Petition — Matsushita Electric Corp. of America v. City of Farmers Branch

In the

Supreme Court of the

Gited States

OctToBER TERM, 1976

MaTsusHITA ELECTRIC CORPORATION OF AMERICA,

Petitioner,

v.

City oF FARMERS BRANCH, TEXAS AND T. E. WALpDRIP,

Respondents.

Petition for a Writ of Certiorari to the

Supreme Court of Texas

Jerry L. Buchmeyer

2300 Republic Bank Building

Dallas, Texas 75201

Attorney for Petitioner

Of Counsel:

Timothy R. McCormick

Thompson, Knight, Simmons & Bullion

Dallas, Texas

Seth Waller

Secaucus, New Jersey

Page

RR SII OE NEN TD Sapeaaioaiad 1

ES ee Re TNE ts REE oe 2

SSIES TT LE EIR TRA 2

Constitutional Provision Involved .................. core 3

Statement 3

Reasons for Granting the Writ

1.

In matters of federal law, state courts must adliere

to federal standards in determining whether a con-

stitutiona! decision should be applied prospectively. 5

2. The decision of the Supreme Court of Texas is in

direct conflict with Chevron Oil Co. v. Huson. 8

3. The questions presented are substantial = --------—s«d20

co iI eal ia cage eel eiataahcas . 11

Appendix

1. Opinion of the Supreme Court of Texas. -——...... A-1

2. Judgment of the Supreme Court of Texas... ... A-7

3. Opinion of the Texas Court of Civil Appeals for the

Twelfth Supreme Judicial District —........__. ak oP A-9

Judgment of the Texas Court of Civil Appeals for

the Twelfth Supreme Judicial District... EOE A-23

Opinion of the Supreme Court of Texas in a related

case, City of Farmers Branch, et al v. American

Honda Motor Company, Ine. ......-...-.-- eee. A-25

ii

TABLE OF AUTHORITIES

CASES

Page

Bergstrom v. Kissinger, 387 F. Supp. 794 (D.D.C. 1974).. 6

Bourns, Inc. v. Allen-Bradley Co., 480 F.2d 123

(7th Cir.), cert. denied, 414 U.S. 1094 (1973) ............ 10

Brown v. State of Maryland, 25 U.S.

I WO oa nosnnscecavescecscrisvsstusesessncssdnnens 3,4

Bush v. Wood Brothers Transfer, Inc.,

398 F. Supp. 1030 (S.D. Tex. 1975) ...000 6

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) _ .. throughout

Gosa v. Mayden, 413 U.S. 665 (1973) 0 sD

Japan Food Corporation v. County of Sacramento,

Cal. App. 3d , 130 Cal. Rptr. 392 (1976). 7

Johnson v. New Jersey, 384 U.S. 719 (1966) 0... 6

Lemon v. Kurtzman, 411 U.S. 192 (1973) . 0... 5, 9, 10

Lemon v. Kurtzman, 403 U.S. 602 (1971) 0 10

Linkletter v. Walker, 381 U.S. 618 (1965) 0000. SS

Low v. Austin, 80 U.S. (13 Wall.) 29 (1872)... 2,3,4,7,8

Michelin Tire Corp. v. Wages,

423 U.S. 276 (1976) .. throughout

Michelin Tire Corp. v. County of San Mateo,

57 Cal. App. 3d 332, 127 Cal. Rptr. 791 (1976)... 7

People v. Livingston, 64 Mich. App. 247,

Be I ID nia cis ncn c ses coves ccsancecnsedacieenete 6

Ralston Purina Co. v. County of Los Angeles,

56 Cal. App. 3d 547, 128 Cal. Rptr. 556 (1976)... 7, 9,10

Relford v. Commandant, 401 U.S. 355 (1970) 200... Il

iii

Relford v. Commandant, 397 U.S. 534 (1970)

Rodrigue v. Aetna Casualty & Surety Co..

395 U.S. 352 (1969) eed

Sears, Roebuck & Co. v. County of Kings.

Cal. App. 3d , 130 Cal. Rptr. 694 (1976)

Southern Pacific Co. v. Cochise County,

92 Ariz. 395, 377 P.2d 770, 778 (1963).

Stovall v. Denno, 388 U.S. 293 (1967).

United States v. Carver, 260 U.S. 482 (1923)

United States v. Peltier, 422 U.S. 531 (1975)...

Wiggins v. State, 275 Md. 689, 344 A.2d 80 (1975)

Williams v. Estelle, 500 F.2d 206 (Sth Cir. 1974)

CONSTITUTIONAL PROVISIONS

U.S. Const. art 1, § 10

STATUTES

28 U.S.C. § 1257(3). .

Ga. Cope Ann. § 92-7701 (1974) |

Tex. Rev. Civ. Stat. ANN. art. 7298 (1960).

SECONDARY AUTHORITIES

Beytagh, Ten Years of Non-Retroactivity: A Critique

and a Proposal, 61 Va. L. Rev. 1557 (1975).

. 2,3

37 CCH State Tax Review No. 11 (Mar. 16, 1976)

10

In the

Supreme Court of the

United States

OcToBEerR TERM, 1976

MatsusuiTa ELectric CORPORATION OF AMERICA,

Petitioner,

v.

City or FARMERS BrANcu, Texas AND T. E. WALDRIP,

Respondents.

Petition for a Writ of Certiorari to the

Supreme Court of Texas

Matsushita Electric Corporation of America petitions for a

Writ of Certiorari to review a judgment of the Supreme Court

of Texas entered on May 5, 1976.

OPINIONS BELOW

The opinion of the Supreme Court of Texas (Appendix, infra,

A1-6) is not yet officially reported.’ The opinion of the Texas

Court of Civil Appeals (Appendix, infra, A9-22), is reported

in 527 S.W.2d 768 (Tex. Civ. App. — Tyler 1976).

' An unofficial opinion has been published in 19 Tex. Sup. Cr. J. 303

(May 5, 1976).

2

JURISDICTION

The judgment of the Supreme Court of Texas was entered on

May 5, 1976 (App. A-7). The jurisdiction of this Court is

invoked under 28 U.S.C. § 1257(3).

QUESTIONS PRESENTED

On January 14, 1976, this Court announced its decision in

Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976). Michelin

overruled Low v. Austin, 80 U.S. (13 Wall.) 29 (1871) and

held that states are not prohibited by Article I, Section 10,

Clause 2 of the United States Constitution (the “Import-Export

Clause”) from imposing a nondiscriminatory ad valorem prop-

erty tax on imported goods no longer in import transit. Relying

upon Michelin, the Texas Supreme Court held in Matsushita

Electric Corporation v. City of Farmers Branch, Texas and T. E.

RW aldrip that the City of Farmers Branch, Texas could assess a

nondiscriminatory ad valorem tax on imported goods in Matsu-

shita’s warehouse for the year 1972, four years prior to

Michelin.

The questions presented are:

(1) Whether a state court is required to apply the test arti-

culated by this Court in Chevron Oil Co. v. Huson, 404 U.S. 97

(1971) to determine whether a decision of this Court should

have prospective effect only;

(2) Whether Chevron requires that the decision in Michelin

Tire Corp. v. Wages, 423 U.S. 276 (1976), be accorded pros-

pective effect only.

3

CONSTITUTIONAL PROVISION INVOLVED

".S. Const. art. I, section 10 provides:

“No State shall, without the Consent of Congress, lay

any Imposts or Duties on Imports or Exports, except what

may be absolutely necessary for executing its Inspection

Laws; * * *.”

STATEMENT

This controversy involves the liability of importers for non-

discriminatory ad valorem property taxes assessed on imported

goods — which remained in the original, unbroken packages in

which they were shipped — for the period prior to this Court’s

decision in Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976).

a.

In 1972, the City of Farmers Branch and its Tax Assessor-

Collector, T. E. Waldrip, imposed ad valorem taxes on certain

personal property held by Matsushita Electric Corporation of

America on January 1, 1972 within the city of Farmers Branch,

Texas. Relying upon this Court’s decisions in Low v. Austin, 80

U.S. (13 Wall.) 29 (1872) and Brown v. State of Maryland,

25 U.S. (12 Wheat.) 419 (1827), Matsushita Electric Corpora-

tion of America requested an exemption from taxation for those

imported goods situated in its warehouse which remained in the

original packages in which such products were shipped. (App.

A10-11). Farmers Branch denied the request.

Matsushita Electric Corporation successfully enjoined collec-

tion of the disputed taxes.” In City of Farmers Branch v. Matsu-

? Matsushita Electric Cogpresiion of America v. City of Farmers

Branch and T. E. Waldrip, No. 72-9516-G (134th Judicial District Court

of Dallas County, Texas, filed October 14, 1974).

+

shita Electric Corporation of America, 527 S.W.2d. 768 (Tex.

Civ. App. — Tyler 1975), (App. A-9), the Texas Court of

Civil Appeals affirmed the decision. Relying upon this Court’s

decisions in Brown v. State of Maryland, 25 U.S. (12 Wheat.)

419 (1827) and Low v. Austin, 80 U.S. (13 Wall.) 29 (1872),

the Court held that imported goods contained in the original

packages which retained their distinctive character as imports

were not subject to ad valorem property taxes, regardless of

whether such tax was nondiscriminatory. (App. A-17). On

January 14, 1976, the Supreme Court of Texas denied the City

of Farmers Branch’s application for Writ of Error.’

On the same day, January 14, 1976, this Court announced

its decision in Michelin Tire Corporation v. Wages, 423 U.S.

276 (1976). Miche’in overruled Low v. Austin, 80 U.S. (13

Wall.) 29 (1872), and held that a local taxing authority could

assess a nondiscriminatory tax on imported goods no longer in

import transit.

2.

Farmers Branch applied for a rehearing on its application

for Writ of Error based upon this Court’s decision in Michelin.

The Supreme Court of Texas granted the application. The merits

of Michelin were not argued by petitioner before the Texas

Supreme Court. Instead, petitioner contended that the principles

articulated by this Court in Chevron Oil Co. v. Huson controlled

and therefore the Supreme Court of Texas should accord only

prospective effect to the decision in Michelin and deny Farmers

Branch’s assessments for the years prior to Michelin.

* The Supreme Court of Texas refused the writ with the notation “no

reversible error.” The action of the court is unofficially reported in

19 Tex. Sup. Cr. J. 134 (Jan. 14, 1976).

o

The Supreme Court of Texas reversed the lower courts and

held that Michelin was retroactive in application (App. A5-6).

REASONS FOR GRANTING THE WRIT

1. In matters of federal law, state courts must adhere to

federal standards in determining whether a consti-

tutional decision should be applied prospectively.

In Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) this Court

articulated the standards to be used by reviewing courts to deter-

mine whether a civil decision involving a question of federal

law should be applied prospectively only: *

(a) the decision to be »pplied non-retroactively must estab-

lish a new principle of law, either by overruling clear

past precedent on which litigants may have relied or by

deciding a question of first impression whose resolution

was not clearly foresl:adowed;

(b) the merits and demerits in each case must be weighed to

determine whether the purpose of the overruling case

can be effected without retroactive application; and

(c) retroactive application would produce substantial in-

equitable results.

The factors enumerated by this Court in Chevron are refine-

ments of the standards adopted in Linkleiter v. Walker, 381

U.S. 618 (1965), and Stovall v. Denno, 388 U.S. 293 (1967),

for determining whether decisions involving substantial reinter-

* This Court has made it clear, however, that for purposes of pros-

pective or retroactive application of an overruling decision, no dis-

tinction should be drawn between civil and criminal cases. See, e.g.,

Lemon v. Kurtzman, 411 U.S. 192, 199 (1973); Linkletter v. Walker,

381 U.S. 618, 627 (1965).

6

pretations of rights of the criminally accused should be given

retroactive effect.

This Court has recognized that reviewing courts have “some”

discretion in determining whether a particular decision should

be accorded prospective effect only. This discretion arises be-

cause each particular constitutional rule has its own function,

background of precedent and impact on the administration of

justice. Johnson v. New Jersey, 384 U.S. 719 (1966). A review-

ing court must reconcile competing policy interests — con-

venience, expense and proper governmental objectives versus

the rights of the individual affected. However, the limits of

discretion do not extead to ignoring or altering the basic deci-

sional standards adopted by this Court. Therefore, in cases

subsequent to Linkletter and Stovall, state and federal courts

have considered the standards articulated by this Court to

determine the retroactive or prospective effect of a criminal

decision to be binding. See, e.g.. Williams v. Estelle, 500 F.2a

206 (Sth Cir. 1974); Wiggins v. State, 275 Md. 689, 344 A.2d

80 (1975); People v. Livingston, 64 Mich. App. 247, 236

N.W.2d 62 (1975).

The rationale for applying uniform standards in criminal

cases is equally applicable to the civil area. Federal cases sub-

sequent to Chevron have interpreted Chevron to be mandatory

in civil cases involving questions of federal or constitutional

law. Bush v. Wood Brothers Transfer, Inc., 398 F. Supp. 1030

(S.D. Tex. 1975); Bergstrom v. Kissinger, 387 F. Supp. 794

(D.D.C. 1974).

Although federal courts have adopted Chevron as the con-

trolling standard, state courts have not always applied Chevron

7

in cases involving federal or constitutional law, see, e.g., City

of Farmers Branch and T. E. Waldrip v. Matsushita Electric

Corporation of America, _____ $.W.2d______ , (App. A25),

or have misappl.ed Chevron. See Ralston Purina Co. v. County

of Los Angeles, 56 Cal. App. 3d. 547, 128 Cal. Rptr. 556

(1976).°

When this Court substantially changes existing federal or

constitutional law, the same considerations applicable to the

criminal area are applicable to civil cases. Uniform standards

are necessary to ensure that equitable results are reached. This

is particularly true because of this Court’s decision in Michelin.

Importers are faced with the possibility of state courts applying

different standards of retroactivity, depending upon applicable

periods of limiiations in each state.®

This Court has not provided specific guidance to lower courts

on the applicability of Chevron to constitutional decisions ren-

dered by this Court, and this issue is proper for resolution by

writ of certiorari. See, e.g., United States v. Peltier, 422 U.S.

531 (1975); Chevron Oil Co. v. Huson, 404 U.S. 97 (1971);

Relford v. Commandant, 397 U.S. 534 (1970).

®° See also, Sears, Roebuck & Co. v. County of Kings, _______ Cal.

App. 3d —___ _., 130 Cal. Rptr. 694 (1976); Japan Food Corporation

v. County of Sacramento, ______ Cal. App. 3d , 130 Cal.

Rptr. 392 (1976) ; Michelin Tire Corp. v. County of San Mateo, 57 Cal.

App. 2d 332, 127 Cal. Rptr. 791 (1976).

° For example, Texas allows a taxing authority to reassess for a period of

four years, Tex. Rev. Civ. Stat. ANN. art 7298 (1960) ; Georgia, seven

years. Ga. Cope ANN. § 92-7701 (1974). In Ralston Purina Co. v. County

of Los Angeles, 56 Cal. App. 3d 547, 128 Cal. Rptr. 556, 558 (1976), the

Court upheld, on the basis of Michelin, taxes assessed in violation of

Low v. Austin, 80 U.S. (13 Wall.) 29 (1871) for a period of eight years

prior to Michelin. Ohio, however, has decided to treat Michelin as apply-

ing only prospectively. 37 CCH State Tax Review No. 11 (Mar. 16.

1976).

8

2. The Decision of the Supreme Court of Texas is in

direct conflict with Chevron Oil v. Huson.

In Chevron, the Court established three factors to determine

if a decision should be accorded prospective effect only: reliance

on clear past precedent, the purpose of the overruling decision

could be effected without retroactive application, and retroactive

application would produce inequitable results.

Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976) over-

ruled Low v. Austin, 80 U.S. (13 Wall.) 29 (1872), a decision

which was settled law for ever one hundred years. Matsushita

and others similarly situated relied upon the principle estab-

lished in Low that nondiscriminatory ad valorem taxes on im-

ports were prohibited by the Import-Export Clause of the United

States Constitution. Matsushita’s position was affirmed by the

Texas Court of Civil Appeals in an opinion strongly relying

upon this holding in Low. (App. A-17).

The Supreme Court of Texas, although initially denying an

application for writ of error filed by the City of Farmers

Branch,’ abruptly reversed their position after the Michelin

decision and, without once mentioning this Court’s decision in

Chevron, held that Matsushita’s reliance on Low was misplaced.”

This Court has held that parties are entitled to rely upon legal

pronouncements from this Court and parties who conform their

conduct to prevailing constitutional norms cannot be held blame-

worthy. United States v. Peltier, 422 U.S. 531 (1975). Further,

"19 Tex. Sup. Cr. J. 134 (Jan. 14, 1976).

* This was somewhat anomalous in view of the statement of the

Court that:

Because of the earlier decision of the Supreme Court of the United

States which this Court is bound to respect, we at first upheld the

position of Matsustiita.

(App. A-2).

9

this Court upheld “reliance” upon statutory schemes which are

constitutionally suspect from their very inception. Lemon v.

Kurtzman, 411 U.S. 192 (1973). The Supreme Court of Texas,

contrary to the position taken by this Court, held that Matsushita

was not entitled to rely upon Low simply because Farmers

Branch had levied its tax prior to Michelin.? The reliance dis-

cussed by this Court clearly encompassed reliance on prevailing

constitutional doctrine and such reliance cannot be defeated

merely by the arbitrary acts of governmental officials who dis-

agree with a particular position taken by this Court.

The purpose of Michelin can be clearly effected without retro-

active application of Michelin. In Michelin, this Court noted

that ultimate consumers should pay for local governmental

services funded by ad valorem property taxes on goods, much

as they pay for transportation costs associated with such goods.

423 U.S. __, 45 L.Ed.2d 505. The taxes assessed by the

City of Farmers Branch were assessed four years prior to

Michelin and the goods have been sold to the ultimate consumer.

Prior to Michelin, business decisions and ad valorem taxation

were based, in part, upon the absolute ban on ad valorem taxes

on imported goods. To reach back now and disturb past legal

relationships would not further the purpose of Michelin because

it would penalize those who relied upon Low, allow local muni-

cipalities to reap a windfall in added revenues without a

concomitant increase in the expenses of local services, and

not affect those who actually benefited from Low — the ulti-

mate consumer. Allowing full retroactive application of

* Other state courts have ignored or misapplied the concept of

reliance, some going so far as to hold that Low itself was not sufficient

as clear past precedent. See, e.g., Ralston Purina Co. v. County of Los

Angeles, 56 Cal. App. 3d 547, 128 Cal. Rptr. 556 (1976).

10

Michelin would require Matsushita, and all other similarly

situated importers, to absorb increased costs without being

able to internalize such costs in the goods which allegedly

benefited from such services.”

3. The questions presented are substantial.

The Supreme Court of Texas held, in part, that Michelin

was fully retroactive because this Court denied Michelin’s

petition for rehearing. The reasoning of the court further

illustrates the confusion permeating lower court decisions

faced with a prospective-retroactive problem. This Court has

held that a determination not to review a question imports no

expression of opinion on the merits. United States v. Carver,

260 U.S. 482, 490 (1923). Nevertheless, lower courts have

held that new decisions are fully retroactive in the absence of

a definitive statement by this Court. See, e.g., Bourns, Inc. v.

Allen-Bradley Co., 480 F.2d 123 (9th Cir.), cert. denied,

444 U.S. 1094 (1973); Ralston Purina Co. r. County of Los

Angeles, 56 Cal. App. 3d 547, 128 Cal. Rptr. 556 (1976).

Such a position has been severely criticized '' and does not

reflect past decisions of this Court. In both Lemon v. Kurtzman,

411 U.S. 192 (1973) and Chevron, this Court determined

that prior decisions '* were not to be applied retroactively and

the extensive discussion of the non-retroactivity doctrine would

' Reversing the facts in the present case would not change the

retroactive-prospective analysis. In situations where a taxpayer has

been successful against a taxing authority, courts have limited the

decision to prospective effect only. See Southern Pacific Co. v. Cochise

County, 92 Ariz. 395, 377 P.2d 770, 778 (1963).

'’ Beytagh, Ten Years of Non-Retroactivity: A Critique and a Pro-

posal, 61 Va. L. Rev. 1557, 1617 (1975).

'?Lemon v. Kurtzman, 403 U.S. 602 (1971): Rodrigue v. Aetna

Casualty & Surety Co. 395 U.S. 352 (1969).

il

have been wasted if the prior decision had foreclosed the issue.

This Court has held the issue of prospective overruling is

best resolved in a case where the issue of retroactivity would

be solely dispositive of the case. Gosa v. Mayden, 413 U.S.

665, 668 (1973); Relford v. Commandant, 401 U.S. 355,

370 (1971). The issues presented in the present petition

would be resolved by a determination by this Court of the

questions presented. Petitioner does not question the holding

of this Court in Michelin. Petitioner does however, request

that this Court determine whether state courts must apply the

Chevron standards to determine the retroactivity of a decision

of this Court and whether, under Chevron, Michelin should

be accorded prospective effect only. The failure of this Court

to resolve this confusion in the lower courts surrounding both

the doctrine of pro:pective overruling and the decision in

Michelin will result in great hardship to those who have made

decisions based upon settled constitutional law.

CONCLUSION

For the foregoing reasons. a Writ of Certiorari should issue

to review the judgment and opinion of the Supreme Court of

Texas.

Respectfully submitted,

Jerry L. Buchmeyer

2300 Republic National

Bank Building

Dallas, Texas 75201

Attorney for Petitioner

12

Of counsel:

Timothy R. McCormick

Thompson, Knight, Simmons &

Bullion

2300 Republic Bank Building

Dallas, Texas

Seth Waller

One Panasonic Way

Secaucus. New Jersey

CERTIFICATE OF SERVICE

I, Jerry L. Buchmeyer, attorney for petitioner Matsushita

Electric Corporation of America and a member of the Bar

of the Supreme Court of the United States, hereby certify

that on July 30, 1976, I served three copies of the foregoing

petition for writ of certiorari on the respondents herein by

hand-delivering the same to Ronald M. Mankoff, Esq., counsel

of record for the respondents, at his office at 3900 First National

Bank Building, Dallas, Texas. I further certify that all parties

required to be served have been served.

J Bachoiyre

erry L. Buchmeyer

2300 Republic National Bank Bldg.

Dallas, Texas 75201]

Attorney for Petitioner

A-1

APPENDIX

1. Opinion of the Supreme Court of Texas.

In the

Supreme Court of Texas

No. B-5551

City oF FARMERS BRANCH, TEXAS and T. E. WaLprip,

Petitioners,

v.

Matsusuita Evectric Corp. oF AMERICA,

Respondent.

Appeal from the Texas Court of Civil A ppeals

for the Twelfth Supreme Judicial District

May 5, 1976

This case involves an interpretation of Section 10 of Article

I of the Constitution of the United States, which provides in

part that,

“No State shall, without the Consent of Congress, lay any

Imposts or Duties on Imports or Exports . . .”

The City of Farmers Branch assessed a nondiscriminatory

ad valorem tax on merchandise stored in warehouses within

A-2

its limits. In 1972, it assessed such a tax on the merchandise

here in question. It had been imported from Japan and Puerto

Rico and was the property of Matsushita Electrical Corpora-

tion of America, a wholly owned subsidiary of a Japanese

corporation of a similar name.

The property had come to its destination in Farmers Branch,

but was still in its original corrugated cartons. Matsushita

declined to pay the tax. In this declaratory judgment suit, its

contention is that the tax on its property is unconstitutional

under the above provision of the Constit:tion of the United

States.

Because of the earlier decision of the Supreme Court of the

United States which this court is bound to respect, we at first

upheld the position of Matsushita. The Court of Civil Appeals

had held the property was not subject to taxation by the city,

and we upheld that decision by refusing a writ of error with

a notation, “no reversible error.” 527 S.W.2d 768. Upon the

same day upon which our court acted, January 14, 1976, the

United States Supreme Court announced its decision in Michelin

Tire Corporation v. Wages, _____ U.S. —____,, 96 $..Ct. 535,

46 L.Ed.2d 495. We thereafter granted a writ of error upon

rehearing. It is our opinion that under Michelin, the tax of the

City of Farmers Branch is not an unconstitutional tax. In the

words of the Michelin decision, an “*. . . assessment of a non-

discriminatory ad valorem property tax ... is not within the

constitutional prohibition against laying any imposts or duties

upon imports...”

The property which is the subject of the tax consists of

Panasonic units and parts manufactured by or for Matsushita

in Japan and Puerto Rico. The items were packed in sealed

A-3

corrugated cartons and were shipped to the United States in

sea vans. After the sea vans reached their port of entry, they

were shipped by rail to Fort Worth. The seals on the sea vans

were broken at Matsushita’s warehouse in Farmers Branch,

and the individual cartons were there unloaded and stored.

No manufacturing, repairing or servicing is carried on at the

Matsushita warehouse. The warehouse is used only to store

the merchandise until needed by retail dealers. The disputed

items were all in their unopened corrugated cartons.

Tre “original package doctrine” had its origin in Brown v.

State of Maryland, 25 U.S. 262 (1827), in which Chief Justice

Marshall wrote:

“When the importer has so acted upon the thing imported

that it has become incorporated and mixed up with the mass

of property in the country, it has, perhaps, lost its distine-

tive characteristic as an import, and has become subject to

the taxing power of the state; but while remaining the prop-

erty of the importer, in his warehouse, in the original form

or package in which it was imported, a tax upon it is too

plainly a duty on imports to escape the prohibition in the

constitution.”” [Emphasis supplied. ]

Brown v. Maryland was enlarged upon in 1871 by Low v.

Austin, 80 U.S. 29, which is characterized by the Supreme

Court in Michelin as “the leading decision of the court tha‘

the States are prohibited by the Import-Export clause from

imposing a nondiscriminatory ad valorem property tax on

imported goods until they lose their character as imports . . . ™

In Michelin, however, the Supreme Court, upon its own

initiative, carefully reviewed the Brown and the Low v. Austin

decisions; and it concluded that, “Low v. Austin was wrongly

decided. That decision therefore must be, and is overruled.”

We understand the holding of Michelin to be that where

A-4

the tax is not upon the importation or movement of imported

goods, and where the goods are no longer in transit, the goods

are subject to the imposition of nondiscriminatory ad valorem

property taxation by the states and their subdivisions.

We agree with the Supreme Court that there is no reason

why an importer should not bear his share of the cost of ser-

vices such as police and fire protection along with his com-

petitors who handie only domestic goods. As the Supreme

Court said in Mickelin, the Import-Export clause “ . . . cannot

be read to accord :mported goods preferential treatment that

permits escape from uniform taxes imposed without regard to

foreign origin for services which the State supplies.”

The ad valorem tax imposed by Farmers Branch is clearly

nondiscriminatory and applicable to all such stored goods

whether imported or not. The property of Matsushita is there-

fore subject to the tax.

In the alternative, Matsushita contends that because the

Supreme Court changed the law in Michelin in 1976, that it

should not be liable for taxes assessed for the vear 1972 and

bevond; i.e., that the Michelin decision should not be given

retroactive effect, and that it should only be liable for taxes

assessed after January 14, 1976, the date of the Michelin

decision. We disagree for the following reasons.

First, the taxes assessed by Gwinnett County, Georgia, in

the Wichelin case were for the years 1972 and 1973, the same

periods involved here. The Supreme Court upheld the judg-

ment of the Supreme Court of Georgia that the taxes were valid,

and at least by inference, that they were collectible. Michelin

filed a motion for rehearing in the Supreme Court, and we

were furnished with a copy of it. In the motion, Michelin

A-5

limited its argument to the retroactive eect of the Michelin

decision, and it urged the Supreme Court to declare its opinion

to be prespective only because it had changed the law in effect

for 100 years. The Supreme Court overruled Michelin's motion.

Second, Matsushita contends that it is inequitable to apply

the Michelin decision and our decision as applying to taxes

assessed in 1972 because under Low v. Austin and other

decisions, Matsushita and others then considered their goods

exempt from taxation. At the same time, however, Matsushita

was plainly informed and put upon notice by the City of

Farmers Branch that the city considered that the goods were

taxable, and that Low v. Austin and similar cases were wrongiy

decided and should be overruled. Thece is no basis for a

contention that Matsushita relied on any previous action or

non-action of the city because the city assessed the Matsushita

property for taxes at its first opportunity.

And thirdly, the reasons for the collectibility of the non-

discriminatory tax as to Matsushita for the years in question

are prominent in the Michelin decision. Matsushita’s property

during such period was afforded the same public services,

including police and fire protection, as were afforded to their

competitors and to others in the community; and ther: is no

great inequity in their having to bear their same fair and

equal share of such expense; i.e., the nondiscriminatory taxes

assessed during such period.

The judgments of the trial court and the Court of Civil

Appeals are reversed. The injunction issued by the trial court

enjoining the assessment and collection of the taxes involved

is dissolved; and judgment is here rendered that the merchan-

A-6

dise in question was and is subject to the nondiscriminatory

ad valorem personal property taxes.

/s/ Joe R. GREENHILL

Chief Justice

Opinion Delivered:

May 5, 1976

A-7

2. Judgment of the Supreme Court of Texas.

JUDGMENT

Extract from the Minutes of May 5, 1976

No. B-5551

City oF FARMERS BRANCH, TEXas and T. E. WAcprip,

v.

MATSUSHITA ELECTRIC CORPORATION OF AMERICA

This cause came on to be heard on writ of error to the Court

of Civil Appeals for the Twelfth Supreme Judicial District and

the original transcript and transcript showing the proceedings

in the Court of Civil Appeals having been duly considered,

because it is the opinion of the Court that there was error in

the judgments of the District Court and Court of Civil Appeals,

it is, therefore, adjudged, ordered and decreed that said judg-

ments be, and hereby are, reversed and set aside.

And this Court now proceeding to render judgment as should

have been rendered below, it is considered, adjudged, ordered

and decreed that the judgment be, and hereby is, rendered that

the merchandise in question was and hereby is, subject to the

nondiscriminatory ad valorem personal property taxes, and ac-

cordingly the injunction issued by the trial court enjoining the

assessment and collection of taxes involved be, and hereby is

dissolved.

It is further ordered that respondent, Matsushita Electric

Corporation of America, pay ail costs expended and incurred

A-8 A-9

in this Court, Court of Civil Appeals and District Court, that 3. Opinion of the Texas Court of Civil Appeals for the

petitioners, City of Farmers Branch et al., have and recover of } Twelfth Supreme Judicial District.

and from respondent, Matsushita Electric Corporation of Amer-

In the

ica, the costs by them expended and incurred in said Courts,

and that this decision be certified to the District Court of Dallas Texas Court of Civil Appeals

County, Texas, for observance.

oa FOR THE TWELFTH SUPREME JUDICIAL DISTRIC?

(Opinion of the Court by Chief Justice Greenhill)

No. 838

City oF FARMERS BRANCH, Texas and T. E. WALpRIP,

Appellants,

v.

MATSUSHITA ELECTRIC CORPORATION OF AMERICA,

Appellee.

Appeal from the 134th Judicial District Court.

July 31, 1975

Plaintiff-appellee, Matsushita Electric Corporation of Amer-

| ica (MECA) brought suit against appellants, City of Farmers

y Branch, Texas, and T. E. Waldrip, the Tax Assessor-Collec r

of Farmers Branch, seeking a declaratory judgment that certain

inventory on hand at MECA’s Farmers Branch warehouse on

A-10

January 1, 1972, is exempt from taxation by virtue of the pro-

visions of Article 1, Section 10, Clause 2 (the Import-Export

Clause) of the United States Constitution. Further, MECA

sought both temporary and permanent injunctions, enjoining

Farmers Branch and Waldrip from attempting to impose, col-

lect or enforce any taxes upon or with respect to the disputed

inventory for the year of 1972. The trial court held that imported

merchandise brought from Japan and stored in its original

cartons in MECA’s Farmers Branch warehouse was exempt from

taxation, but that any merchandise stored in MECA’s warehouse

in Farmers Branch which was received from any other MECA

warehouse in the United States was not exempt even if the mer

chandise remained in its original cartons. Also, the court held

that any merchandise imported from Pu* to Rico and stored in

MECA’s warehouse in Farmers Branch was not exempt. The

parties filed stipulated facts, and pursuant to appellants’ re-

quest, the trial court filed findings of fact and conclusions of law.

We have this day decided an appeal in City of Farmers

Branch, et al v. American Honda Motor Co., Inc., No. 839, which

appeal raised some of the same questions as are presented here.

This cause of action arose by virtue of appellants’ imposition

of an ad valorem tax on personal property located within

Farmers Branch, under the power vested in it by Article 1165

of the Texas Revised Civil Statutes. MECA rendered to Farmers

Branch for taxation certain personal property situated in its

warehouse. MECA had additional personal property valued at

$2,425,334.70 situated in its Farmers Branch warehouse which

it did not render, claiming that the property was exempt under

Article 1, Section 10, Clause 2, of the United States Constitution.

Of that amount, the total value of Panasonic products imported

A-1]

from Puerto Rico was $140,714.71. It is undisputed that MECA

claimed this exemption and pursued all administrative remedies,

but was denied the claimed exemption for the disputed inventory.

No manufacturing, repairing or servicing is carried on at

the Farmers Branch warehouse, as it is only used to store the

imported products prior to their sale and shipment to retailers,

de: lers, distributors and others in Texas, Louisiana, Mississippi,

Arkansas, Oklahoma and three counties in Tennessee.

MECA did not claim any exemption from the ad valorem tax

for (1) non-inventory property, (2) property not imported from

outside the United States or (3) for imported products which

had been removed from the corrugated cartons in which they

were shipped from outside the United States. MECA did claim

an exemption from taxation for the imported Panasonic products

which remained in their original unbroken packages and were

imported from either Japan or Puerto Rico.

The Panasonic products imported from Japan were manutac-

tured in Japan and placed in corrugated cartons by the foreign

manufacturer. Each carton was taped or stapled at the factory

and was loaded into a large sea van, 40 feet long, 8 feet high and

814 feet wide, weighing 6,260 pounds, and leased by an inde-

pendent common carrier. After a sea van was loaded, it pro-

ceeded to dockside, was separated from its wheels and cab by

crane and loaded onto a ship, where title to the products passed

to MECA. The ship proceeded to the United States and at

Seattle, Washington, the port of entry, federal custom duties

were paid on the products. The entire van was removed from

the ship by crane and affixed to a railroad flat car, by which it

proceeded to Fort Worth, Texas. There, the van was once again

afhxed wheels and a cab and proceeded directly to MECA’s

A-12

,

warehouse in Farmers Branch. Upon the van’s arrival at the

warehouse, each of the original corrugated cardboard cartons was

unloaded and placed in the warehouse. Throughout the entire

process described, the original corrugated cartons remained

taped and/or stapled and were stored in that condition in the

warehouse until an order was received from a dealer or dis-

tributer to purchase the particular products contained in the

cartons. After unloading, the van was immediately returned to

the carrier for use in transporting goods of other manufacturers

and importers. At all times the van was owned or leased by the

independent common carrier and MECA at no time had direct

control over its progress. The Panasonic products imported from

Puerto Rico were purchased by and shipped to MECA in the

same manner as those imported from Japan except that the port

of entry was New Orleans, Louisiana.

On a few occasions, when the MECA warehouse in Farmers

Branch was in short supply of a particular Panasonic product,

MECA made arrangements for a shipment of these products

from another MECA warehouse in the United States. When

these products arrived at the Farmers Branch facility they were

in the original unbroken cartons in which they were imported

from Japan or Puerto Rico.

In their first point, appellants maintain that the trial court

erred in concluding that the goods in the Farmers Branch ware-

house of MECA on January 1, 1972, had not been incorporated

into the mass of goods in the United States, and, therefore, were

st'll “imports” for the purposes of Article 1, Section 10, Clause

2 of the United States Constitution. Appellants argue that (1)

the disputed inventory, through an elaborate marketing system,

has lost its character as imports; (2) the disputed inventory

A-13

has been fully committed to appellee’s operational needs and,

therefore, should not be tax exempt; and (3) the act of importa-

tion may end, and in this case has ended, before the goods are

removed from the original package. We disagree.

Article 1, Section 10, Clause 2 of the United States Constitu-

tion provides:

“No State shall, without the Consent of the Congress, lay

any Imposts or Duties on Imports or Exports, except what

may be absolutely necessary for executing its Inspection

laws...”

In Brown vy. State of Maryland, 25 U. S. (12 Wheat.) 419,

6 L. Ed., 678 (1827), the Supreme Court interpreted the

Import-Export Clause and adopted what has become known as

the “original package” doctrine. The Court stated, speaking

through Chief Justice Marshall:

.

*.. . When the importer has so acted upon the thing im-

ported, that it has become incorporated and mixed up with

the mass of property in the country, it has, perhaps, lost its

distinctive character as an import, and has become subject

to the taxing power of the State; but while remaining the

property of the importer, in his warehouse, in the original

form or package in which it was imported, a tax upon it is

too plainly a duty on imports to escape the prohibition in

the constitution.” Brown v. State of Maryland, supra,

p. 441-2.

The United States Supreme Court has continued to apply

the original package doctrine in Low v. Austin, 80 U. S. (13

Wall.) 29 (1872) ; Hooven & Allison Co. v. Evatt, 324 U.S. 652,

65 S. Ct. 870 (1945); and Dept. of Revenue v. Beam Distilling

Co., 377 U. S. 341, 84 S. Ct. 1247 (1964). Some of the more

recent state and federal court decisions which apply the “original

package”’ doctrine to imported goods held for sale are: Wages

A-14

v. Michelin Tire Corporation, 214 S. E. 2d 349 (Georgia S. Ct.,

1975) cert. granted; Wilson v. County of Wake, 199 S. E. 2d

665, 668 (N.C. Ct. App. 1973); Price Paper Corporation v.

Detroit, 202 N. W. 2d 523, 525 (Ct. App., Mich. 1972) ; Sterling

Liquor Distributors Inc. v. County of Orange, 83 Cal. Rptr. 571

(Ct. App., Cal. 1970) cert. denied, 400 U. S. 822 (1970);

Tricon, Inc. v. King County, 60 Wash. 2d 392, 274 P. 2d 174

(1962) cert. denied, 372 U. S. 908 (1963) ; Standard-Triumph

Motor Company v. City of Houston, Texas, 220 F. Supp. 732,

734 (S. D. Tex. 1963) vacated on other grounds, 347 F. 2d 194

(Sth Cire. 1965) cert. denied 382 U. S. 974, 86 S. Ct. 539

(1966) ; State ex rel H. A. Morton Company v. Board of Review,

City of Milwaukee, 15 Wis. 2d 330, 112 N. W. 2d 914 (1962);

Miehle Printing Press and Manufacturing Company v. Depart-

ment of Revenue, 18 Ill. 2d 445, 164 N. E. 2d 1, (Ill. 1960);

Singer Co. v. County of Kings, 121 Cal. Rep. 398, (Ct. of App.,

Cal. 1975).

In the case at bar, the disputed inventory remained as the

property of MECA, in MECA’s Farmers Branch warehouse in

the corrugated cartons in which it was imported. Therefore,

applying the “original package” doctrine, we believe that a tax

upon the disputed inventory could not escape the prohibition

set forth in the Import-Export Clause of the Constitution.

In Youngstown Sheet and Tube Company v. bowers, 358

U. S. 534, 541-2 (1959), 79 S. Ct. 383, the Supreme Court,

relying upon Brown v. Maryland, reemphasized some of the acts

or conduct of the importer that would deem the importer to

have ‘so acted upon the thing imported’ as to cause it to be ‘mixed

up with the mass of property in the country (and to !ose) its

A-15

distinctive character as an import.’ The Court stated that goods

lost their character as imports when the importer (1) ‘sells

them,’ (2) ‘(breaks up his packages, and (travels) with them

as an itinerant pedlar’ or (3) when goods are brought into this

country by an importer ‘for his own use’ and are here ‘used’ by

him. Also, see Brown v. Maryland, supra.

In the case at bar, at the time of the controversy MECA had

not (1) sold the disputed inventory, (2) broken the disputed

inventory out of the corrugated cartons in which it was imported,

nor (3) brought the disputed inventory into the country for its

own use and here used the inventory in such a manner that it

has become incorporated and mixed up with the mass of prop-

erty in the country.

Appellants attempt to rationalize by analogy the facts involved

in the case at bar with the op'nion of the court in Youngstown

in which the court stated that the iron ore, lumber, and veneers

had been irrevocably committed to use in manufacturing at the

plants to which they were shipped and that the iron ore, lumber

and veneers were necessarily required to be kept on hand to

meet current operational needs and were actually being used

to supply those needs. To show that imported goods which are

held for sale should be treated similarly to imported goods held

for use in manufacturing, appellants cite a quote from Hooven

& Allison Co. v. Evatt, supra, which is discussed in the following

quotation from Youngstown, supra, 542:

“In Hooven & Allison Co. v. Evatt, 324 U.S. 652, 65 S. Ct.

870, 89 L. Ed. 1252, it was held that goods imported for

‘use’ share the same immunity as goods imported for ‘sale,’

and that goods imported ‘for manufacture (do not) lose

their character as imports any sooner or more readily than

imports for sale’ (id., 324 U. S. at page 667, 65 S. Ct. at

A-16

page 373); but ‘when (the imported goods are) used for

the purpose for which they are imported, they cease to be

imports and their tax exemption is at an end.’ Id., 324 U. S.

at page 665, 65 S. Ct. at page 877.”

The Youngstown case has been distinguished many times from

cases similar to the case at bar, and we believe that the facts

involved here are distinguishable from Youngstown. Later in

the Youngstown opinion is found this language (79 S. Ct. 389):

.

*, . . The constitutional design was then to immunize im-

ports from taxation by the importing States, and all others

through or into which they may pass, so long as they retain

their distinctive character as imports. Hence, that design is

not impinged by the taxation of materials that were im-

ported for use in manufacturing after all phases of the

importation definitely have ended and the materials have

been ‘put to the use for which they were imported’ (Hooven

& Allison Co. v. Evatt, supra, 324 U.S. (652) at page 657,

65 5S. Ct. at page 873) for in such a case they have lost their

distinctive character as imports and are subjection to

taxation...”

We agree with a quote from Tricon, Inc. v. King County,

supra, p. 176:

“We do not think the Supreme Court has indicated by

implication that goods imported for resale, and which re-

main in their original containers, lose their character as

imports immune from state taxation when they become a

part of the importer’s current inventory of goods held for

sale.”

Appellants’ first point is overruled.

In their second point appellants maintain the trial court erred

in concluding that the general property tax imposed on the dis-

puted inventory is an “impost” or “duty” within the meaning of

A-17

the import clause of the United States Constitution. Appellants

argue that Youngstown established that a non-discriminatory

property tax does not viclste the Import-Export Clause, and

that the language of the Import-Export Clause indicates that a

general property tax was not within its intended prohibition.

We disagree.

The Supreme Court of the United States has rejected appel-

lants’ argument in Low v. Austin, supra, by holding that while

goods retain their character as imports, a tax upon them in any

form is within the constitutional prohibition. The court stated:

“The question is not as to the extent of the tax, or its equality

with respect to taxes on other property, but as to the power of

the state to levy any tax.” (Emphasis added.) If, in fact, any

discrimination against domestic and in favor of foreign pro-

ducers of goods does result because of the tax immunity of

imports, such discrimination is implicit in the constitutional

provision and in its purpose to protect imports from state taxa-

tion. Hooven & Allison Co. v. Evatt, supra. Moreover, the dis-

puted inventory was subject to substantial custom duties while

domestic goods are not.

The rationale of Low and Hooven thai all taxes, even non-

discriminatory ad valorem taxes, are unconstitutional if imposed

upon merchandise which retains its status as imports has been

reafirmed in Richfield Oil Corp. v. State Board of Equalization,

329 L. S. 69, 76, 67 S. Ct. 156 (1946) and Department of

Revenue v. James Beam Distilling Company, supra, p. 343.

Appellant also argues that the rationale employed in interstate

commerce cases should be applied to the disputed inventory so

that a non-diseriminatory tax will not violate the import clause.

A-18

The Import-Export Clause and the Commerce Clause, while

related, are not coterminous. There are two important differences

between the two clauses. First the Import-Export Clause prohibits

taxation by the states on the import or export, while the appli-

cation of the Commerce Clause has no relationship to whether

an article was, or ever had been, an import or export. Second,

the Commerce Clause is not cast in terms of a prohibition against

taxes but in terms of power of the Congress to regulate com-

merce. The Import-Export Clause does not prohibit every state

from laying “any discriminatory” tax on imports or exports,

but rather prohibits the state from laying “any” tax — “except

what may be absolutely necessary for executing its inspection

laws.”” Richfield Oil Corp. v. Board of Equalization, supra, 67

S. Ct. 159-60. Consequently, we cannot write any qualifications

into the Import-Export Clause. Appellants’ second point is

overruled.

In their third point, appellants maintain the trial court erred

in concluding that the goods stored in the Farmers Branch ware-

house of MECA had not been removed from the containers in

which they had been transported into this country and, there-

fore, were not subject to local taxation under the “original

package” doctrine. Appellants argue that the sea van is the

original package since it is the container in which the units are

shipped from Japan or Puerto Rico. We do not agree.

The facts in the case at bar reveal that the sea van is fur-

nished by the steamship lines for the purpose of carrying the

corrugated cartons overseas and that when the sea vans are

unloaded at Farmers Branch, they are returned to the steamship

line for use in transporting goods of other manufacturers and

A-19

importers. The mere use of new technology in shipping should

not destroy the tax immunity of the property shipped. Here,

the use of the sea van did not go to the essential nature of the

transaction, but only to formalities of transportation. Therefore,

we do not believe that the opening of the sea vans constitutes

the breaking of the original packages. Wages v. Michelin Tire

Corporation; supra; Montgomery Ward & Co., Inc. v. County

of Alameda, 390 Fd. Supp. 177 (N. D. Cal. 1975); Michigan

State Tax Commission vy. Garment Corpoartion, 32 Mich. App.

715, cert. denied, 404 U. S. 992 (1971).

In its first cross-point, appellee maintains the trial court erred

in holding that merchandise which was imported by MECA and

stored at MECA’s warehouse in Farmers Branch in its original,

unbroken cartons, was not exempt from taxation under the

Import-Export Clause if it was first stored in some other MECA

warehouse in the United States. We sustain appellee’s contention.

We are unable to distinguisn between the situation in which

the disputed inventory is shipped directly from its port of entry

to Farmers Branch and the situation in which the disputed inven-

tory is stored in the corrugated cartons in which it was shipped

in another MECA warehouse in the United States before it is

shipped to Farmers Branch. The Import-Export Clause was in-

tended to immunize imports from taxation by the importing

states, and all other states through or into which they may pass

so long as they retain their distinctive character as imports.

Youngstown Sheet & Tube Co. v. Bowers, supra, p. 389. It mat-

ters not that the imported merchandise is stored in the original

packages at the importer’s warehouse at the port of entry or in

an interior state. This tax immunity attaches and “survives their

A-20

arrival in this country and continues until they are sold, removed

from the original package, or put to the use for which they are

imported.” Hooven & Allison Co. v. Evatt, supra, p. 657; Wilson

v. County of Wake, supra.

Therefore, we believe the trial court erred in holding that

the disputed inventory, which was stored in the “surplus” stor-

age area of another warehouse before it was shipped to the

Farmers Branch warehouse, is not exempt from taxation. This

portion of the judgment is reversed and rendered for appellee.

In its second cross point, appellee maintains that the trial

court erred in holding that merchandise imported by MECA into

the United Siates from Puerto Rico was not an “import” within

the meaning of the Import-Export Clause of the United States

Constitution. We sustain appellee’s ceniention.

Merchandise which is brought into the United States from a

piace without the country, even though the merchandise does

not come from a foreign country, may be considered as

“imports.” The only material question which must be deter-

mined is whether it came from a place without the country.

Hooven & Allison Co. v. Evatt, supra, 671.

The United States acquired Puerto Rico by cession without

obligation to admit it to statehood or to incorporate it as a part

of the United States. We do not believe Puerto Rico is a part

of the United States in the sense that it is subject to and enjoys

the benefits or protection of the Constitution as do the States

which are united under the Constitution. Hooven & Allison Co.

v. Evatt, supra, 678.

Puerto Rico is apparently now a commonwealth. An instru-

ment of government or constitution was adopted by Puerto Rico

pursuant to a congressional statute; and it seems to have more

A-21

autonomy than a territory but is short of statehood. If not “a

territory” it is not a part of the country proper. Merchandise

brought into one of the United States from Puerto Rico would

be “imports” under the Import-Export Clause of the U. S. Con-

stitution and entitled to the immunity from taxation as goods

from a foreign country. See Rice Growers’ Assn. of California

v. County of Yolo, 94 Cal. Rep. 847, 852, 853 (Ct. of App.,

Cal. 1971).

Therefore, 2 believe that the trial court erred in holding

that merchandise imported by MECA into the United States from

Puerto Rico was not an “import,” and that portion of the trial

court’s judgment is reversed and judgment is rendered in favor

of appellee.

The judgment of the trial court is affirmed in part and re-

versed in part, and judgment is here rendered for appellee to

that portion of the judgment which is reversed.

Since we have affirmed the judgment in part and reversed

in part, we tax the costs on appeal and in the court below

equally against appellants and appellee. Coca Cola Bottling

Company of Houston v. Hobart, 423 S. W. 2d 118, 126 (Tex.

Civ. App. — Houston 14th Dist., 1967, writ ref’d, n. r. e.);

Combined American Insurance Company v. The City of Hills-

boro, 421 S. W. 2d 488, 491 (Tex. Civ. App. — Waco, 1967,

writ ref’d, n. r. e.); Wichita National Bank v. United States

Fidelity & Guaranty Co., 147 S. W. 2d 295, 298 (Tex. Civ. App.

— Fort Worth, 1941, n. w.h.); Rule 448, T. R. C. P.

/s/ CoNNALLY McKay

Associate Justice

Opinion delivered:

July 31, 1975.

A-22

ON MOTION FOR REHEARING

Appellee Matsushita Electric Corp. of America, moves for

a rehearing only insofar as our original opinion and judgment

taxes the cost one-half to appellants and one-half to appellee.

In our original opinion the judgment of the trial court was

affirmed in part and reversed and rendered in part. We taxcd

the cost one-half to appellants and one-half to appellee.

However, appellee reminds us that the portion of the trial

court’s judgment we reversed was on the cross-points of appellee

and therefore all relief was denied to the appellants and full

relief granted to appellee.

We confess our error in this regard and accordingly that

portion of our origina! decision in this cause is modified to the

extent that all of the costs are taxed against the appellants.

Appellants also have filed a motion for rehearing which we

have duly considered and same is overruled.

/s/ CONNALLY McKay

Associate Justice

Opinion delivered:

August 28, 1975

A-23

4. Judgment of the Texas Court of Civil Appeals for the

Twelfth Supreme Judicial District.

JUDGMENT

Extract from the Minutes of August 28, 1975.

No. 838

City oF Farmers Brancu, Texas and T. E. WALprRiP

v.

MATSUSHITA ELECTRIC CORPORATION OF AMERICA

The judgment heretofore entered on July 31, 1975, is set aside

and same withdrawn and the following judgment is entered in

lieu therefor, to-wit.

THIS CAUSE having been transferred to this Court from the

Court of Civil Appeals for the Fifth Supreme Judicial District

of Texas by Order of the Supreme Court, and said cause coming

on to be heard on the transcript of the record, and that the same

being inspected, it is the opinion of the Court that there was

error in the judgment as entered by the trial court, and that the

same should be affirmed in part and reversed and rendered

in part.

It is therefore ORDERED, ADJUDGED and DECREED that

that portion of the trial court’s judgment holding that merchan-

dise which was imported by Matsushita Electric Corporation of

America and stored in its warehouse in Farmers Branch in its

original, unbroken cartons, was not exempt from taxation if it

was first stored in another of its warehouses in the United States

A-24

is hereby reversed and judgment is here rendered for appellee,

Matsushita Electric Corporation of America; it is further

ORDERED, ADJUDGED and DECREED that that portion of

the trial court’s judgment holding that merchandise imported

by Matsushita Electric Corporation of America into the United

States from Puerto Rico was not an “import” and was subject

to taxation is hereby reversed and judgment is hereby rendered

for the appellee, Matsushita Electric Corporation of America;

that in all other respects, the judgment of the trial court is af-

firmed; and that the appellee, Matsushita Electric Corporation

of America, recover of and from the appellants, City of Farmers

Branch, Texas, and T. E. Waldrip, jointly and severally, all costs

in this behalf expended, both ia this court and the court below

for all of which execution may issue, and that this decision be

certified to the court below for observance.

A-25

5. Opinion of the Supreme Court of Texas in a related

case, City of Farmers Branch, Texas et al v. American

Honda Motor Company, Inc.

In the

Supreme Court of Texas

No. B-5550

City OF FARMERS Brancu, Texas and T. E. WaALpriP,

Petitioners,

v.

AMERICAN Honpa Motor Company, INc.,

Respondent.

A ppeal from the Texas Court of Civil Appeals

for the Twelfth Supreme Judicial District

May 5, 1976

This is a companion case to our Cause Number B-5551, City

of Farmers Branch v. Matsushita Electric Corp. of America,

decided this day. _____. $.W.2d _._____. The cases were

submitted and argued together in this court.

The Honda warehouse in Farmers Branch stores parts and

accessories for Honda automobiles, motorcycles, and outboard

A-26

motors. The parts and accessories were imported from Japan

in sealed sea vans. As in Matsushita, Farmers Branch assessed

ad valorem personal property taxes on these items for the year

1972. Honda declined to pay the tax and brought this suit for

a declaratory judgment that the merchandise was tax-exempt

under the import-export clause, Section 10 of Article 1 of the

United States Constitution.

The questions are the same as those presented in Matsushita,

and the disposition of those questions in Matsushita control

the disposition of this cause.

The judgments of the trial court and the Court of Civil

Appeals are reversed; the injunction entered by the trial court

against the assessment and collection of the taxes is dissolved:

and judgment is here rendered that Honda is subject to the

non-discriminatory ad valorem taxes assessed by Farmers

Branch.

/s/ Joe R. GREENHILL

Chief Justice

Opinion delivered:

May 5, 1976