Ayer & Lord Tie Co. v. Kentucky, 202 U.S. 409 (1906)

Ayer and Lord Tie Company v. Kentucky

No. 28

Argued April 27, 1906
Decided May 21, 1906
202 U.S. 409

ERROR TO THE COURT OF APPEALS

FOR THE STATE OF KENTUCKY

Syllabus

The general rule as to vessels plying between the ports of different states and engaged in the coastwise trade is that the domicil of the owner is the situs of the vessel for the purposes of taxation, wholly irrespective of the place of enrollment, subject to the exception that, where a vessel engaged in interstate commerce has acquired an actual situs in a state other than that which is the domicil of the owner, it may there be taxed because within the jurisdiction of the taxing authorities.

Vessels owned by a corporation domiciled in Illinois and which, although enrolled in a Kentucky port, are not engaged in commerce wholly in the state, but are engaged in interstate commerce, and which have acquired a permanent situs for taxation and are taxed in another state, are not subject to taxation by the Kentucky, nor is their situs for taxation therein on account of their being enrolled at a port of that state.

The Commonwealth of Kentucky, by Frank A. Lucas, revenue agent, commenced an action in the County Court of McCracken County to recover from the Ayer & Lord Tie Company alleged omitted state, county, and municipal taxes for the years 1899, 1900, and 1901, claimed to be assessable upon two steamboats and certain barges, and, for the year 1901, upon one other steamboat, all the property of the company.

In the statement of the plaintiff, the right to recover in respect of the steamboats was based solely upon the assertion that, on the dates when it was alleged the boats became subject to the taxes in question, they were

enrolled, in accordance with the laws of the United States governing navigation at the port of Paducah, in the County of McCracken and State of Kentucky; that, as required by the said laws of the United States governing navigation, the words of "Paducah, Kentucky" were painted on the stern of said steamboats; that said boats, when not in use, are kept at Paducah, Kentucky, and that the said port of Paducah is, and was, on each of said days, the home port of said steamboats.

The right to recover in respect of the barges was based upon the allegation that

each and all of said boats are now, and were, on each of the above days mentioned, used by the defendant for the purpose of towing ties, loaded on barges; that the defendant was, on each of the days aforesaid, the owner, seised of, and in possession of, certain barges, used in connection with said steamboats for the purpose of transporting railroad ties.

The tie company answered as follows: that it was an Illinois corporation, chartered in 1893 and empowered "to transact business with steamboats engaged in interstate commerce;" that,

ever since its incorporation, it has been engaged in business as owner of towboats, plying on the Mississippi, Ohio, Tennessee, and Cumberland Rivers and their tributaries; that the business in which towboats had been engaged is that of interstate commerce and of transporting railroad ties in its own barges from different points of said rivers to the port of Brookport in the State of Illinois; that their said towboats, in pursuit of their business, occasionally touch at the point of Paducah, Kentucky, but never to discharge their cargo, but simply for the purpose of buying stores, employing seamen, and for other like purposes; that they and said barges are in the State of Kentucky but temporarily, and most of their business is transportations from ports and places in Alabama, Mississippi, Kentucky, Missouri, Arkansas, Illinois, and Tennessee to said Port of Brookport, in the State of Illinois; St. Louis, in the State of Missouri; Duval’s Bluff, in the State of Arkansas -- at which ports said towboats discharge and deliver their respective cargo of ties, and said boats and barges, owned and controlled by Ayer & Lord Tie Company, were engaged in the business aforesaid during and prior to years 1899, 1900, and 1901, and, since owned by the said defendant company, have never been engaged in any other business but as aforesaid, nor has said company, since its incorporation, been engaged in any other business than as aforesaid; that their said vessels were and are regularly licensed and enrolled by the United States under and in pursuance to the acts of Congress.

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.

It was denied that the home port of its vessels was in the port of Paducah, Kentucky, and it was averred that such vessels were enrolled in Kentucky for convenience, and that, when they were so enrolled, the general manager of its transportation department and of the steamboats of the tie company was a resident of the State of Kentucky.

It was further specifically averred that, during the year for which the State of Kentucky was seeking to assess the property in question for taxation,

all of said property was assessed [listed?] by the defendant in the State of Illinois for taxation, and has been taxed, and defendant has paid taxes under the State of Illinois, to said state and City of Chicago on all of said property, and denies the right of the State of Kentucky to subject same property to taxation.

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 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. 1068. A petition for rehearing was denied for reasons stated in an opinion. 25 Ky. 2061.

After the mandate of the Court of Appeals was filed in the circuit court, that court, upon the pleadings, and the mandate and opinion of the Court of Appeals, entered a judgment sustaining the demurrer, and, the defendant declining to plead further, the allegations of plaintiff’s statement were taken for confessed, and it was adjudged that the property therein described was liable for taxation at the values stated in the judgment, and the defendant was adjudged to pay the taxes due upon such assessable values for the years in controversy, with the statutory penalty. In compliance with the request of the defendant, the court separately stated its findings of fact and conclusions of law, which are as follows:

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, Inverness, 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.

As a matter of law, the court adjudges that the port of Paducah, Kentucky, was at the times mentioned in the statement the home port of said vessels and barges belonging to defendant and named in the statement, and that all of said vessels were liable to assessment and valuation at the times stated in the statement, in McCracken County, Kentucky, for purposes of state, county, and city taxes for the years, respectively, Russel Lord and Pavonia, 1899, 1900, and 1901; Inverness, 1901; barges, 1899, 1900, and 1901. The defendant excepts to each of the above findings of facts, and also to all of the conclusions of law.

A motion to set aside the judgment and for a new trial having been made and overruled, the cause was again appealed to the Court 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.