the cause of action alleged. There is not an intimation that the property had its situs for taxation elsewhere. The claims of exemption from the tax, and the only claims of exemption, were: (1) that Porto Rico, by virtue of the laws of the United States and of Porto Rico, and especially by virtue of those acts and proclamations of Congress and of the President of the United States creating reservations in and about the island of Porto Rico, was "not authorized to levy or collect any tax in connection with property the status [situs?] of which" was "within such reservation, or within any navigable waters or harbor areas of the said island of Porto Rico;" (2) that the property was not subject to taxation "while being employed in the performance of" the dredging company's "contract with the United States of America and within the said harbor area."
the attention of the Court" to "certain other considerations" expressed in the opinion of the court below. To analyze or summarize the opinion would extend our discussion unduly. Elements that are really independent are mingled somewhat, making it difficult to assign the exact strength given to them respectively, but we think the basis of the decision was, as it is of the contentions discussed by counsel for the company, that the property was not subject to the taxing power of Porto Rico because of its situation within the harbor area and because the title to such area had been reserved to the national government -- an untenable position, as we have seen.
Decree reversed, with directions to sustain the demurrer and dismiss the bill.
We are unable to concur in the judgment just pronounced. The reversal of the judgment below is, in our view, inconsistent with decisions heretofore made in this Court concerning the power of taxation.
We agree with the decision of the court that the Territory of Porto Rico has jurisdiction for taxing purposes over the harbor and waters in question, and that the use of the property for government purposes does not exempt it from taxation, and therefore do not dissent from anything that is said in the opinion of the Court upon those subjects. Our objection to the judgment of reversal is that, as we see it, there is a ground of decision in the court below, ample to sustain its decree, which does not turn upon the determination of the controversy as to the political jurisdiction over these waters. In our opinion, the property of the dredging company had not acquired a taxable situs within the jurisdiction of the Territory of Porto Rico.
"That, by virtue of the requirements of the said contract, your orator did, prior to the said first day of April, 1908, bring to and within the said harbor area of the said harbor of San Juan certain boats and machinery, to be used by it in connection with its operations under the said contract, to-wit, one dredge, one tugboat, two scows for dumping material to be removed, one coal scow, and one launch. That the said machinery and boats so brought by the said complainant and used in connection with its operations under said contract in the said harbor area of the harbor of San Juan were and are the property of the said complainant company, and since the same were so brought to the said harbor area, the same have been constantly used by the said complainant, and engaged in its operations in carrying out its said contract with the said the United States, and the same have not been used in connection with any other business or operations whatsoever, and the same have at all times been entirely within the said harbor areas where the said operations under said contract were so being carried on. And your orator further states that it has not conducted or carried on any business in Porto Rico or in the waters adjacent thereto except the said operations under the said contract with the United States aforesaid."
of $1,200 upon a valuation of the property at $75,000, under the laws of the territory, as of that date.
"It has, we think, been settled by numerous recent decisions of the Supreme Court of the United States that the old rule of personal property following the domicil of the owner has been so varied and departed from as that it does not mean very much at the present time; the real question to be decided in every such case being whether the personal property -- be the same rolling stock, machinery, merchandise, or even floating property, such as steamships, boats, or dredges -- has been brought within the taxing jurisdiction of the government attempting to levy the tax. In other words, it must always be determined that the situs of the property is within the taxing jurisdiction. See Old Dominion Steamship Co. v. Virginia, 198 U. S. 299, and the many cases cited. Also Ayer & Lord Tie Co. v. Kentucky, 202 U. S. 409, and cases cited, and Metropolitan Life Insurance Company v. New Orleans, 205 U. S. 395, and citations."
Rico had no jurisdiction over the harbor and waters where this work was done, but that the property had no taxable situs in Porto Rico. See pp. 154 and 155, Vol. V, Porto Rico Federal Reporter.
It is well settled that property outside of the jurisdiction of a state cannot be taxed within the due process clause of the Fourteenth Amendment. Louisville &c. Ferry Co. v. Kentucky, 188 U. S. 385; Delaware, L. &c. R. Co. v. Pennsylvania, 198 U. S. 341; Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194.
"Personal property, in the absence of any law to the contrary, follows the person of the owner, and has its situs at his domicil. But, for the purposes of taxation, it may be separated from him, and he may be taxed on its account at the place where it is actually located. These are familiar principles, and have been often acted upon in this Court."
To the same effect, See St. Louis v. Wiggins Ferry Co., 11 Wall. 423; Bristol v. Washington County, 177 U. S. 133; Ayer & Lord Tie Co. v. Kentucky, 202 U. S. 409.
In Buck v. Beach, 206 U. S. 392, this Court, while recognizing the rule of taxable situs of personal property as distinguished from the domicil of the owner, held that notes temporarily within a state, although in the possession of an agent of the owner, and there held for collection, were not within the taxing power where the owner lived elsewhere.
of the owner. Commonwealth v. American Dredging Co., 122 Pa. 386 (see infra).
The decisions in this Court indicate that personal property of a tangible character, to become taxable, must have acquired a situs of a permanent nature within the jurisdiction of the authority seeking to levy the tax. The use of the term "permanent" in this connection may not mean the continued and unchangeable location of the property at a given place, but certainly does intend to include the idea of location which is not of a temporary or fleeting character.
"It is the opinion of the Court that the State of Alabama had no jurisdiction over this vessel for the purpose of taxation, for the reason that it had not become incorporated into the personal property of that state, but was there temporarily only."
thereby acquired jurisdiction for imposing a tax as upon property which had become incorporated into the tangible property within her territory."
"But, if enrollment at that place was within the statutes, it is wholly immaterial, since the previous decisions to which we have referred decisively establish that enrollment is irrelevant to the question of taxation, because the power of taxation of vessels depends either upon the actual domicil of the owner or the permanent situs of the property within the taxing jurisdiction."
As was said in one of the latest of this Court's deliverances upon the subject (Metropolitan Life Ins. Co. v. New Orleans, 205 U. S. 395), "but personal property may be taxed in its permanent abiding place, although the domicil of the owner is elsewhere."
And in the latest deliverance of this Court upon the subject (Southern Pacific Co. v. Kentucky, supra), decided at this term, the principle is again stated and applied, that tangible personal property, unless it has acquired an actual situs elsewhere, is taxable at the domicil of the owner.
the general property of the state (Delaware, L. &c. R. Co. v. Pennsylvania, supra), or "permanently located" there (Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194), or "incorporated in" the local property (Southern Pacific Co. v. Kentucky, supra). All these expressions indicate the idea of a permanent situs of the property.
The question then comes to this: when the Porto Rico authorities, on the first of April, 1908, undertook to levy this tax upon the dredging outfit, had it acquired a situs in that jurisdiction for the purpose of taxation? Answering this question, we must bear in mind that there is no showing that the property was permanently located in San Juan harbor in the sense we have indicated, but that, on the contrary, it appears it was brought into Porto Rico for the purpose of carrying out a government contract upon which the owner of the property had entered at the time of the attempted taxation; that it was not used in connection with any other business or operation whatsoever, but had been continuously and entirely engaged in carrying out the contract for which it was taken to Porto Rico, and that the owner of the property had not engaged in any operations in Porto Rico or the waters thereof, except only those under the contract with the United States.
Tangible personal property is taxable at the owner's domicil, except where it is shown to have an actual situs elsewhere, and, as we have seen, actual situs is not gained when the property comes only temporarily within the taxing jurisdiction. Applying this test, we are of the opinion that this dredging outfit had not become incorporated into the personal property of the Territory of Porto Rico, as manifestly it was there temporarily only. In our judgment, this situation falls far short of a location in Porto Rico sufficient to subject it to the taxing power of that territory.
General of Porto Rico (National Dredging Co. v. State, 99 Ala. 462, and North Western Lumber Co. v. Chehalis County, 25 Wash. 95), are entirely different in their facts.
"Indeed, as appears from this record, other property of the same kind which had previously been used by residents of Alabama in the prosecution of this work was purchased by the appellant company, and, being incorporated with that involved here, has all along been used like it in dredging the channel of Mobile Bay, and one scow so used was built in the City of Mobile, and has never been, we assume, outside of the state."
"In other words, taking into consideration the business of the corporation, the amount and continuing character of the work to be done in Mobile Bay, the preparations made by the company for doing so much thereof as is authorized under one annual appropriation, it may be that this property will be for years engaged upon this work, as a part of that now being used by the company of like kind with this had been used thereon for a year or years prior to 1891. On this state of the case -- or even leaving out of view the considerations last adverted to -- it is clear, we think, that this property is not merely temporarily within Alabama, but that, to the contrary, its presence here is for such an indefinite period as involves the idea of permanency, in the sense in which that term is used with respect to the situs of property for the purposes of taxation."
port in another state. The evidence disclosed that these tugs had been in use in the State of Washington from four to seven years, and not elsewhere, and that the only absence of the tugs from the harbors of that state was for the temporary purpose of repairs, and further, that they were used for all those years appurtenant to and as a part of the lumber plant and business of the lumber company in the county and state where taxed. Under such circumstances, the Supreme Court of Washington held that the tugs were permanently in Washington, transacting a local business, and had acquired a taxable situs within that state.
A statement of these cases readily distinguishes them from the one at bar. In the case now before us, it was sought to tax the dredging property upon its removal from the domicil of its owner for the performance of a single contract and for the transaction of no other business whatsoever, and presumably, as the court below said, not to remain in the jurisdiction beyond the term of the contract for which it was used. To tax property in this situation, it seems to us, would be extending the doctrine of taxable situs elsewhere than at the owner's domicil beyond any authority shown, and certainly beyond the reason of the rule. If property thus located could be taxed, the same principle would permit the taxing of a dredging outfit upon the Great Lakes of the country, frequently moving from port to port, in the performance of dredging contracts, in every jurisdiction where it might temporarily be, as well as at the domicil of the owner, where such property could unquestionably be reached.
"It must be conceded that the property in question must be liable to taxation in some jurisdiction. If it were permanently located in another state, it would be liable to taxation there. But the facts show that it is not permanently located out of the state. From the nature of the business, it is in one place today and in another tomorrow, and hence not taxable in the jurisdiction where temporarily employed. It follows that, if not taxable here, it escapes altogether. The rule as to vessels engaged in foreign or interstate commerce is that their situs, for the purpose of taxation, is their home port of registry, or the residence of their owner, if unregistered. Pullman's Palace Car Co. v. Twombly, 29 F. 658; Hays v. Pacific Mail S.S. Co., 17 How. 596."
"These vessels, if they may be so called, were not registered. Hence, their situs for taxation is the domicil of the owners. This rule must prevail in the absence of anything to show that they are so permanently located in another state as to be liable to taxation under the laws of that state."
represented by property in stocks of coal which had been sent out of the state, and were deposited in other states for sale, could not be taxed.
"Such property is entirely unlike the property involved in Commonwealth v. American Dredging Co., 122 Pa. 386. That property consisted of vessels, or scows, or tugs, only temporarily out of the State of Pennsylvania for the purpose of engaging in business, and liable to return to the state at any time, and was without any actual situs beyond the jurisdiction of the state itself."
We think, therefore, that the property in question was taxable in Delaware at the domicil of the owner, and we agree with the district court in its conclusion that it had not acquired a taxable situs in Porto Rico.
For this reason, we dissent from the judgment of the Court.

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