1. A state cannot tax personal property which is in actual
transit in interstate commerce. P.
272 U. S.
471.
Page 272 U. S. 470
2. Pursuant to a contract of sale, logs cut in Minnesota by the
vendors were floated by river to Lake Superior, there loaded on the
vendee's vessels and transported to their destination in Michigan.
Part of the price was paid when provisional inspection and
estimates of quantity, etc., were made by the vendee at river
landings, another part when the logs reached booms at or near the
place of their transference to the vessels, and the remainder at
destination. The wood was scaled by representatives of both parties
when stowed in the vessels and at destination. Liability insurance
was carried by the vendor, and cargo insurance by the vendee. The
vendor warranted title.
Held, that the logs had begun their continuous
interstate journey with the beginning of their drive down the
river, not with their subsequent transfer to the vessels. Pp.
272 U. S. 473,
272 U. S.
475.
3. The contract and the method of complying with it were
circumstances throwing light on the question whether the interstate
transportation began at the beginning of the drive, when the ice
broke up, or at the point of loading in the lake. P.
272 U. S.
473.
4. The change in the method of transportation from floating to
carriage on a vessel did not affect the continuity of the
interstate passage. P.
272 U. S.
474.
5. The interstate character of the movement of goods actually on
their way from one state to another is not destroyed by the fact
that the transportation is not by carrier, but under control of the
owner, who may divert them to another destination. P.
272 U. S.
475.
163 Minn. 4 reversed
Certiorari (269 U.S. 542) to a judgment of the Supreme Court of
Minnesota which affirmed, with a modification, a judgment for taxes
on personal property recovered by the State of Minnesota in a
special proceeding against the Hughes Bros. Timber Company. The tax
in question was assessed on some pulpwood which the company alleged
was at the time in actual transit from Minnesota to Michigan, and
therefore was not subject to taxation by Minnesota.
Page 272 U. S. 471
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
This was a special proceeding in the District Court of Cook
County, Minnesota, by the state, through the county treasurer, to
collect taxes on personal property owned by the Hughes Bros. Timber
Company. With the penalty and fees and costs, the amount sued for
was $2,919.50. The amount claimed by items appeared in a delinquent
list furnished by the treasurer to the sheriff of the county for
collection for the year 1922. It included a tax upon 10,000 cords
of pulp wood of the assessed value of $21,233. In its answer as
amended, the timber company pleaded that the pulpwood was not
subject to taxation in the State of Minnesota at the time it was
assessed, May 1, 1922, but was at that time in actual transit in
interstate commerce by continuous route from the State of Minnesota
to the State of Michigan. This presents the only question in the
case.
The issue was submitted, without a jury, to the district court,
which found that the wood was not being carried in interstate
commerce. The result was a judgment against the timber company for
$2,456.78, including a penalty. The case was appealed to the
supreme court, which held that the judgment of the district court
was wrong in the penalty imposed, because the defendants had not
been given opportunity to pay the correct amount of the taxes, but,
with this modification, affirmed the judgment of the district
court. 163 Minn. 4. The case is here by certiorari granted October
12, 1925. 269 U.S. 542.
Page 272 U. S. 472
The Timber Company was a partnership, having its office
headquarters at Hovland, Cook County, Minnesota. The Swamp River
flows through the county, and empties into the Pigeon River. The
latter forms the boundary between Cook County, Minnesota, and the
Province of Ontario, Canada, and empties into Lake Superior. The
timber company's pulpwood was cut and gathered at various places in
the county, but was hauled to the Swamp River and piled up on the
ice and on its banks at a point about two miles and a half above
its discharge into the Pigeon River. In October, 1921, the timber
company had made a contract with the Central Paper Company, of
Muskegon, Michigan. By that contract, the timber company agreed to
deliver to the paper company, over the rail of the paper company's
vessels at the mouth of the Pigeon River, approximately 10,000
cords of spruce pulpwood. The timber company agreed to load the
wood into them as promptly as possible after its arrival. The paper
company was to give to the timber company three days' notice of the
arrival of its vessels at the booms where the logs were held. The
wood was to be scaled and measured by a representative of both
parties when the first cargo was loaded, and also on arrival at
Muskegon, Michigan, the measurement at Muskegon to be the basis for
final settlement. The price per cord was to be $12. The paper
company agreed to make progress estimates or provisional
measurements during the months of January, February, and March at
river landings, and an advance of $3 per cord for all wood
inspected and measured, its inspector to be properly assisted by
the timber company. The title to the wood on which advances were
made was to be in the name of the paper company, and to be branded
at the time of provisional inspection and measurement. The paper
company agreed to advance the second 25 percent, or $3 per cord,
when the wood was delivered in the Pigeon River booms, and the
balance, or $6 a cord, within five days after its delivery at
Muskegon.
Page 272 U. S. 473
Liability insurance was to be carried and paid by the timber
company, and cargo insurance was to be carried and paid for by the
paper company. There was a warranty of title and freedom from all
incumbrances by the timber company.
The hauling and placing of the logs on the ice and on the banks
of the Swamp River were completed the latter part of March. When
the ice broke, April 29, 1922, the drive of the logs began; those
on the ice moved of themselves, and those on the banks were pushed
in. The drive was conducted by the timber company's men. It had
lasted 18 days when the logs reached the Pigeon River booms. By the
latter part of July, all the logs had been shipped by vessels of
the paper company on the lake to Muskegon.
We do not think it important, for purposes of this case, to
decide where the title to the timber was at the time the drive
began. The paper company had an interest in the timber, and so had
the timber company. Although the point was at first made by the
timber company that the logs were not taxable in the name of the
timber company May 1, 1922, the day fixed as the tax day, that
point is not pressed. The contract and the method of complying with
it are all circumstances, however, throwing light on the question
whether the transportation in interstate commerce began at the
beginning of the drive when the ice broke up, or at the point of
loading on the lake.
The timber company was under contract to float the timber down
from the place of piling on the Swamp River and deliver it as
promptly as possible. The paper company, by payment of $3 a ton,
had acquired a qualified ownership in the timber even before it was
segregated and put to float. Had the timber company or someone
claiming under it attempted to stop the drive after it had begun,
and interfered with the passage of the timber
Page 272 U. S. 474
down the Swamp or Pigeon River, it would have been a breach of
the contract of sale. All this characterizes what was being done in
the drive between the Swamp River entrepot and the mouth of the
Pigeon River. That was the beginning, or first leg, of the
interstate journey. The obligations of both parties accorded with
that view. The change in the method of transportation by floating
to carriage on a vessel did not affect the continuity of the
interstate passage, if such a passage was intended by the parties
and had begun, any more than did shipment by local railroad bills
of lading from a point in a state to a port of the same state, for
shipment by vessel to a foreign port, prevent its being interstate
or foreign commerce.
Southern Pacific Terminal Co. v.
Interstate Commerce Commission, 219 U.
S. 498;
Ohio Railroad Commission v.
Worthington, 225 U. S. 101;
Texas, etc., R. Co. v. Sabine Tram Co., 227 U.
S. 111;
R. Co. Commission v. Texas & Pacific Ry.
Co., 229 U. S. 336;
Philadelphia & Reading Ry. Co. v. Hancock,
253 U. S. 284,
253 U. S. 286;
B. & O. S.W. R. Co. v. Settle, 260 U.
S. 166,
260 U. S. 170;
Spalding & Bros. v. Edwards, 262 U. S.
66,
262 U. S. 70.
The case seems to us to come within the ruling of this Court in
the case of
Champlain Co. v. Town of Brattleboro,
260 U. S. 366.
That was a tax case like this. There, the owner had cut pulpwood in
several towns in Vermont. The wood was placed upon the banks of the
West River and its tributaries, to be floated down into the
Connecticut River and thence to its destination at the mill of the
owner in Hinsdale, on the New Hampshire side of the river. Four
thousand of the cords had been floated down the West River on the
high water, and reached a boom at the mouth of the West River, but
it was thought not safe, in view of the high water, then to let the
wood into the State of Connecticut. It was contended that the logs
which were held in the boom at the mouth of the West River were
taxable there. We held otherwise, that the interstate journey of
the logs had already begun when
Page 272 U. S. 475
the boom was reached, that the boom was not a depot for the
gathering of logs preparatory for the final journey, that it was a
safety appliance in the course of the final journey, a harbor of
refuge from danger to a shipment on its way, that it was not used
by the owner for any beneficial purpose of his own except to
facilitate the safe delivery of the wood in New Hampshire on the
other side of the Connecticut River.
This Court distinguished the facts in that case from the facts
in the main case discussed in
Coe v. Errol, 116 U.
S. 517, as they can be distinguished here. It is clear
that the entrepot or depot for the interstate shipment of logs was
in the Swamp River. The drive in the two rivers, though under the
direction of the timber company, was not gathering the logs for
subsequent interstate shipment; it was the interstate movement
itself. Both parties intended interstate shipment, they had bound
themselves to it, the logs were segregated and were moving in the
contemplated journey which neither could prevent if they carried
out their agreement. The delays in the continuity of movement were
only incidental to the journey and the necessary change in the mode
of transportation by which the logs were carried from a place in
one state to a place agreed upon in another.
The conclusion in cases like this must be determined from the
various circumstances. Mere intention by the owner ultimately to
send the logs out of the state does not put them in interstate
commerce, nor does preparatory gathering for that purpose at a
depot. It must appear that the movement for another state has
actually begun and is going on. Solution is easy when the shipment
has been delivered to a carrier for a destination in another state.
It is much more difficult when the owner retains complete control
of the transportation, and can change his mind and divert the
delivery from the intended interstate destination, as in the
Champlain Company case. The character of the shipment in
such a case depends
Page 272 U. S. 476
upon all the evidential circumstances looking to what the owner
has done in the preparation for the journey and in carrying it out.
The mere power of the owner to divert the shipment, already stated,
does not take it out of interstate commerce if the other facts show
that the journey has already begun in good faith and temporary
interruption of the passage is reasonable and in furtherance of the
intended transportation, as in the
Champlain case. Here,
the case is even stronger in that the owner and initiator of the
journey could not, by his contract, divert the logs after they had
started from Swamp River without a breach of contract made by him
with his vendee who, by the agreement of sale, divided with him the
responsibility for the continuous interstate transportation.
The judgment of the Supreme Court of Minnesota is reversed and
remanded for further proceedings not inconsistent with this
opinion.