Gromer v. Standard Dredging Company/Dissent R. Day
Mr. Justice Day, with whom concurred Mr. Justice Hughes and Mr. Justice Lamar, dissenting:

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.

The case was heard upon demurrer, and we must therefore take the allegations of the bill, well pleaded, to be true. From them it appears that prior to the 1st day of April, 1908, complainant company, a corporation of the state of Delaware, having its principal office and place of business at Wilmington, in that state, entered into a contract with the United States to perform certain services in connection with the dredging of portions of the harbor of San Juan, Porto Rico, and the channel leading from the ocean to the harbor. The bill alleges:

'That by virtue of the requirements of the said contract your orator did, prior to the said 1st 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.'

It is further alleged that on the 1st day of April, 1908, the taxing officer of Porto Rico undertook to levy a tax of $1,200 upon a valuation of the property at $75,000, under the laws of the territory, as of that date.

The case was submitted upon briefs without argument. In the brief of the attorney general, as well as that of the appellee, the question principally argued concerns the jurisdiction of the teritory of Porto Rico over the harbor and waters of the bay. In the brief of the attorney general argument is made and cases are cited to sustain the claim that the situs of the property for the purposes of taxation was within the jurisdiction of the territory. In the brief submitted by the appellee reference is made to the opinion of the court for additional reasons for supporting the decree, which reasons are not adverted to at length in the brief. In the opinion of the court the allegations of the bill are treated, as might rightly be done, as raising the question of taxable situs of this property, and, among other things, the judge says:

'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 S. S.C.o. v. Virginia, 198 U.S. 299, 49 L. ed. 1059, 25 Sup. Ct. Rep. 686, 3 A. & E. Ann. Cas. 1100, and the many cases cited. Also Ayer & L. Tie Co. v. Kentucky, 202 U.S. 409, 50 L. ed. 1082, 26 Sup. Ct. Rep. 679, 6 A. & E. Ann. Cas. 205, and cases cited, and Metropolitan L. Ins. Co. v. New Orleans, 205 U.S. 395, 51 L. ed. 853, 27 Sup. Ct. Rep. 499, and citations.'

After consideration of the subject the court reached the conclusion, not only that the local government of Porto 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. 5, Porto Rico Fed. Rep.

It is well settled that property outside of the jurisdiction of a state cannot be taxed within the due-process clause of the 14th Amendment. Louisville & J. Ferry Co. v. Kentucky, 188 U.S. 385, 47 L. ed. 513, 23 Sup. Ct. Rep. 463; Delaware, L. & W. R. Co. v. Pennsylvania, 198 U.S. 341, 49 L. ed. 1077, 25 Sup. Ct. Rep. 669; Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 50 L. ed. 150, 26 Sup. Ct. Rep. 36, 4 A. & Ed. Ann. Cas. 493.

As a general rule, in the absence of a situs elsewhere, the domicil, of the owner is the place where personalty is taxable. As was said in Tappan v. Merchants' Nat. Bank, 19 Wall. 490, 22 L. ed. 189, by Mr. Chief Justice Waite, speaking for the court:

'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, 20 L. ed. 192; Bristol v. Washington County, 177 U.S. 133, 44 L. ed. 701, 20 Sup. Ct. Rep. 585; Ayer & L. Tie Co. v. Kentucky, 202 U.S. 409, 50 L. ed. 1082, 26 Sup. Ct. Rep. 679, 6 A. & E. Ann. Cas. 205.

In Buck v. Beach, 206 U.S. 392, 51 L. ed. 1106, 27 Sup. Ct. Rep. 712, 11 A. & E. Ann. Cas. 732, 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.

It requires a showing that the property sought to be taxed is incorporated in or commingled with the property of the taxing authority, before it can become liable to taxation in any other jurisdiction than that of the domicil OF THE OWNER. COM. V. AMERICAN DREDGING co. 122 pa. 386, 1 l.r.a. 237, 2 Inters. Com. Rep. 221, 9 Am. St. Rep. 116, 15 Atl. 443 (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.

As was said by this court in Morgan v. Parham, 16 Wall. 471, 21 L. ed. 303, in declaring that a vessel engaged in interstate commerce was not subject to taxation in the city of Mobile, Alabama, although it was physically within the limits of the city in the course of navigation:

'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.'

In Old Dominion S. S.C.o. v. Virginia, 198 U.S. 299, 49 L. ed. 1059, 25 Sup. Ct. Rep. 686, 3 A. & E. Ann. Cas. 1100, it was held that certain vessels engaged in interstate commerce and registered outside of the state of Virginia were taxable in that state, it appearing that they were continuously used in navigating the waters of that state. Of that case this court said in Southern P. Co. v. Kentucky, 222 U.S. 63, 72, 56 L. ed. 96, 32 Sup. Ct. Rep. 13, 16:

'The case of Old Dominion S. S.C.o. v. Virginia affords an instance of where the domicil of the owner as a taxing situs was held to have been lost and a new taxing situs acquired by reason of a permanent location within another jurisdiction. But in that case the judgment was rested upon the fact that the vessels had for years been continuously and exclusively engaged in the navigation of the Virginia waters, which state had thereby acquired jurisdiction for imposing a tax as upon property which had become incorporated into the tangible property within her territory.'

In Ayer & L. Tie Co. v. Kentucky, supra, this court had occasion to consider the taxation of vessels plying between the ports of different states, and it was held that where a vessel has acquired an actual situs in a state other than that which is the domicil of the owner, it may be taxed, because it is within the jurisdiction of the taxing authority; and, after reviewing the previous cases in this court, Mr. Justice White, speaking for the court, said (p. 423):

'But, if enrolment at that place was within the statutes, it is wholly immaterial, since the previous decisions to which we have referred decisively establish that enrolment 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 L. Ins. Co. v. New Orleans, 205 U.S. 395, 51 L. ed. 853, 27 Sup. Ct. Rep. 499), '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 P. 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.

In all the cases to which our attention has been called, decided in this court, the idea of permanency in the abiding place is emphasized as essention to taxable situs,-that is, the property sought to be taxed must become 'commingled' with the property of the state (Old Dominion S. S.C.o. v. Virginia, supra), or 'intermingled' with the general property of the state (Delaware, L. & W. R. Co. v. Pennsylvania, supra), or 'permanently located' there (Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 50 L. ed. 150, 26 Sup. Ct. Rep. 36, 4 A. & E. Ann. Cas. 493), or 'incorporated in' the local property (Southern P. 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 1st 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.

The cases relied upon and cited in the brief of the attorney general of Porto Rico (National Dredging Co. v. State, 99 Ala. 462, 12 So. 720, and North Western Lumber Co. v. Chehalis County, 25 Wash. 95, 54 L.R.A. 212, 87 Am. St. Rep. 747, 64 Pac. 909), are entirely different in their facts.

In the Alabama case the dredging outfit was held presumably to be in Mobile bay for the purpose of carrying out a series of contracts in the line of the dredging company's business. The court says:

'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.'

In the Washington case, the property sought to be taxed was certain tugboats, which were claimed to be exempt from taxation because they were registered at a 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.

In Com. v. American Dredging Co. supra, where a dredging outfit was specifically involved, the supreme court of Pennsylvania held that so much of the capital stock of the corporation as was invested in the state of New Jersey in a dredging outfit, namely $92,000 in four dredges which were built outside of the state of Pennsylvania, three of which had never been within the limits of that state, and the fourth of which had never been within its limits until after the end of the year; $6,000 in a tug which was built outside of the state of Pennsylvania, and was not within its limits during the year, and $38,500 in eleven scows, built outside of the state of Pennsylvania, and never within its limits, the property all being employed for corporate purposes in the states of New Jersey, Maryland, and Virginia, was nevertheless subject to taxation in the state of Pennsylvania, which was the domicil of the American Dredging Company, the owner of the property. In reaching that conclusion, Mr. Justice Paxson, who spoke for the court, said:

'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 to-day and in another to-morrow, 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 Fed. 658; Hays v. Pacific Mail S. S.C.o. 17 How. 596, 15 L. ed. 254.

'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.'

That case was commented on in the opinion of this court in Delaware, L. & W. R. Co. v. Pennsylvania, 198 U.S. 341, 49 L. ed. 1077, 25 Sup. Ct. Rep. 669, in which it was held that the capital stock of a corporation 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.

Of the Dredging Company Case, mr. Justice Peckham, speaking for this court, said:

'Such property is entirely unlike the property involved in Com. v. American Dredging Co. 122 Pa. 386, 1 L.R.A. 237, 2 Inters. Com. Rep. 221, 9 Am. St. Rep. 116, 15 Atl. 443. 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. 

Notes