Union Tank Line v. Wright/Dissent Pitney
Mr. Justice PITNEY, with whom concurred Mr. Justice BRANDEIS and Mr. Justice CLARKE, dissenting.

During the period in controversy the Union Tank Line, plaintiff in error, a New Jersey corporation, was the owner of many tank cars, aggregating in value more than $10,000,000, and was engaged in the business of renting them out to be employed in transporting oil and similar fluids over railroads throughout the United States extending to more than 250,000 miles. In the course of its business it made a contract with the Standard Oil Company of Kentucky to furnish to that corporation cars for use in the transportation of oils and like fluids from depots at Savannah, Georgia, and Jacksonville, Florida. The oils were brought to those depots chiefly in vessels by sea, and were shipped thence in the Tank Line cars to various destinations whthin and without the state of Georgia; plaintiff in error being compensated in part by rentals paid by the Standard Oil Company, based on size and capacity of cars, and in part by payments received from the railroad companies over whose lines the cars were run; those companies, in lieu of providing their own tank cars, paying to plaintiff in error three-fourths of a cent per mile per car for the car movements.

Under the provisions of the Georgia statutes (Civil Code, §§ 989, 990, 1031), property taxes were imposed upon plaintiff in error by reason of the habitual use and employment of its rolling stock within that state, based upon a valuation not limited to the value of the tank cars as separate chattels, but considering their value as a part of the entire system of cars owned and operated by plaintiff in error, and regarding these as a part of the equipment of the railroads over which they ran. Thus, it appearing from a return made by the Tank Line to the comptroller general for the year 1913 that the number of miles of railroad lines in Georgia over which its cars were run was 6,976.5, and the total number of miles of railroad lines over which its cars were run in Georgia and elsewhere was 251,999, and that the total value of its cars and other personal property in Georgia and elsewhere was $10,518,333.16, the comptroller general assigned to the state of Georgia for taxation the same proportion of the property value of the system of cars that the Georgia rail mileage bore to the total mileage. This gave a valuation of $291,195.84, whereas plaintiff in error had returned that during the same year it had an average of only 57 tank cars in Georgia, amounting, at a valuation of $830 per car, to $47,310.

The Supreme Court of Georgia sustained the tax on the authority of numerous decisions of this court, cited for the purpose. 143 Ga. 765, 85 S. E. 994, 146 Ga. 489, 91 S. E. 680. This court reverses the judgment, and holds the taxing law unconstitutional, upon reasoning to which I am unable to yield assent.

In my opinion the Georgia system of taxing movable property of this character when habitually employed in the state, and the decision of the state Supreme Court sustaining the particular taxes in question, are based upon a correct view of the powers of the state under the federal Constitution, and are in entire harmony with principles laid down in authoritative decisions of this court which have remained unchallenged for more than a quarter of a century. Western Union Tel. Co. v. Massachusetts, 125 U.S. 530, 552, 8 Sup. Ct. 961, 31 L. Ed. 790; Marye v. Baltimore & Ohio R. R., 127 U.S. 117, 123, 8 Sup. Ct. 1037, 32 L. Ed. 94; Pullman's Car Co. v. Pennsylvania, 141 U.S. 18, 22, 26, et seq., 11 Sup. Ct. 876, 35 L. Ed. 613; Cleveland, etc., Ry. Co. v. Backus, 154 U.S. 439, 445, 14 Sup. Ct. 1122, 38 L. Ed. 1041; Western Union Tel. Co. v. Taggart, 163 U.S. 1, 14, 16 Sup. Ct. 1054, 41 L. Ed. 49; Adams Express Co. v. Ohio, 165 U.S. 194, 221, 17 Sup. Ct. 305, 41 L. Ed. 683; Adams Express Co. v. Ohio, 166 U.S. 185, 17 Sup. Ct. 604, 41 L. Ed. 965; American Refrigerator Transit Co. v. Hall, 174 U.S. 70, 75, et seq., 19 Sup. Ct. 599, 43 L. Ed. 899; Union Refrigerator Transit Co. v. Lynch, 177 U.S. 149, 152, 20 Sup. Ct. 631, 44 L. Ed. 708; Cudahy Packing Co. v. Minnesota, 246 U.S. 450, 453, 38 Sup. Ct. 373, 62 L. Ed. 827.

The case presents no question of taxing a foreign corporation with respect to personal property that never has come within the borders of the state. According to the agreed state of facts and the petition of the Union Tank Line which is to be read with it, any and all cars of the company were liable to be used indiscriminately, as occasion required, in the transportation of oil within the state of Georgia, and there is nothing to show how many were so used during either of the taxing years in question. Fifty-seven cars simply represent the average number within the state at one and the same time within the year, and is not representative of the number of cars used in the state during the year. This court has declared that a state may lay hold of the average habitual use of movable railroad equipment as a basis of taxation (Marye v. Baltimore & Ohio R. R., 127 U.S. 117, 123, 8 Sup. Ct. 1037, 32 L. Ed. 94); but there is nothing in the Constitution of the United States to confine the state to that particular method. It is but a method of approximation. Nor is the state obliged to ignore the special value that rolling stock has because of its organic relation to, and its customary use in connection with, the railroad tracks upon which it runs. Although the equipment be held in separate ownership, it may be regarded in fact as an appurtenance of the railroad and valued in that relation. It is admitted that the revenue derived by plaintiff in error from the use of its cars is in part paid by the railroad companies and proportioned to the mileage covered by the run of the cars.

The opinion of this court recognizes that plaintiff in error, because its tank cars are regularly and habitually used and employed in the state of Georgia, is taxable according to their fair value along with other property subject to the jurisdiction of the state, although they are devoted to interstate commerce; that while the valuation must be just it need not be limited to the mere value of the cars considered separately, but may include also the special value attributable to their organic relation to the entire system; that fair appraisal, in a case like this, where the cars constitute part of a system operating in many states, is a matter of serious difficulty, but that absolute accuracy usually is impossible and therefore is not required by the Constitution; and it seems to be intimated that a valuation based upon the aggregate car mileage within the state during the taxable year would be permissible. But, even assuming that such a basis could be adopted without in effect regulating interstate commerce by varying the burden of taxation in direct proportion to the volume of such commerce, it still is obvious that a valuation according to aggregate car mileage would virtually ignore the particular value due to the relation of the cars to the rail system, would in effect be equivalent to a valuation according to average use, and would be open to the same objection, viz., that its ascertainment would lie wholly within the breast of the taxpayer. For, if the state authorities were required to keep a check either upon the average use or the aggregate mileage covered by the movements of rolling stock within the state, and to supplement this with observations in other states in order to arrive at the due proportion, the cost of administration easily might consume the tax.

It is because of difficulties such as these that so many of the states have resorted to track mileage-readily ascertained and little subject to change-as an equitable method of ascertaining the proportionate value taxable by a single state, out of the aggregate value of the movables of an equipment company that does business in several states.

This method was very clearly sustained by this court in Pullman's Car Co. v. Pennsylvania, 141 U.S. 18, 26, 11 Sup. Ct. 876, 35 L. Ed. 613, a case decided in the year 1891, followed repeatedly, and never questioned in the least until now. The tax laws of the state of Georgia, and doubtless of many other states, have been based upon that decision, and I regard it as most unfortunate that at this late date its authority should be overthrown.

The Pullman Company was a corporation of the state of Illinois, having its principal office in Chicago, and its business was to furnish sleeping coaches and parlor and dining cars to various railroad companies for use as a part of the equipment of passenger trains running in interstate commerce; the railroad companies collecting the usual passenger fares and the Pullman Company separate charges for seats and berths. The company was subjected by the state of Pennsylvania to a tax upon a part of its capital stock bearing the same proportion to the whole as the number of miles of railroad over which its cars were run in Pennsylvania bore to the whole number of miles in that and other states over which they were run. The Pullman Company objected to the taxation of any part of its capital stock by the state of Pennsylvania by reason of its running its cars through that state in the course of their employment in interstate transportation of passengers; and it is obvious that unless the tax was sustainable as being in substance and effect a tax upon property of the company no greater than that which the state had a right to impose it was invalid because amounting in its effect to a burden upon interstate commerce. It was from this point of view that the court tested and sustained the tax, as the following excerpts from the opinion will show. After declaring that the legislative power of every state extends to all property within its borders; that for purposes of taxation personal property may be separated from its owner and the owner taxed on account of it at the place where it is located, although he is not a citizen or resident of the state which imposes it; and that there is nothing in the Constitution or laws of the United States to prevent a state from taxing personal property employed in interstate or foreign commerce like other personal property within its jurisdiction, the court, speaking by Mr. Justice Gray, proceeded to say (141 U.S. 25, 26, 11 Sup. Ct. 879, 35 L. Ed. 613):

'Much reliance is also placed by the plaintiff in error upon      the cases in which this court has decided that citizens or      corporations of one state cannot be taxed by another state      for a license or privilege to carry on interstate or foreign      commerce within its limits. But in each of those cases the      tax was not upon the property employed in the business, but      upon the right to carry on the business at all, and was      therefore held to impose a direct burden upon the commerce      itself. * * * The tax now in question is not a license tax or      a privilege tax; it is not a tax on business or occupation;      it is not a tax on, or because of, the transportation, or the      right of transit, of persons or property through the state to      other states or countries. * * * The tax on the capital of      the corporation, on account of its property within the state,      is, in substance and effect, a tax on that property. * * *      The cars of this company within the state of Pennsylvania are      employed in interstate commerce; but their being so employed      does not exempt them from taxation by the state; and the      state has not taxed them because of their being so employed,      but because of their being within its territory and      jurisdiction. The cars were continuously and permanently      employed in going to and fro upon certain routes of travel. *      * * The fact that, instead of stopping at the state boundary,      they cross that boundary in going out and coming back, cannot      affect the power of the state to levy a tax upon them. * * *      The route over which the cars travel extending beyond the      limits of the state, particular cars may not remain within      the state; but the company has at all times substantially the      same number of cars within the state, and continuously and      constantly uses there a portion of its property; and it is      distinctly found, as matter of fact, that the company      continuously, throughout the periods for which these taxes were levied, carried on business in      Pennsylvania, and had about one hundred cars within the      state.

'The mode which the stage of Pennsylvania adopted, to      ascertain the proportion of the company's property upon which      it should be taxed in that state, was by taking as a basis of      assessment such proportion of the capital stock of the      company as the number of miles over which it ran cars within      the state bore to the whole number of miles, in that and      other states, over which its cars were run. This was a just      and equitable method of assessment; and, if it were adopted      by all the states through which these cars ran, the company      would be assessed upon the whole value of its capital stock,      and no more. [Italics mine.] The validity of this mode of      apportioning such a tax is sustained by several decisions of      this court,' etc.

It was upon this decision, among others, that the Supreme Court of Georgia relied as authority for its judgment. I cannot agree that any part of what I have quoted-least of all the italicized clause which relates to the apportionment of the tax according to track mileage-was obiter dictum or unnecessary for the decision. It was necessary-certainly so this court deemed it that the disputed tax be vindicated as a property tax in order to relieve it from the criticism that it was an unwarranted interference with interstate commerce; and it could not be sustained as a property tax unless the method of apportionment was fair and equitable. The authority of the case cannot properly be overthrown by showing, even if it could be shown, that the court might have reached the same result upon some other ground than that which in truth it adopted as the basis of its decision. And it seems to me that a considered judgment of this court upon a constitutional question affecting the taxing powers of the states, long acted upon as a guide to state legislation upon this important and difficult matter, ought not to be set aside without more cogent reasons than any that are here adduced. Certainly the fact that the established rule of taxation may operate with hardship or even with apparent injustice in a particular case is not sufficient to condemn it.

The decision referred to, Pullman's Car Co. v. Pennsylvania, supra, has always been regarded as a leading case, and cited with uniform approval in repeated decisions of this court, not only upon the point that property employed in interstate commerce, and in the ordinary use of it situate sometimes within and sometimes without a state, is subject to state taxation without regard to the place of the owner's domicile, but also and especially in support of the proposition that the mileage basis of apportionment as between the different states may be resorted to in order to determine what tax each state shall lay upon rolling stock used upon interstate railroads, just as it often is resorted to in apportioning the tax upon a railroad as between different taxing districts in the same state.

The reasoning of the case upon the point now in controversy has never heretofore been regarded as obiter dictum. On the contrary, it was cited in support of the mileage basis of apportionment for the taxation of a railroad in Pittsburgh, etc., Ry. Co. v. Backus, 154 U.S. 421, 431, 14 Sup. Ct. 1114, 38 L. Ed. 1031, and, in Adams Express Co. v. Ohio, 165 U.S. 194, 221, 17 Sup. Ct. 305, 41 L. Ed. 683, to sustain a mileage apportionment with respect to interstate express companies, notwithstanding the absence of physical unity. Adams Exp. Co. v. Ohio, 166 U.S. 185, 17 Sup. Ct. 604, 41 L. Ed. 965. It was quoted from extensively in American Refrigerator Transit Co. v. Hall, 174 U.S. 70, 75, 76, 19 Sup. Ct. 599, 43 L. Ed. 899, as authority for the apportionment of taxes upon rolling stock according to the track mileage within and without the state; the very part of the opinion now held to be dictum being included in the quotation. See also Western Union Tel. Co. v. Taggart, 163 U.S. 1, 14, 21, 16 Sup. Ct. 1054, 41 L. Ed. 49; Union Refrigerator Transit Co. v. Lynch, 177 U.S. 149, 152, 20 Sup. Ct. 631, 44 L. Ed. 708; Union Transit Co. v. Kentucky, 199 U.S. 194, 206, 26 Sup. Ct. 36, 50 L. Ed. 150, 4 Ann. Cas. 493; Galveston, Harrisburg, etc., Ry. Co. v. Texas, 210 U.S. 217, 225, 28 Sup. Ct. 638, 52 L. Ed. 1031; Pullman Co. v. Kansas, 216 U.S. 56, 63, 64, 30 Sup. Ct. 232, 54 L. Ed. 378; Louisville & Nashville R. R. Co. v. Greene, 244 U.S. 522, 548, 37 Sup. Ct. 683, 61 L. Ed. 1291, Ann. Cas. 1917E, 97; Cudahy Packing Co. v. Minnesota, 246 U.S. 450, 453, 38 Sup. Ct. 373, 62 L. Ed. 827. In Fargo v. Hart, 193 U.S. 490, 499, 24 Sup. Ct. 498, 48 L. Ed. 761, the court recognized the authority of Pullman's Car Co. v. Pennsylvania as supporting the acknowledged doctrine of organic unity and the reasonableness and constitutionality of the mileage proportion, but found in the particular case an exception to the rule.

I can see nothing arbitrary or unreasonable in the general rule of mileage apportionment adopted by the state of Georgia, upon the authority of these repeated decisions of this court, for the taxation of railroad cars and other equipment habitually operated on lines extending within and without the state, and hence am convinced that the statute is not repugnant to the federal Constitution. If, for any reason that does not appear, the rule operated unfairly in this particular case, and imposed an unjust and inequitable burden of taxation upon plaintiff in error, it was incumbent upon plaintiff in error to show this by calling for an arbitration upon the question of true value, as permitted by the Georgia statutes (Civil Code, §§ 1045-1046, 1050-1054), or by some appropriate proceeding for relief against the excessive part of the taxes. Having failed to do this although properly notified, it cannot in justice be heard to say that the valuation of its property, made according to a statutory rule that in its general application is just and reasonable, is in the particular case so excessive as to amount to a deprivation of property without due process of law, or an undue burden upon interstate commerce.

Mr. Justice BRANDEIS and Mr. Justice CLARKE concur in this dissent. 

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