Ayer and Lord Tie Co. v. Commonwealth, 202 U.S. 409 (1906)

Mr. Justice White,

after making the foregoing statement, delivered the opinion of the court.

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 interT state 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 at 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 enrollment and license. But this is immaterial, since vessels in order to be enrolled must possess the qualifications and fulfill the requirements necessary for registration.

To comprehend the question a chronological statement of the legislation of Congress as to the registration or enrollment of vessels, etc., is necessary.

By 'section 3 of an act approved December 31, 1792, 1 Stat. 287, 288, it was provided as follows:

On June 23, 1874, 18 Stat. 252, the foregoing provision was amended so as to allow the name of, the vessel to be painted upon her stern in yellow or gold letters. In the Revised Statutes the requirement in question was separated into two sections (sections 4141, 4178), reading as follows:

fomid without having her name and the name of the port to which she belongs so painted, the owner or owners shall be liable to a penalty of fifty dollars; recoverable one-half to the person giving the information thereof; the other half to the use of the United States.”

By section 2,of the act of February 18, 1793, 1 Stat. 305, “for enrolling and licensing ships or vessels to be employed in the coasting trade,” etc.,-the same requirements were made essential for enrollment as for registering, and by section 11 licensed, vessels were specifically obliged to have the name and port painted on the stern. As incorporated into the Revised Statutes the latter provision reads as follows:

By section 21 of an act approved June 26, 1884, 23 Stat. 53, 58, it was provided as follows:

Again, by acts approved February 21, 1891, c. 250, sec. 1, 26 Stat. 765, and January 20, 1897, c. 67, sec. 1, 29 Stat. 491, section-4178, Rev. Stat., was amended so that it now reads as follows:

or in a dark color on a light ground, secured in place', and to be distinctly visible. Thé smallest letters used shall not be less in size than four inches. If any such vessel shall be found without these names being so marked the owner or owners shall be liable to a penalty of ten dollars for each name omitted: Provided, however, That the names on each bow may be marked within . the year eighteen hundred and ninety-seven.”

Was the ruling below justified by these statutes? We think not.

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 enrollment, 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, 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 Nad not become incorporated into the property of California so &j¡ to have an actual situs in that State, and it was declared that the vessels were properly taxable at the domicil of their owner.

In St. Louis v. Ferry Co., 11 Wall. 423, the boats of the company, an Illinois corporation, were enrolled at St. Louis and plied between that city and the city of East St. Louis, in the State of Illinois. The company had an office in St. Louis, where its president and other principal officers' lived and where the ordinary business meetings of the directors were held and the corporate seal was kept. A tax was paid upon the boats in Illinois, the residence of the owner. The city of St. Louis

"taxed the ferry boats as personal property “within the city.” It was, however, held that 'the boats did not so abide within the city ks to become incorporated with and form part of its personal property, citing Hays v. Pacific Mail S. S. Co., 17 How. 559. In the course of the opinion the court said (italics ' minei):

In Morgan v. Parham, 16 Wall. 471, 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 Transportation Co. v. Wheeling, 99 U. S. 273, vessels engaged in commerce between ports of different States were held taxable at the domicil of the owner.

Quite recently, in Old Dominion S. S. Co. v. Virginia, 198 U. S. 299, the foregoing authorities were approvingly cited, and were in effect reaffirmed. In that case the vessels were enrolled in New York, the domicil of the owner, but, although engaged in interstate commerce, the vessels were navigated wholly within the limits of the State of Virigina, it was held that they came within the exception to the general rule which we have previously stated, and were properly taxable in Virginia.

As in the case at bar, .the owner of the vessels was domiciled in Illinois aald the vessels were not employed exclusively in commerce between points in the State of Kentucky, but were engaged in traffic between that State and the ports of other States, including Illinois, it seems obvious that, as a question of fact they had no permanent situs in the State of Kentucky within the rule announced in the Old Dominion Steamship case. The right then of the State of Kentucky to tax the vessels must solely depend upon the fact that they were enrolled at the port of Paducah in that State. . 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. The court below, however, did not apparently decline to apply the previous decisions of this court, but treated them as inapposite, under the assumption that they were rendered before the act of 1884, and that the necessary effect of that statute was to change the general law só as to cause vessels to be subject to taxation within a State where they were enrolled, although that State was neither the residence of the owner nor the place of the actual situs of the property. As the ruling below was made before the decision of this court in the Old Dominion Steamship Company case, rendered since the act of 1884, we might well leave the demonstration of the error into which the court fell to result from the decision of that case,- since the ruling below is wholly inconsistent with that decision. This clearly follows, since in the Old Dominion Steamship case the right of the State of' Virginia to tax was based upon the permanent situs of the vessels in Virginia, although they were enrolled in another State. But in view of the general importance of the subject we shall briefly point out the mistaken construction given by the court below to the act of 1884.

After referring to the act of 1884, and quoting the provisions

of the Rev. Stat. sec. 4178, as now existing, the court below said:

. It is at once apparent that this line of reasoning, whilst it

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.

The act in question was an elaborate on$, containing thirty sections, relating to the American merchant marine, and was entitled “An act to remove certain burdens on the American merchant marine and encourage the American foreign carrying trade and for other purposes.” 23 Stat. 53. The only provision contained in that act which had any reference to the subject under consideration and which was relied upon in the court below was section 21, which we have previously quoted, and which we again copy:

Clearly this section does not essentially change the prior general law respecting enrollment, 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 enrollment clearly exacted that the owner, as an incident to enrollment, should mark upon his vessel the name of the place of enrollment; in other words, compelled the owner to hail his vessel from the place of enrollment, although he might be domiciled elsewhere. Now,

as the settled ruie at the time of the passage of this act was that enrollment, and consequent marking of the stern of. the vessel with the name of the place of enrollment, 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 enrollment to be marked upon a vessel, to overthrow the settléd 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.

Unddubtedly, as we have said, the general statutes as to enrollment in force prior to 1884 required that the name of the port to be painted upon the vessel should be the port of enrollment, although such place might not be the domicil, of the owner. In practice, however, that rule was not always observed, because the owners of vessels desired to hail them from the place of the residence of the owner. The Albany, 4 Dill. 439. And thd history of the adoption of the provision now known as section 21 of the act of 1884 referred to leaves

no room for doubt that Congress simply intended to legalize such practice. The provision had its origin in an amendment unanimously reported by the Committee on Commerce of the Senate on May 1, 1884, to a bill then pending in the Senate. The chairman of the committee, in reporting the proposed amendment, said (15 Cong. Rec. p. 3650):

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.

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.. 15 Cong. Rec. 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 enrollment 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 he reversed and the cause remanded for further proceedings not inconsistent with this, opinion.