I. M. Darnell & Son Co. v. City of Memphis

delivered the opinion of the. court;

Article 2 of the Tennessee constitution of 1870 provides":

“Sec. 28. All property, real, personal or mixed, shall be taxed, but the legislature may except such as may be held by the State, by counties, cities or towns, and used exclusively for public or corporation purposes, and such as m'ay be held or used for purposes purely religious, charitable, scientific, literary or educational, and shall except one thousand dollars’ worth of personal property in the hands of each taxpayer, and the direct product of the soil in the hands of the producer and his immediate vendee.

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“Sec. 30. No article manufactured of the produce of this State shall be taxed otherwise than to pay inspection fees.”By chapter 258, p. 632, of the acts of Tennessee for 1903 it was, among other things, provided:

“Sec. 1. That all-property, real, personal and mixed, shall be assessed for taxation for State, county and municipal purposes, except such as is declared exempt in the next section.

“Sec. 2. That the property herein>enumerated, and none other, shall be exempt from taxation. . . . Sub-sec. 5. All

growing crops of whatever nature and kind, the direct product of the soil of this State in the hands of the producer and his immediate vendee, and manufactured articles from the produce of the State in the hands of the manufacturer.”

In the recent case of Benedict v. Davidson County, 110 Tennessee, 183, 191, the Supreme Court of Tennessee-held as follows:

“We are of opinion that, under the facts in this record, the' logs upon the yard, .in the hands of the mill-operating manufacturer and his property, and lumber, rough and smooth, cut by him from such logs grown on Tennessee soil, are articles manufactured from the produce of the State, and exempt under the provisions'of section 30, article 2, of the constitution; and the demurrer was therefore properly overruled, and complainants, under the allegations of their bill, are entitled

For more than three years prior to January 30, 1905, the I..M. Darnell & 'Son Company, a corporation of Tennessee, was domiciled- in Memphis, in that State, and there owned and operated a lumber mill. Shortly prior to the date just named, pursuant to chapter 366 of' the acts- of Tennessee for 1903 (Acts Term., 1903, pp. 1097-1101), the value of'the personalty of the Darnell Company was assessed for taxation by the city of Memphis at $44,000. Of- this amount $19,325 was the value of logs cut from the soil of States other than Tennessee, which the company-had brought into Tennessee from other States and were, held by the company as the immediate purchaser or vendee awaiting manufacture into lumber, or consisted of lümber already manufactured by the company from logs which had been acquired and brought into. the State from other States, as above-mentioned, and all of which lumber was lying in the mill yard of the company awaiting sale. The Darnell Company protested against this "assessment, asserting that it was not liable to be taxed on said sum of $19,325, the value of the property owned by it as the immediate purchaser of logs, brought from other States, or lumber, the product thereof. The ground of the protest was that the property represented by the valuation in question could not be taxed without discriminating against it, as like property, the product of the soil of Tennessee, was exempt from taxation under the constitution and laws of that- State, and therefore to tax its said property would violate the commerce clause, section 8, Article I) of the Constitution and the equal protection clause of the Fourteenth Amendment.

The protest was overruled. Thereupon threat of distress and sale was made by the collecting officer, unless the taxes on all the property were'paid. On January 30, 1905, the Darnell Company filed in the Chancery Court of Shelby County its bill against the city of Memphis-and -the collecting officer to enjoin the enforcement of the tax' as to the logs brought in from other

On appeal the Supreme Court of Tennessee, in considering the demurrer, held the disputed tax not to be repugnant to. the Constitution of the United States, arid reversed the decree of the Chancery Court. 116 Tennessee, 424. The court eritered a decree against the Darnell Company and H. D. Mirior, the surety on the appeal bond, for the amount of the disputed tax, penalty and interest. The company and Minor.prosecute this writ of error.

The court in its opinion conceded that the property embraced in the assessment complained of was purchased by the complainant in and brought from other States, or consisted of lumber produced from logs so brought into Tennessee, and that property of like character would not be subject to taxation under the state law if it had been produced from the soil of Tennessee. -But the levy of the tax was held not to be a direct burden upon interstate commerce, and hence, not repugnant to. the commerce clause • of the Constitution of the United States, as a result of the interpretation which the court affixed to previous decisions of this court concerning the operation of the commerce clause of the Constitution and the right of a State to impose a tax, even if discriminatory in character, upon property coming from other States, after such property had come at rest within a State and been commingled with the mass- of property therein. The court, after stating that the provision of the state constitution which authorized the exemption of -property produced from the soil’ of Tennessee had its inception in the “first constitution of this State, adopted on February 6, 1796, and hence formed a part of the fundamental • law of the State, when it was admitted by the act of Congress, approved June 1, 1796, ch. 67, 1 Stat. 491 ,” proceeded to state its reasons for holding that the discriminatory tax was not repugnant to the commerce clause, as follows (p. 429):

“1. Upon the, averments of the bill it is manifest that, although the property sought, to be taxed was purchased by

“Although the origin of property-may be in another State, nevertheless, when it is brought into this State and here merged into- the mass of general property, it at once becomes subject to the tax laws of this State. American Steel & Wire Co. v. Speed, 110 Tennessee, 524-546, 75 S. W. Rep. 1037 , 100 Am. St. Rep. 814 .

“This principle was recognized and the holding of this court affirmed by the Supreme Court of the United States (American Steel & Wire Co. v. Speed, 192 U. S. 500 ), and in harmony with other adjudications of that court. Woodruff v. Parham, 8 Wall. 123 ; Brown v. Houston, 114 U. S. 622 ; May v. New Orleans, 178 U. S. 496 ; Emert v. Missouri, 156 U. S. 296 .

“In Kehrer v. Stewart, 197 U. S. 60 , 65, the Supreme Court of the' United States, in substa ce, declared that it can make no difference whence the property came or to whom it should be ultimately sold, because upon its arrival in the State where it is offered for sale and intermingled with the general property of the State, it becomes and is a part of the taxable property of the State.”

As we are of opinion that the question for decision is clearly foreclosed by prior decisions of this court, which demonstrate that the court below misconceived the rulings of this court upon which it relied, we do not stop to analyze the reasoning of the court considered as an original proposition, but come at once to test its correctness by making a brief review of the decided cases relied upon by the court below and others not referred to which relate to the subjéct, and which are controlling.

As a prelude to a review of the cases referred to, we observe that while it is undoubted that it has -been settled'that where property which has moved in the channels of interstate com

The leading cases announcing the doctrine‘that ..a State may tax property which had moved in the channels of interstate commerce, when such property had become at rest therein, even before sale in the original package, are Woodruff v. Parham, 8 Wall. 123 , and Brown v. Houston, 114 U. S. 622 . But in both those cases it was sedulously pointed out that the power which was thus recognized" did not, and could not, include the authority to burden the property brought from another State with a discriminating tax. In American Steel Wire Co. v. Speed, 192 U. S. 500 , 519, where the doctrine of Woodruff v. Parham and Brown v. Houston was reviewed and restated, it was pointed out that to prevent the levy of a tax upon property brought from g-nother State, even after it had come at rest within a State, from being-a direct burden upon interstate commerce, property so situated must be taxed “without discrimination, like other property situated within the State.”

The statements just made adéquately point out the misconception as to the rulings.of this court upon which the court below placed its conclusion, since the court took no .heed of the express declaration concerning the nullity of any discriminating tax made.in the cases which the court relied on. The importance of the subject, however, and the statement' made by the court below as to the. long existence in Tennessee of the tax exemption in favor of the products of.the soil of Tennessee, leads us to a brief review of other decided cases in this court which have long since clearly established the want

In Guy v. Baltimore, 100 U. S. 434 , the invalidity was adjudged of a municipal ordinance of the city of Baltimore which established rates of wharfage to be charged on vessels resorting to or lying at, “landing, depositing or transporting goods' or articles other than the productions of this State, on any wharf or wharves belonging to said mayor and city council, or any public wharf in the said city, other than the wharves belonging to or rented by the State.” The principle, settled by earlier decisions, which were referred to (Woodruff v. Parham, 8 Wall. 123 ; Hinson v. Lott, 8 Wall. 148 , and Ward v. Maryland, 12 Wall. 418 ), was reaffirmed, the court saying (pp. 439, 442):

“In view of these and other decisions of this court, it must be regarded as settled that no State can, consistently with the Federal Constitution, impose -upon the products of other States, brought therein for sale or use, or upon citizens because engaged in the sale therein, or the transportation thereto', of the products of other States, more onerous public burdens or taxes than it imposes upon the like products of its own territory. If this' were hot so, it is easy to perceive how the power of Congress to regulate commerce with foreign nations and among, the several States could be practically annulled, and the equality of commercial-privileges'secured by the Federal Constitution to citizens of the séveral States be materially abridged and impaired

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“ The State, it will be admitted, could not lawfully impose upon such cargo any direct public burden or tax because it may consist, in whole or in part, of the products of other States. The concession of such a power to the States would render wholly nugatory all National control of commerce among the Staltes, and place the trade and business of the country at the mercy of local regulations, having for their object to secure exclusive benefits to the citizens and products

In Webber v. Virginia, 103 U. S. 344 , a license statute of the State of Virginia was held to be a regulation of commerce and invalid because the tax was made to depend upon the foreign character of the articles dealt in; that is, upon their having been manufactured without the State. The court said (p. 350):

“If by reason of their foreign character the State can impose a tax upon them or. upon the person through whom the sales are effected, the amount of the tax will be a matter resting in her discretion. She may place the tax at so high a figure as to exclude the introduction of the foreign article and prevent competition with the home product. It was against legislation of this discriminating kind that the framers of the Constitution intended to guard when they vested in Congress the power to regulate commerce among the several States.”

In Walling v. Michigan, 116 U. S. 446 , an act of the State of Michigan, which imposed a tax or duty on persons who, not having their principal place of business within the State, engaged in the business of selling, or of soliciting the sale of certain described liquors, to be shipped into the State, was held to be repugnant to the commerce clause, as being “a discriminating tax levied against persons for selling goods brought into the State from other States or countries.” The court said (p. 455):

“A discriminating tax imposed by a State operating to the

And-in -the course of the opinion, referring to state decisions announcing a want of authority in the several States to prescribe different regulations in relation to the commerce in certain articles,, dependent upon the State from which they were brought, the court thus referred to a decision of the Supreme Court of Missouri (p. 457):

“In State v. North, 27 Missouri, 464, where an act of Missouri imposed a tax upon merchants for all goods purchased by them, except such as might be the growth, produce, or manufacture of that State, and manufactured articles, the growth or produce of other States, it was held by the Supreme Court of that State that the-law was unconstitutional and void. The court says: ‘From the foregoing .statement of the law and facts of this case it will be seen that it presents the question of the power of the States, in the exercise of the right of taxation, to discriminate between products of this State and those manufactured in our sister States.’ And after an. examination of the causes which led to the adoption of the Federal Constitution, one of the. principal of which was the necessity for the regulation of- commerce and the laying of imposts and duties by a single government, the court says: 'But, whatever may be the motive for the tax, whether revenue, restriction, retaliation or protection of domestic manufactures, it is equally a regulation of commerce, and in effect, an exercise of the power of laying duties on imposts, and its exercise by the States is entirely at war with the spirit of the Constitution, and would render vain and nugatory the power granted to Congress in relation to these subjects. Can any power more destructive to the union and harmony of the States be exercised than that of imposing discriminating taxes or duties on imports from other States? Whatever may be the motive for such

The principle applied in the foregoing cases was also given effect in Minnesota v. Barber, 136 U. S. 313 ; Brimmer v. Rebman, 138 U. S. 78 , and Voight v. Wright, 141 U. S. 62 , and so-called inspection laws of various States were held to be repugnant to the commerce clause of the Constitution because of their discriminating character. In New York v. Roberts, 171 U. S. 658 , while the tax there considered, imposed by New York upon a corporation of another State, was sustained as a valid tax upon the franchise of doing business as a corporation in .New York, the court reaffirmed the authority of its former decisions declaring the invalidity of all taxes of a discriminating character levied by a State upon the products of other States.

In this connection we excerpt from the opinion in Philadelphia Steamship Co. v. Pennsylvania, 122 U. S. 326 , statements which directly relate to the subject in hand and which conclusively demonstrate the unsoundness of the proposition which the court below upheld, that is, that the commerce clause of the Constitution does not protect property brought from another State from -being discriminated against after it has arrived and been commingled with the mass of property within the State of its destination. Commenting upon the reasoning of the opinion in State Tax on Railway Gross Receipts, 15 Wall. 284 , the court said ( 122 U. S. 341 ):

“When the latter (imported goods) become mingled with the general mass of property in the State, they are no’t followed and singled out for- taxation as imported goods, and by reason of their being imported. If they were, the tax would be as unconstitutional- as if imposed upon .them whilst in the original packages. When mingled with the general 'mass of property in the State they.are taxed in the same manner as other prop

As there can be no- doubt within the principles so clearly settled by the decided cases, to which we have referred, that, the disputed tax, which.the court below sustained-, was a direct burden upon interstate commerce since the law of Tennessee in' terms discriminated against property the product of the soil of other States brought into the State óf Tennessee by exempting like property when produced'from the soil of Tennessee, it follows that the court below erred in deciding the tax to be valid, without reference to the reasoning indulged in by it concerning the application of the equal protection clause of the

Reversed, and remanded.