Nashville, C. & St. Louis Ry. Co. v. Wallace
288 U.S. 249 (1933)

Annotate this Case

U.S. Supreme Court

Nashville, C. & St. Louis Ry. Co. v. Wallace, 288 U.S. 249 (1933)

Nashville, Chattanooga & St. Louis Railway Co. v. Wallace

No. 176

Argued December 12, 1932

Decided February 6, 1933

288 U.S. 249

APPEAL FROM THE SUPREME COURT OF TENNESSEE

Syllabus

1. Whether an appeal to this Court from a judgment of a state court in a proceeding under a state "declaratory judgments" law, presents a "case or controversy" within the jurisdiction of this Court depends not upon the name or the form, but upon the nature and substance, of the proceeding and the effect of the judgment upon the rights asserted by the appellant. P. 288 U. S. 260.

2. The Tennessee Declaratory Judgments Act, as construed by the Supreme Court of the State, may be invoked only when the complainant asserts rights which are challenged by the defendant, and presents for decision an actual controversy to which he is a party, capable of final adjudication by the judgment to be rendered, and no judgment will be rendered when all the parties who will be adversely affected by it are not before the court. In a suit under the Act to secure a judicial determination that a tax levied against

Page 288 U. S. 250

the complainant, and about to be enforced by defendant state officers, was invalid under the Federal Constitution, which, in substance, differed from the ordinary injunction suit only in the absence of a prayer for an injunction and of an allegation of irreparable injury -- Held that a judgment upholding the tax and affirming dismissal of the bill on the merits was reviewable by this Court. Pp. 288 U. S. 260-264.

3. While the ordinary course of judicial procedure results in a judgment requiring an award of process or execution to carry it into effect, such relief is not an indispensable adjunct to the exercise of the judicial function. P. 288 U. S. 263.

4. The Constitution does not require that the case or controversy should be presented by traditional forms of procedure, invoking only traditional remedies; the judiciary clause defined and limited judicial power, not the particular method by which that power might be invoked. P. 288 U. S. 264.

5. When the judicial power is invoked to review judgments of state courts, the ultimate constitutional purpose is protection of rights arising under the Constitution and laws of the United States; changes by the States in the form or method by which federal rights are brought to final adjudication in their courts do not preclude review by this Court so long as the case retains the essentials of an adversary proceeding, involving a real, not a hypothetical, controversy which is finally determined by the judgment below. P. 288 U. S. 264.

6. As the prayer for relief by injunction is not a necessary prerequisite to the exercise of judicial power, allegations of threatened irreparable injury, which are material only if an injunction is asked, may likewise be dispensed with if, in other respects, the controversy is real and substantial. P. 288 U. S. 264.

7. A railroad company brings gasoline into Tennessee, stores it in its tanks, and withdraws and uses it as required as a source of motive power for moving its interstate trains in that State and in others. No ascertainable part of the gasoline when imported has a destination beyond the local storage tanks. Held:

(1) That, upon being unloaded and stored, the gasoline ceases to be a subject of interstate commerce, and loses its immunity as such from state taxation. P. 288 U. S. 265.

(2) A Tennessee "privilege tax" on the storage of gasoline within the State and its withdrawal from storage for sale or use, when applied to petitioner's gasoline, is not a tax on the use of the gasoline as an instrument of commerce, and burdens the function

Page 288 U. S. 251

of interstate commerce too indirectly and remotely to transgress constitutional limitations. P. 288 U. S. 267.

8. The power to tax property -- the sum of all the rights and powers incident to ownership -- necessarily includes the power to tax its constituent parts. As the gasoline in storage could be taxed by the State as property notwithstanding its prospective use as an instrument of interstate commerce, the State can likewise tax the successive exercise of two of the powers incident to it ownership, storage and withdrawal from storage, both completed before interstate commerce begins. P. 288 U. S. 268.

9. The constitutional power to levy taxes doe not depend upon the enjoyment by the taxpayer of any special benefit from the use of the funds raised by taxation. P. 288 U. S. 268.

10. The allegations of the bill showing a heavier state tax burden upon railroads than upon common carriers by motor bus fall short of alleging a discrimination forbidden by the commerce clause or by the Fourteenth Amendment. P. 288 U. S. 268.

Affirmed.

APPEAL from the affirmance of a decree dismissing a bill challenging a Tennessee excise tax.

Page 288 U. S. 258

MR. JUSTICE STONE delivered the opinion of the Court.

Appellant brought suit in the Chancery Court of Davidson County, Tennessee, under the Uniform Declaratory Judgments Act of that state, * c. 29, Tennessee Public Acts, 1923, to secure a judicial declaration that a state excise tax levied on the storage of gasoline, c. 5, Tennessee Public Acts, 1923, as amended by c. 67, Tennessee Public Acts, 1925, is, as applied to appellant, invalid under the commerce clause and the Fourteenth Amendment of the Federal Constitution. A decree for appellees was affirmed by the Supreme Court of the State, and the case comes here on appeal under § 237(a) of the Judicial Code.

Page 288 U. S. 259

After the jurisdictional statement required by Rule 12 was submitted, this Court, in ordering the cause set down for argument, invited the attention of counsel to the question "whether a case or controversy is presented in view of the nature of the proceedings in the state court." This preliminary question, which has been elaborately briefed and argued, must first be considered, for the judicial power with which this Court is invested by Art. 3, § 1 of the Constitution, extends by Art. 3, § 2, only to "cases" and "controversies"; if no "case" or "controversy" is presented for decision, we are without power to review the decree of the court below. Muskrat v. United States,219 U. S. 346.

In determining whether this litigation presents a case within the appellate jurisdiction of this Court, we are concerned not with form, but with substance. See Fidelity National Bank v. Swope,274 U. S. 123; compare Gasoline Products Co. v. Champlin Refining Co.,283 U. S. 494, 283 U. S. 498. Hence, we look not to the label which the legislature has attached to the procedure followed in the state courts, or to the description of the judgment which is brought here for review, in popular parlance, as "declaratory," but to the nature of the proceeding which the statute authorizes, and the effect of the judgment rendered upon the rights which the appellant asserts.

Section 1 of the Tennessee Declaratory Judgments Act confers jurisdiction on courts of record "to declare rights . . . whether or not further relief is or could be claimed," and provides that

"no action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect, and such declaration shall have the force and effect of a final judgment or decree."

By § 2, it is provided that

"any person . . . whose rights, status or other legal relations are affected by a statute . . . may have determined any question of

Page 288 U. S. 260

construction or validity arising under the . . . statute . . . and obtain a declaration of rights . . . thereunder."

Under § 6, the Court may refuse to render a declaratory judgment where, if rendered, it "would not terminate the uncertainty or controversy giving rise to the proceeding." Declaratory judgments may, in accordance with § 7, be reviewed as are other orders, judgments or decrees, and, under § 8, "further relief based on a declaratory judgment or decree may be granted whenever necessary or proper." Section 11 requires that,

"when declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceeding."

This statute has often been considered by the highest court of Tennessee, which has consistently held that its provisions may only be invoked when the complainant asserts rights which are challenged by the defendant and presents for decision an actual controversy to which he is a party, capable of final adjudication by the judgment or decree to be rendered. Miller v. Miller, 149 Tenn. 463, 261 S.W. 965; Goetz v. Smith, 152 Tenn. 451, 465, 278 S.W. 417; Hodes v. Hamblen County, 152 Tenn. 395, 277 S.W. 901; Cummins v. Shirp, 156 Tenn. 595; 3 S.W. (2d) 1062; Tennessee Eastern Electric Co. v. Hannah, 157 Tenn. 582, 587, 12 S.W.2d 372, Perry v. Elizabethton, 160 Tenn. 102, 106, 22 S.W.2d 359; Nashville Trust Co. v. Drake, 162 Tenn. 356, 359, 36 S.W.2d 905. It has also held that no judgment or decree will be rendered when all the parties who will be adversely affected by it are not before the Court. Harrell v. American Home Mortgage Co., 161 Tenn. 646, 32 S.W.2d 1023; Sadler v. Mitchell, 162 Tenn. 363, 367, 36 S.W.2d 891.

Proceeding in accordance with this statute, appellant filed its bill of complaint in the state Chancery Court,

Page 288 U. S. 261

joining as defendants the appellees, the Attorney General and the state officials charged with the duty of collecting the gasoline privilege tax imposed by the Tennessee statute. The complaint alleged that appellant is engaged in purchasing gasoline outside the state, which it stores within the state pending its use within and without the state in the conduct of appellant's business as an interstate rail carrier; that appellees assert that the statute taxes the privilege of storing gasoline within the state and is applicable to appellant; that they have demanded payment of the tax in a specified amount and have determined to enforce their demand and that, under the circumstances alleged, the statute, as applied to appellant, is invalid under the commerce clause and the Fourteenth Amendment. The relief prayed was that the taxing act be declared unconstitutional as applied to appellant. The Chancery Court sustained the appellees' demurrer to the sufficiency in law of the allegations relied on to establish the unconstitutionality of the tax. Its final decree dismissing the bill on the merits has been affirmed by the highest court of the state.

That the issues thus raised and judicially determined would constitute a case or controversy if raised and decided in a suit brought by the taxpayer to enjoin collection of the tax cannot be questioned. See Risty v. Chicago, R.I. & P. Ry. Co.,270 U. S. 378; compare Terrace v. Thompson,263 U. S. 197; Pierce v. Society of Sisters,268 U. S. 510; Euclid v. Ambler Realty Co.,272 U. S. 365. The proceeding terminating in the decree below, unlike that in South Spring Hill Gold Mining Co. v. Amador Medean Gold Mining Co.,145 U. S. 300; Muskrat v. United States,219 U. S. 346, was between adverse parties seeking a determination of their legal rights upon the facts alleged in the bill and admitted by the demurrer. Unlike Fairchild v. Hughes,258 U. S. 126; Texas v. Interstate Commerce Commission,258 U. S. 158; Massachusetts v.

Page 288 U. S. 262

Mellon,262 U. S. 447; New Jersey v. Sargent,269 U. S. 328, valuable legal rights asserted by the complainant and threatened with imminent invasion by appellees, will be directly affected to a specific and substantial degree by the decision of the question of law, and unlike Luther v. Borden, 7 How. l; Field v. Clark,143 U. S. 649; Pacific States Telephone & Telegraph Co. v. Oregon,223 U. S. 118; Keller v. Potomac Electric Power Co.,261 U. S. 428; Federal Radio Commission v. General Electric Co.,281 U. S. 464, the question lends itself to judicial determination, and is of the kind which this Court traditionally decides. The relief sought is a definitive adjudication of the disputed constitutional right of the appellant, in the circumstances alleged, to be free from the tax, see Old Colony Trust Co. v. Commissioner,279 U. S. 716, 279 U. S. 724, and that adjudication is not, as in Gordon v. United States, 2 Wall. 561, and Postum Cereal Co. v. California Fig Nut Co.,272 U. S. 693, subject to revision by some other and more authoritative agency. Obviously the appellant, whose duty to pay the tax will be determined by the decision of this case, is not attempting to secure an abstract determination by the Court of the validity of a statute, compare Muskrat v. United States, supra,219 U. S. 361; Texas v. Interstate Commerce Commission, supra,258 U. S. 162; or a decision advising what the law would be on an uncertain or hypothetical state of facts, as was thought to be the case in Liberty Warehouse Co. v. Grannis,273 U. S. 70, and Willing v. Chicago Auditorium Assn.,277 U. S. 274; see also Warehouse Co. v. Tobacco Growers Assn.,276 U. S. 71, 276 U. S. 88; compare Arizona v. California,283 U. S. 423, 283 U. S. 463. Thus, the narrow question presented for determination is whether the controversy before us, which would be justiciable in this Court if presented in a suit for injunction, is any the less so because, through a modified procedure, appellant has been permitted to present it in the state courts without praying for an injunction

Page 288 U. S. 263

or alleging that irreparable injury will result from the collection of the tax.

While the ordinary course of judicial procedure results in a judgment requiring an award of process or execution to carry it into effect, such relief is not an indispensable adjunct to the exercise of the judicial function. Fidelity National Bank v. Swope, supra,274 U. S. 132. This Court has often exerted its judicial power to adjudicate boundaries between states, although it gave no injunction or other relief beyond the determination of the legal rights which were the subject of controversy between the parties, Louisiana v. Mississippi,202 U. S. 1; Arkansas v. Tennessee,246 U. S. 158; Georgia v. South Carolina,257 U. S. 516; Oklahoma v. Texas,272 U. S. 21; Michigan v. Wisconsin,272 U. S. 398, and to review judgments of the Court of Claims, although no process issues against the Government. United States v. Jones,119 U. S. 477; compare District of Columbia v. Eslin,183 U. S. 62; Ex parte Pocono Pines Hotels Co., 285 U.S. 526, reported below in 73 Ct.Cls. 447. As we said in Fidelity National Bank v. Swope, supra,274 U. S. 132,

"Naturalization proceedings, Tutun v. United States,270 U. S. 568; suits to determine a matrimonial or other status; suits for instructions to a trustee or for the construction of a will; Traphagen v. Levy, 45 N.J.Eq. 448, 18 Atl. 222; bills of interpleader so far as the stakeholder is concerned, Wakeman v. Kingsland, 46 N.J.Eq. 113, 18 Atl. 680; bills to quiet title where the plaintiff rests his claim on adverse possession, Sharon v. Tucker,144 U. S. 533, are familiar examples of judicial proceedings which result in an adjudication of the rights of litigants, although execution is not necessary to carry the judgment into effect, in the sense that damages are required to be paid or acts to be performed by the parties."

See also Old Colony Trust Co. v. Commissioner, supra,279 U. S. 725; La Abra Silver Mining Co. v. United States,175 U. S. 423.

Page 288 U. S. 264

The issues raised here are the same as those which, under old forms of procedure, could be raised only in a suit for an injunction or one to recover the tax after its payment. But the Constitution does not require that the case or controversy should be presented by traditional forms of procedure, invoking only traditional remedies. The judiciary clause of the Constitution defined and limited judicial power, not the particular method by which that power might be invoked. It did not crystallize into changeless form the procedure of 1789 as the only possible means for presenting a case or controversy otherwise cognizable by the federal courts. Whenever the judicial power is invoked to review.a judgment of a state court, the ultimate constitutional purpose is the protection, by the exercise of the judicial function, of rights arising under the Constitution and laws of the United States. The states are left free to regulate their own judicial procedure. Hence, changes merely in the form or method of procedure by which federal rights are brought to final adjudication in the state courts are not enough to preclude review of the adjudication by this Court, so long as the case retains the essentials of an adversary proceeding, involving a real, not a hypothetical, controversy, which is finally determined by the judgment below. See Old Colony Trust Co. v. Commissioner, supra,279 U. S. 724. As the prayer for relief by injunction is not a necessary prerequisite to the exercise of judicial power, allegations of threatened irreparable injury which are material only if an injunction is asked may likewise be dispensed with if, in other respects, the controversy presented is, as in this case, real and substantial. Such was the purport and effect of our decision in Fidelity National Bank v. Swope, supra, where it was held that a final judgment rendered by a state court in an adversary proceeding brought under a state statute to determine the validity of liens about to be imposed for benefits assessed under a city improvement ordinance presented a case

Page 288 U. S. 265

within the appellate jurisdiction of this Court. Accordingly, we must consider the constitutional questions raised by the appeal.

Chapter 58, Tennessee Public Acts, 1923, as amended by Chapter 67, Tennessee Public Acts, 1925, is said, by its caption, to impose a privilege tax " on persons . . . and corporations engaged in or carrying on the business . . . of selling or storing or distributing gasoline . . ." within the state at the rate of 2

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