Petitioners Brief — Sears, Roebuck & Co. v. County of Los Angeles

~~ Bupreme Court, U.

I FILED

IN THE NOV 15 > |

Supreme Court of the Uni OAK, IR Cl

. ‘ ‘+e ete, OOO

October Term, 1979

Ne. 78-1577

SEARS, ROEBUCK AND Co., a corporation,

Petitioner,

vs. .

COUNTY OF Los ANGELES and City oF COMPTON,

Respondents.

On Writ of Certiorari to the Court of Appeal of the

State of California, Second Appellate District.

BRIEF FOR THE PETITIONER.

FRANK M. KEESLING, Esq.,

ANDREW S. Garp, Esq.,

1600 One Wilshire Building,

Los Angeles, Calif. 90017,

Attorneys for Petitioner.

THoMAs W. HENNING, Esgq., and

LOEB AND Logs,

and

ANN XK. SMITH, Esq., and

JONES, HALL AND ARKY,

Of Counsel.

Parker & Son, Inc., Law Printers, Los Angeles. Phone 724-6622

aiden

SUBJECT INDEX

Page

I SENN *sisssciscbavesistichscetisseseunindchncbolotasinrtcavaateciiinedions l

SII wacissvisledsscschmiucscunvunvessdcengjuudenemnvoracsuhibienein 2

RN SN cciinencenicscarsdbunndntaledensanennidunsvntaien 2

Constitutional Provisions and Statutes Involved ...... 2

I Or TI IE ict peiricitsen csacacacsncncoscasnsnsiasnsiane a

I Oe FI iar esactsnccnssincennnicgieestnhtceenesensee 7

IIIT ccelies-kisnnubelatiebadcieonskaussdiaiiugpleeenibeaduniennitcse 11

The Commerce Clause Permits California’s Prop-

erty Tax to Favor Foreign Commerce Over

I GID iin ci cncemesescceivosiioncesentecteeees 11

A. The California Inventory Tax Structure .. 11

B. The Constitution Permits a State to Place

Local Business at a Disadvantage ............ 1]

C. The Commerce Clause Is Directed at Pro-

hibiting Discrimination in Favor of Local

Business at the Expense of Interstate

RII oiin sauncakiorsiatateintaiectasienteniislinat 13

D. The Boston Stock Exchange Decision Is

Distinguishable From the Instant Case,

Was Misconstrued by the Lower Court,

and Supports the Validity of the Cali-

NII: icancisseseonisshchnipiteciatpeichighetdniscaansnts 14

E. The California Statute Is Consistent With

Constitutional Policies Articulated in the

IN ooo Sc cscectonsensmiecincdones 18

il.

Page

F. Federal Policy Encourages States to Favor

Foreign Commerce Over Interstate Com-

IID oaceciccssscsiictienonsionbansaaeioaaaaaen 19

The Exemption Accorded Imported Goods Did

Not Frustrate Congressional Power in Estab-

ee TT CN AD Ma ia HS Fart 21

Il

The California Statute Should Be Upheld Because

No Impermissible Effect Upon Commerce Has

MID: ROOT assis snncencesconcttascnnsaeiaaa 23

A. The Lower Court Erroneously Applied a

Per Se Test in Determining the Statute’s

CORRE . «......--.~.-ciesieenseinnnane 23

B. Respondents Failed to Establish That the

Statute Has Any Effect on Interstate

i 25

C. The Effect of the Statute, if Any, Is too

Insubstantial to Place an Undue Burden

on Interstate Commerce _......................... 27

COORD: nitisincsicniiaStelciilsiinenteaidaie spatter 29

Exhibit A. Pertinent State Statutes Involved .......... l

ili.

TABLE OF AUTHORITIES CITED

Cases : Page

Alaska v. Arctic Maid, 366 U.S. 199 (1961) ...... 8, 12

Allied Stores v. Bowers, 358 U.S. 522 (1959) ....8, 12

‘Boston Stock Exchange v. State Tax Commission,

RUPE vedenecnsnessnisieimarwdicrmanntindenseds

7 Se Dae RC 7, 8, 9, 14, 15, 16, 17, 18, 28

Brown v. Maryland, 25 U.S. (12 Wheat.) 262

NER Sinhala. alice tninuniasinesnanhiehdpeenetinissnnnscrneooutians 2

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274

IN ida cicastat acing dich inivaseonhieneeshuslsiown 10, 24, 25

Department of Revenue v. Association of Washing-

ton Stevedoring Cos., 435 US. 734 (1978) ....27, 28

Dunbar-Stanley Studios, Inc. v. Alabama, 393 U.S.

INE cd indececcacinndghighianndacnsnWalieaianatboininsatinaksdy 12

First Federal Savings and Loan Association v. State

Tax Commission, 437 U.S. 255 (1978) .......... ys

Gregg Dyeing Co. v. Query, 286 U.S. 472 (1932).. 27

Guy v. Baltimore, 100 U.S. 434 (1879) -..0..200002... 13

Halliburton Oil Well Cementing Co. v. Reily, 373

Ws Ie CRIED. wccsvevcscesesscscsasaene piibceiaertiaieceebinn 13, 14

Hooven & Allison Co. v. Evatt, 324 U.S. 652

GUSTER PE SEN er av OMEN Ce Oe ASA oe 3

I.M. Darnell & Son v. Memphis, 208 U.S. 113

RRR i ha crea tahenks Chcpasibelinas ice 14

Japan Line, Ltd. v. County of Los Angeles, ........

Se 60 1.2.26 336 (1979) ............ 8, 18. 19

iv.

Page

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

MELEE TEAS RAE VER RETRY TR ETE ee 3, 4, 6

May v. New Orleans, 178 U.S. 496 (1900) ...... 3

‘Metropolitan Casualty Ins. Co. v. Brownell, 294

RN I osc cidiwnsneeracenenmbanensdivophseislalenmee 25

Michelin Tire Com. v. Wages, 423 U.S. 276

RITE ebcbncpdtchovshcanaadinscannesien 6, 8, 18, 19, 26, 27, 28

Moorman Mfg. Co. v. Bair, 437 U.S. 267 (1978)

cis cai iiodjadinncdiankeaestswacieabaiaaaniatuoeysseas 10, / 12, 43,23

Nippert v. Richmond, 327 U.S. 416 (1946) . » ae

Spector Motor Service, Inc. v. O'Connor, 340 U.S.

RN TD Sc cidiicaNiceetinsuibadipbuaciinenesencekinihsiediaiaha 24

Volkswagen Pacific, Inc. v. City of Los Angeles,

7 Cal.3d 48, 496 P.2d 1237 (1972) .....0022....... ae

Welton v. Missouri, 91 U.S. 275 (1875) -200....ce... 14

Miscellaneous

California Assembly Bill 66, + ae 1150, Sec. 7

TP nicks cisaaeiailaacana lcd cienintitasiiistinesesionses men 5

House of Representatives Report 91-601, 91st

RM, EOE TOME, BO COP) vc ccciccesckpeseversorceperasaccs 20

Regulations

Code of Federal Regulations, Title 26, Sec. 154.2-1

Sd Rae Rr CSRS CST SR ee rie Ge Lee ae Aa 20

Code of Federal Regulations, Title 26, Sec. 154.2-1

” HEpe NENG Eee Wer ves WEEN tren | ESE a pve me SSMS? SOR BRPL 20

Rules

Rules of the United States Supreme Court, Rule 36... 1

v.

Statutes Page

California Constitution, Art. XII, Sec. 1 -................. 11

California Revenue and Taxation Code, Sec. 201 .... 11

California Revenue and Taxation Code, Sec. 219 ....

California Revenue and Taxation Code, Sec. 225

3, 5, 6, 7, 8, 9, 10, 11, 13, 14, 17, 18, 19, 20, 26, 28

California Revenue and Taxation Code, Sec. 401.3.. 11

Internal Revenue Code, Sec. 4271 ...................ccceseeee 8

Internal Revenue Code, Sec. 4272 ....................2.... 8

Internal Revenue Code, Sec. 4272(a) ..........22..22.....- 20

PUREE Ee FU DE ace nccceisecicae eee 20

United States Code, Title 28, Sec. 1257(3) ............ 2

United States Constitution, Fourteenth Amendment

ss: Soci Supseaeleinnk abode epeda as dis biedincdaiains alee eam daa 12

United States Constitution, Fourteenth Amendment

BRR B eacoievcaececisps<sdicveiiamseanabinecbndeaeeae eb 2

United States Constitution, Art. I, Sec. 8, Clause 3

NCTM Nes Ne ikl ME RRNA AUN s A MOLES 2

United States Constitution, Art. I, Sec. 10, Clause 2

aks sabes pasondbisnsbesinennsiatdatecea abun sdiiaidtanani al nascent ame 2

Textbook

Keesling, Michelin Tire Corporation v. Wages: The

Demise of the Original Package Doctrine, 50

Se. Col. 1. Bers TED, TES CET eases tccincecnnniccsss 26

Maltz, The Burger Court, The Commerce Clause,

and the Problem of Differential! Treatment. 54

Bd CS. BRR: BGT CRO. ewnidicrnien es 15

IN THE

Supreme Court of the United States

October Term, 1979

No. 78-1577

SEARS, ROEBUCK AND Co., a corporation,

Petitioner,

vs.

COUNTY OF Los ANGELES and CiTy OF COMPTON,

Respondents.

On Writ of Certiorari to the Court of Appeal of the

State of California, Second Appellate District.

BRIEF FOR THE PETITIONER.

Opinions Below.

The order of the trial court is not officially reported.

The opinion of the Court of Appeal (Pet. App. 1-

29)' is reported at 85 Cal.App.3d 763, 149 Cal.Rptr.

750 (1978). The denial by the Supreme Court of

California of a petition for hearing (Pet. 2) is reported

at 149 Cal.Rptr. 764 (1979).

1The Appendix attached to the Petition for Certiorari shall

be referred to as “Pet. App.” followed by the appropriate

page numbers. The separate Appendix required by Rule 36

shall be referred to as “A.” followed by page numbers. The

Petition for Certiorari shall be referred to as “Pet.” followed

by page numbers.

pres, ‘aes

Jurisdiction.

The decision of the Court of Appeal was filed on

October 25, 1978 (Pet. 2; Pet. App. 1). The Supreme

Court of California denied a petition for hearing on

January 17, 1979 (Pet: 2). The petition for a writ

of certiorari was filed on April 16, 1979. The petition

was granted on October 1, 1979. The jurisdiction of

this Court is invoked under 28 U.S.C. § 1257(3).

Question Presented.

Does a California statute exempting from its property

tax certain goods manufactured or produced outside

the United States and imported into California for

shipment outside the state violate the Commerce Clause

of the United States Constitution?

Constitutional Provisions and Statutes Involved.

1. Article I, Section 8, Clause 3 of the United

States Constitution provides: “The Congress shall have

Power * * * To regulate Commerce with foreign

Nations, and among the several States, and with the

Indian Tribes;”

2. Article I, Section 10, Clause 2 of the United

States Constitution 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; * * *”

3. Amendment XIV to the Constitution of the

United States, Section 1, provides: “* * * No State

shall make or enforce any law which shall abridge

the privileges or immunities of citizens of the United

States; nor shall any State deprive any person of life,

liberty, or property, without due process of law; nor

po. a

deny to any person within its jurisdiction the equal

protection of the laws.”

4. California Revenue and Taxation Code, Section

225 provides: “Personal property manufactured or pro-

duced, (1) outside this state and brought into this

state for transshipment out of the United States, or

(2) outside of the United States and brought into

this state for transshipment out of this state, for sale

in the ordinary course of trade or business shall be

exempt from taxation. The exemption under this section

shall not apply to personal property in manufacturing

process or production. Such process or production shall

not include the breaking in bulk, labeling, packaging,

relabeling. or repackaging of such property.”

Statement of the Case.

The Commerce Clause challenge at issue here results

from an evolution of constitutional doctrine beginning

with Low v. Austin, 80 U.S. (13 Wall.) 29 (1872).

There the Court held that the Import-Export Clause

prohibited states from imposing an ad valorem property

tax on imported goods until they lost their status as

imports and became commingled with the mass of

property in the state. In ascertaining whether imported

goods retained their character as imports, the Court

endorsed a principle which came to be known as the

“original package doctrine.” first articulated in Brown

v. Maryland, 25 U.S. (12 Wheat.) 262 (1827). Under

this doctrine imported goods which remained the prop-

erty of the importer in his warehouse in the original

form or package in which they were imported were

immune from state taxation. May v. New Orleans,

178 U.S. 496 (1900); Hooven & Allison Co. v. Evatt,

324 U.S. 652 (1945).

a

One hundred years after Low v. Austin, the decision

of the California Supreme Court in Volkswagen Pacific,

Inc. v. City of Los Angeles, 7 Cal.3d 48, 496 P.2d

1237 (1972), triggered a series of events which led

to this case. Volkswagen held that receipts of a whole-

saler from the sale of goods imported in a shipping

container or sea van taken to the importer’s warehouse

where it was opened and the goods removed for sale

and delivery to dealers lost their immunity from a

city license tax.

The assessors of many California counties interpreted

Volkswagen as holding that a shipping container or

sea van containing imported goods constituted the origi-

nal package for the purpose of the original package

doctrine, and that upon opening such container or

sea van, the imported goods lost their immunity from

ad valorem property taxes. The assessments made by

such assessors on goods that had been considered im-

mune for over 100 years since this Court’s decision

in Low v. Austin, supra, caused consternation among

importers. See Report of the Research Department

of the Security Pacific National Bank (A. 28-49).

Prior to Volkswagen, California’s neighbor, Oregon,

and many other states had enacted statutes exempting

from their property taxes goods brought into such

states for shipment to other states, including goods

imported from foreign countries.”

From the report of the Research Department of

the Security Pacific National Bank it is also clear

*Citations to these statutes are set forth in Exhibit “A”

hereto. A Commerce Clearing House list of states with “free

port” laws and a brief analysis of the provisions thereof are

reproduced in Appendix A of Petitioner’s Reply to Response

to Petition for Writ of Certiorari.

=

that firms which imported goods in shipping containers

considered the California ad valorem tax to be a major

problem; that such firms were either changing their

operations or making plans to do so by diverting imports

to “free port” areas and by relocating part of their

facilities outside the state. Furthermore, such firms

were not expanding their facilities in California (A.

41).

Thus, as a result of the assessments made by Cali-

fornia assessors based upon their questionable interpre-

tation of the Volkswagen case, California was faced

with substantial deterioration of its import business

occasioned by the diversion of imports to other states

where partial exemption from property taxes was as-

sured by virtue of such states’ “free port” statutes.

The California legislature in 1975 enacted a free

port statute, Revenue and Taxation Code Section 225,

which provides for an exemption from property taxation

of goods purchased outside the United States and

brought into California for shipment and sale outside

the state. Section 225 also provides an exemption

for goods brought into California from other states

for shipment outside the United States, but it does not |

provide an exemption for goods produced in the state or

for goods brought into California from other states for

shipment within the United States."

8Effective January 1, 1980, business inventories will be

exempt from property taxation in California. Cal. Assem-

bly Bill 66, Ch. 1150, § 7 (1979), amending Cal. Rev. &

Tax. Code § 219. However, the 36 free port laws of states

other than California are in jeopardy, based upon Respondents’

assertion that a statute which treats interstate and foreign goods

more favorably than loca! gocds is invalid on Commerce Clause

grounds (Respondents’ Response to Petition for Writ of Cer-

tiorari, p. 5). Thus the issues raised herein are of importance

not only to Celifornia but to some 36 other states as well.

— a

Shortly after Section 225 became effective, this Court

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

held that imports not in transit were no longer im-

mune from state ad valorem property taxes. The Court

overruled Low v. Austin’s prohibition on state taxation

of imports in their original packages. Although Cali-

fornia was thus free to impose an ad valorem prop-

erty tax on such imports, California’s free port law

which was enacted prior to Michelin remained in effect.

All of the facts of this case were stipulated to by

the parties, and such stipulation was adopted by the

trial court (A. 10-24).

On March 1, 1976, Petitioner was holding certain

imported goods in warehouses located in Los Angeles

County and the City of Compton. Petitioner brought

these goods into California for distribution throughout

the United States (A. 10), to be shipped as quickly

as distribution operations permitted (A. 12). The rate

of turnover averaged approximately three times per

year (A. 12).

Pursuant to Section 225, Petitioner claimed an ex-

emption for the imported goods in its warehouses on

March 1, 1976. Respondents denied Petitioner’s claim

and imposed two assessments, one in the amount of

$80,381.58 by the County of Los Angeles and the

City of Compton, and another in the amount of

$204,142.13 by the County of Los Angeles. Petitioner

paid the assessments under protest and after exhaust-

ing its administrative remedies filed suit for refund

(A. 12).

At trial, Respondents urged that the property tax

exemption of Section 225 applied only to imported

goods in transit and not to goods (such as those in

—

question here) held in warehouses while awaiting ship-

ment to other states. Respondents also asserted that

Section 225 violated the Commerce Clause of the United

States Constitution. The trial court held for Petitioner

on both issues and granted Petitioner the refund sought,

entering judgment in the amount of the two assessments

plus interest (A. 52-54).

The California Court of Appeal rejected Respondents’

interpretation of Section 225, but held for Respondents

on the ground that the section violated the Commerce

Clause of the United States Constitution. In so ruling,

the court reasoned that Boston Stock Exchange v. State

Tax Commission, 429 U.S. 318 (1977), prohibited

any differentiation in state taxation between foreign

commerce and interstate commerce (Pet. App. 10-18).

Summary of Argument.

1. California Revenue and Taxation Code Section

225 exempts from property tax goods imported into

California for shipment and sale outside the state and

goods brought into California from other states for

exportation. However, goods produced in California

and goods brought into California from other states

for shipment within the United States are not exempt

from tax.

The fact that Section 225 does not exempt goods

brought into California from another state to be shipped

to still another state does not render the statute invalid

under the Commerce Clause.

California taxes intrastate goods precisely the same

as interstate goods. Such tax treatment is unobjection-

able. California taxes intrastate goods less favorably

than certain out-of-state goods (imports and exports).

oe ee

Unfavorable treatment of intrastate goods vis-a-vis out-

of-state goods is permissible under the Commerce

Clause, Alaska v. Arctic Maid, 366 U.S. 199 (1961),

and under the Equal Protection Clause, Allied Stores

v. Bowers, 358 U.S. 522 (1959).

Favorable tax treatment of foreign goods is not pro-

hibited by any provision of the Constitution. Historical-

ly, Commerce Clause policy has been concerned with

discrimination in favor of local business at the expense

of interstate commerce. Section 225 is entirely consistent

with such policy. It is also consistent with the policies

underlying the Import-Export Clause as articulated in

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

Moreover, Japan Line, Ltd. v. County of Los Ange-

les, .... U.S. ...., 60 L.Ed.2d 336 (1979), not only

permitted but required that in certain instances foreign

commerce be treated more favorably than interstate

commerce. Recent Congressional enactments in the tax

field consistent with California’s Section 225 also reveal

a favorable treatment of imports and exports over inter-

state goods. Internal Revenue Code Sections 4271 and

4272.

The Court of Appeal misconstrued Boston Stock

Exchange v. State Tax Commission, 429 U.S. 318

(1977), on which it relied heavily. There, New York

devised a scheme which provided for a reduction in

the rate of its stock transfer tax but only on the

condition that the sale of the stock to be transferred

also occur in New York rather than in another state,

thereby benefiting stock exchanges in New York to

the detriment of exchanges in other states. The Court,

in striking down the New York scheme, applied classic

Commerce Clause principles.

a

Section 225 imposes no coercive condition and is

consistent with Commerce Clause principles. The Cali-

fornia statute preserves tax neutrality between Califor-

nia and other free port states in a manner sanctioned

by the court in Boston Stock Exchange.

2. The Court of Appeal held that the exemption

accorded imported goods by Section 225 has the effect

of offsetting tariff rates and does not give domestic

manufacturers the protection from imports which Con-

gress intended they should have. The court cited such

effect as an additional reason for holding that the

section violates the Commerce Clause.

In addition to California, some thirty-six states with

free port laws provide for the exemption of imports

shipped to other states. If the lower court’s holding

is correct then the laws of such states relating to

the taxation of inventories of imports and domestic

goods are also invalid. - 3

Furthermore, some states completely exempt inven-

tories or tax them at more favorable rates than those

prevailing in other states. When imported goods shipped

from such states compete with domestic goods subject

to higher inventory tax rates, the imported goods enjoy

an advantage similar to the advantage accorded

imported goods by California and by the thirty-six

states referred to above. There should be. no difference

so far as their validity is concerned between the prop-

erty tax laws of a free port state and those of a

state with either no inventory tax or a low rate of

tax.

Such consequences are inevitable given (1) a nation

composed of fifty states each having considerable auton-

omy, and (2) Constitutional policies ensuring the free

==

flow of trade among the states. These consequences

can be eliminated only by requiring that all state tax

laws applicable to inventories be uniform. Such a policy

would destroy the principle of Federalism upon which

the nation was founded. .

3. No evidence was introduced to establish that

Section 225 had an actual discriminatory effect upon

interstate commerce. Such an effect was assumed by

the Court of Appeal, and the statute was declared

unconstitutional per se without any consideration of

its effect. A per se test has been rejected by this

Court in determining the validity of statutes under

the Commerce Clause. Complete Auto Transit, Inc.

v. Brady, 430 U.S. 274 (1977); Moorman Mfg. Co.

v. Bair, 437 U.S. 267 (1978).

The party attacking a statute as violative of the

Commerce Clause has the burden of proving a substan-

tial adverse effect on interstate commerce. To show

that Section 225 had such an effect, several facts

should have been established to demonstrate actual

competition between comparable interstate and foreign

goods competing in markets outside of California.

Respondents made no attempt to establish any of the

foregoing elements required to support their claim that

the California statute is unconstitutional.

Even if a substantial adverse effect were shown

to result, the California statute should not be declared

unconstitutional unless it unduly burdens interstate com-

merce. Such a conclusion should not be reached without

balancing the national interest in open trade against

California’s legitimate interest in exercising its taxing

power.

er) an

ARGUMENT.

]

The Commerce Clause Permits California’s Property

Tax to Favor Foreign Commerce Over Interstate

Commerce.

The instant case presents a question not heretofore

decided by this Court: Does the Commerce Clause

prohibit a state from according more favorable property

tax treatment to imports and exports than it accords

to goods produced in the state or to goods in inter-

state commerce?

A. The California Inventory Tax Structure.

All property in California on the tax lien date is

subject to an ad valorem property tax unless such

property qualifies for an exemption.* Section 225 ex-

empts goods produced outside California which have

a foreign origin or destination and which are held

in California for shipment and sale outside the state.

Goods held for sale in California are all equally subject

to tax. Goods produced in other states and held tempo-

rarily in California are also subject to tax unless des-

tined for exportation.

Thus, California’s property tax system treats intra-

state goods precisely the same as goods travelling

in interstate commerce. It is axiomatic that such equal

treatment is permissible.

B. The Constitution Permits a State to Place Local Business at

a Disadvantage.

California treats intrastate goods less favorably than

certain out-of-state goods, i.e., imports and exports held

4California Constitution Art. XIII, § 1; Cal. Rev. & Tax.

Code §§ 201, 401.3.

a

for transshipment. As will be discussed, unfavorable

treatment of local economic interests vis-a-vis outside

interests is entirely consistent with the Constitution.

The Equal Protection Clause of the Fourteenth

Amendment permits a state to tax local residents less

favorably than nonresidents. In Allied Stores v. Bowers,

358 U.S. 522 (1959), the Court considered a challenge

to an Ohio statute which, in an effort to promote

local warehouse business, exempted from Ohio’s prop-

_erty tax nonresidents’ property stored in Ohio ware-

houses. The Ohio law did not accord a similar ex-

emption to property of residents similarly stored. Em-

phasizing the wide discretion afforded the states in

laying taxes and the attribute of sovereignty that entitles

the states to devise fiscal systems appropriate to their

needs, the Court rejected the challenge and approved

Ohio’s statutory discrimination in favor of out-of-state

residents. Allied Stores v. Bowers, 358 U.S. at 526-27.

In Alaska v. Arctic Maid, 366 U.S. 199 (1961),

‘the Court considered the validity under the Commerce

Clause of an Alaska tax statute and reached the same

result as in Allied Stores. Under the Alaska tax system,

interstate taxpayers were taxed at a rate lower than

local businesses with which they competed. The Alaska

tax thus favored out-of-state interests over local busi-

nesses. The Court upheld the Alaska tax, reasoning

that so long as the tax on out-of-state interests “did

not exceed” the tax on local competitors, no unconstitu-

tional discrimination existed.*

In short, as the Court stated in Moorman Mfg.

Co. v. Bair, 437 U.S. 267, 291 (1978):

*See also Dunbar-Stanley Studios, Inc. v. Alabama, 393

U.S. 537, 542 (1969).

—

“The Commerce Clause does not concern itself

with a State’s decision to place local business

at a disadvantage.”

C. The Commerce Clause Is Directed at Prohibiting Discrimina-

tion in Favor of Local Business at the Expense of Inter-

state Commerce.

There is, however, an additional element of differen-

tiation in the California tax system that presents the

novel question in this case—the more favorable treat-

ment accorded foreign goods in relation to goods travel-

ling in interstate commerce. Respondents would have

this Court extend the Commerce Clause to invalidate

this distinction. Such an extension is not warranted.

Despite the unusual claim of discrimination based upon

California’s statutory distinction between foreign and in-

terstate commerce, traditional Commerce Clause analysis

affirms the validity of Section 225. Prior decisions

of this Court which addressed the question of discrimi-

nation against interstate commerce have held that the

Commerce Clause operates to prohibit the states from

discriminating in favor of local business at the expense

of interstate commerce. Favoritism toward local inter-

ests is the sine qua non of a Commerce Clause violation:

“(I]t 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.” Guy

v. Baltimore, 100 U.S. 434, 439 (1879). See

Halliburton Oil Well Cementing Co. v. Reily, 373

=<

U.S. 64 (1963). Nippert v. Richmond, 327 USS.

416 (1946); 7.M. Darnell & Son v. Memphis,

208 U.S. 113 (1908); Welton v. Missouri, 91

U.S. 275 (1875).

D: The Boston Stock Exchange Decision Is Distinguishable

From the Instant Case, Was Misconstrued by the Lower

Court, and Supports the Validity of the California Statute.

The Court of Appeal’s decision in the present case

flies in the face of the Commerce Clause principles

historically applied in cases involving allegedly discrimi-

natory taxes. In finding that Section 225 unduly dis-

criminated between interstate and foreign commerce,

the lower court relied heavily on Boston Stock Exchange

v. State Tax Commission, 429 U.S. 318 (1977). But

the court radically misconstrued the holding of that

case. Rather than precluding Section 225’s differentia-

tion between interstate and foreign commerce, the prin-

ciples underlying the decision in Boston Stock Exchange

fully support the California exemption.

The New York statute challenged in Boston Stock

Exchange taxed transfers of securities in New York

by nonresidents at one rate if the sale of the securities

occurred outside New York and applied a substantially

lower rate if the sale occurred in New York.® The

use of discriminatory tax rates depending on whether

the sale occurred in other states or in New York

was the method or tool employed to induce nonresidents

to make their stock sales in New York rather than

in other states. The purpose of such discriminatory

rates was to benefit the stock exchanges in New York

at the expense of exchanges in other states.

*In the case of large transactions a lower rate of tax was

available to both residents and nonresidents if the sale occurred

in New York.

~~. a

In an effort to uphold the scheme, the New York

Court of Appeals held that a sale by a nonresident

outside the state followed by a transfer in New York

constituted a transaction in interstate commerce and

that a sale in New York by a nonresident followed

by a transfer in New York was also a transaction

in interstate commerce. The New York Court of Ap-

peals held that the statute did not discriminate against

interstate commerce in favor of local commerce but

rather discriminated between two kinds of interstate

transactions.

This Court in effect held that it was immaterial

that the discrimination involved two types of interstate

commerce. In striking down the New York scheme,

this Court applied classic Commerce Clause principles,

i.e., that a state may not discriminate against interstate

commerce in order to benefit local commerce.’ Thus

this Court held that discrimination between “two types

of interstate transactions in order to favor local commer-

cial interests over out-of-state businesses . . . is constitu-

tionally impermissible.” Boston Stock Exchange v. State

Tax Commission, 429 U.S. at 335.

The Court found that New York used “its power

to tax an in-state operation as a means of ‘requiring

[other] business operations to be performed in the

home state.’” 429 U.S. at 336. New York could not

have directly required that sales of New York securities

‘Boston Stock Exchange has recently been cited in support

of the following proposition:

“This Court consistently has struck down state and local

taxes which unjustifiably benefit local business at the ex-

pense of out-of-state business.” Moorman Mfg. Co. v.

Bair, 437 U.S. 267, 288 (1978) (Powell, J., dissenting).

See also Maltz, The Burger Court, The Commerce Clause,

and the Problem of Differential Treatment, 54 Ind. L.J.

165, 167 (1979).

a:

to be transferred in New York must be made in New

York rather than in some other state. This Court

held that the state could not endeavor to achieve the

same objective through the guise of a conditional reduc-

tion of its transfer tax—a method which was essentially

coercive in nature. Such a scheme prevented a non-

resident from making a tax neutral choice of exchange,

creating an advantage for New York exchanges and

a discriminatory burden on interstate commerce.

The present case presents completely different cir-

cumstances. The unconditional exemption of imported

goods is not coercive. It was not designed to benefit

local business at the expense of goods in interstate

commerce nor does it have any such effect. These

circumstances completely distinguish this case from

Boston Stock Exchange.

The purpose of the exemption was to encourage

import business to remain in the state by creating

a condition of tax neutrality as between California

and various other States with free port laws. Whether

or not the exemption was extended to interstate goods

was completely immaterial so far as achieving this

objective is concerned.

The Court of Appeal read Boston Stock Exchange

to stand for the proposition that differential tax burdens

which favor one class of commerce over another are

prohibited, irrespective of any purpose or effect to

advantage the home state. (Pet. App. 15). The court

thereby construed Boston Stock Exchange as prohibiting

all state differentiations between types of out-of-state

commerce. But the mere existence of tax differentiation

between types of out-of-state commerce, with no benefit

to local interests resulting from such differentiation,

—

does not violate the Commerce Clause." As this Court

has repeatedly and unequivocally held, the gravamen

of a Commerce Clause violation is the benefit to local

business that results from differential treatment. Boston

Stock Exchange simply reiterates and applies this rule

to the unusual facts of the case. Only by misinterpreting

Boston Stock Exchange to preclude all differentiations

between out-of-state transactions could the lower court

conclude that Section 225 unduly discriminated against

interstate commerce. The fact is that Section 225 is

a perfectly legitimate exercise of state power under

the rule of Boston Stock Exchange and is manifestly

distinguishable from the New York statute held to

be invalid in that case.

In this connection the following excerpt from Boston

Stock Exchange—which is conspicuously absent in the

Court of Appeal’s opinion—is noteworthy:

“Our decision today does not prevent the States

from structuring their tax systems to encourage

the growth and development of intrastate com-

merce and industry. Nor do we hold that a State

may not compete with other States for a share

of interstate commerce.” 429 U.S. at 336-37.

What California did in enacting Section 225 is pre-

cisely the kind of “structuring” to which this principle

is addressed. No preference is accorded local commer-

cial interests. It is not the differentiation in tax treat-

ment between foreign commerce and interstate com-

merce which may induce import business to remain

in the state. It is the fact that imported goods in

_ “See Boston Stock Exchange, supra, at 330 n. 11 suggest-

_ that an exemption like California’s would have been permissi-

2.

=. wae

California are exempt from tax. The tax differential

itself—the only alleged vice of the California statute—

can have no bearing on an out-of-state shipper’s deci-

sion to use California’s facilities. Thus, nothing in

the Boston Stock Exchange decision supports the attack

‘on Section 225’s validity.

E. The California Statute Is Consistent With Constitutional

_ Policies Articulated in the Michelin Decision.

Section 225 is not only consistent with underlying

Constitutional policy, but even goes further than re-

quired to advance such policy. Perhaps the most com-

prehensive recent discussion by this Court of many

of the constitutional policies relevant to the instant

case was in. Michelin Tire Corp. v. Wages, 423 USS.

276 (1976). Although Michelin involved an analysis

of the Import-Export Clause, it is established that the

policies animating the Import-Export Clause and the

Commerce Clause are much the same and that both

Clauses were directed to similar concerns. See Japan

Line, Ltd. v. County of Los Angeles, ........ iS Geen .

60 L.Ed.2d 336, 348 n.14 (1979).

In Michelin, the Court dealt at length with the con-

cerns which led the Framers of the Constitution to

correct the major defects of the Articles of Confedera-

tion. The Michelin opinion highlighted three original

concerns of the Framers: (1) The Federal Government

must speak with one voice when regulating tariffs and

commerce with foreign nations; (2) Import revenues

should not be diverted to the states; and (3) Seaboard

states should not be permitted to tax imports merely

flowing through their ports to inland states to the

detriment of citizens in states less favorably located.

Michelin Tire Corp. v. Wages, 423 U.S. at 285-86.

—19—

An analysis of the concerns expressed in Michelin

in the context of the instant case goes far to demon-

strate that Section 225, by freeing imports from property

tax burdens, advances each of the relevant constitutional

interests. Taking these in order: (1) So long as a

state forbears from imposing its property tax upon

imports, as California has done in Section 225, Congress

and the Federal Government are given maximum oppor-

tunity to speak with one voice to the extent necessary

to regulate tariffs and foreign commerce; (2) Section

225 diverts no import revenues, directly or indirectly,

to the states; and (3) Not only is California as a

coastal state not taking advantage of its location at

the expense of inland states, but rather it is facilitating

the process of importation and exportation and thereby

benefitting other states.

F. Federal Policy Encourages States to Favor Foreign Com-

merce Over Interstate Commerce.

The foregoing analysis demonstrates that the Consti-

tution permits the states to give favorable treatment

to imports and exports. In fact, state preferences for

imports and exports have been constitutionally encour-

aged. Thus, in Japan Line, Ltd. v. County of Los

Angeles, supra, the Court construed the Commerce

Clause to favor foreign commerce over domestic com-

merce. There, the Court held that shipping containers

used exclusively in foreign commerce are not subject

to state property tax. However, domestic containers

of the same type, when engaged in interstate commerce,

are subject to state taxation. The County of Los Ange-

les argued in Japan Line that such discrimination in

favor of foreign commerce and against interstate com-

merce is impermissible. The argument was deficient

in Japan Line and is likewise deficient here.

—20—

In addition, recent federal legislation shows that Cali-

fornia’s exemption for imports and exports is entirely

consistent with Congressional. policy. The Airport and

Airway Revenue Act of 1970, in order to compensate

for the cost of Government services provided to air

users, established a 5 percent tax on the amount

paid for the transportation of property by air.” The

‘Act,, however, excludes from tax the transportation

10

of imports and exports.

The provisions of the federal tax on transportation

of property by air are thus strikingly parallel to Cali-

fornia’s Section 225. The Federal provisions favor im-

ports and exports by limiting the tax to domestic air

transportation. Transportation of property in interstate

commerce is taxed but foreign commerce is exempt.

Moreover, Treasury Regulations issued under the Act

provide flexible rules permitting stopovers, repackag-

ing and consolidation of cargo in the course of move-

‘ment without loss of exemption from tax."' Califor-

nia’s Section 225 similarly provides that breaking in

bulk, labeling, packaging, relabeling or repackaging

of property is permitted without loss of exemption.

As pointed out at page 12 of the Brief for the

United States supporting the Petition for Certiorari,

“California’s removal of property tax burdens upon

imports and exports is therefore entirely consistent with

congressional poticy.”

*Pub. L. No. 91-258. H.R.Rep. No. 91-601, 91st Cong.,

Ist Sess., 38 (1969).

Internal Revenue Code § 4272(a).

1126 C.F.R. § 154.2-1(c), (d).

oe

II

The Exemption Accorded Imported Goods Did Not

Frustrate Congressional Power in Establishing

Tariffs.

The Court of Appeal held that the exemption accord-

éd certain imported goods had the effect of regulating

commerce by frustrating Congressional power in estab-

lishing tariffs. The reasoning of the court apparently

was that the exemption accorded imported goods had

the effect of offsetting tariffs, thus reducing the amount

of protection Congress intended to give domestic manu-

facturers (Pet. App. 15-16). If the exemption is invalid

on this ground, then the property tax laws of virtually

all the other states would likewise be invalid.

Each of some thirty-six other states with free port

laws exempts imported goods intended for shipment

to other states. Most do not extend the exemption

to goods produced in the state even though destined

for out-of-state shipment. Thus imported goods passing

through a free port state enjoy a competitive advan-

tage in markets in other states over (1) goods manufac-

tured in a free port state and shipped to other states,

and (2) goods manufactured and taxed in other states.

There is also a similar problem with respect to the

tax laws of states which do not have free port laws.

Although they do not single out imports for preferential

treatment, many of such states either exempt all inven-

tories or tax inventories at rates lower than those pre-

vailing in other states. If goods imported into any susch

state remained in the state of importation and competed

ae

only with goods manufactured there, the tax laws of

such state would not operate to “offset” tariffs. But this

is not the case.

The competition of imported goods is not confined

to goods manufactured in the state of importation.

On the contrary, imports flow through the state of

importation to other states. Once an import has been

shipped into another state, it there competes with locally

manufactured goods as well as goods manufactured

in the other states. Thus, competition will exist between

goods imported, goods manufactured in such state, and

goods manufactured in other states. These goods will

have been subject to different states’ property taxes.

To suggest that the above differences in state proper-

ty taxes result in interference with Congressional power

to levy tariffs is far fetched. Differences in state tax

laws are a corollary of Federalism. The nation is com-

posed of fifty states each of which within broad limits

is ftee to structure its tax laws as it sees fit. Except

by coincidence they will not be precisely alike. The

free flow of trade among the states and with foreign

countries is also an attribute of Federalism. Therefore

it is inevitable that consequences such as those discussed

will occur.

Many differences among states’ tax laws have long

existed. It must be assumed that Congress was aware

of such differences and adjusted tariffs accordingly

or, more likely, ignored them.

In the overall context of the tariff making process,

state property taxes are at most a minor item in the

determination of manufacturing costs throughout the

United States. Like California, most states impose a

tax only on goods in the state on the state’s tax

date—one day out of 365. As a result only a fraction

of the toial goods in the state during any given year

are actually taxed.

During the year at issue in the instant case, 1976,

the California tax rate on the market value of property

varied between 3 and 342%. A 50% exemption for

inventories reduced the tax rate to 1% to 14%.”

In the case of the goods in question there was a

turnover rate of three times per year, resulting in

an average effective rate of tax of as little as ’%%.

(A. 12). Thus. even if there were some merit to the

Court of Appeal’s holding regarding frustration of Con-

gressional power, the effect of the exemption in question

was de minimis.

Il

The California Statute Should Be Upheld Because No

Impermissible Effect Upon Commerce Has Been

Established.

A. The Lower Court Erroneously Applied a Per Se Test in

Determining the Statute’s Constitutionality.

No effort was made by Respondents to establish

that the California statute had an actual discriminatory

effect upon interstate commerce. The court below treat-

ed the statute as invalid on its face, thereby applying

a per se test in determining the statute’s constitutional-

ity.'* Thus, without any evidence on the subject. the

court assumed that an unconstitutional effect existed.

Cal. Rev. & Tax. Code § 219.

"The Court of Appeal assumed that since the statute accord-

ed goods different tax treatment on the basis of their origin,

“Foreign goods are thereby given a competitive advantage over

interstate goods of the same nature and competing in the same

market.” (Pet. App. 11).

a,” ee

In this respect, the Court of Appeal was in error.

This Court has rejected a per se test in determining

the validity of statutes under the Commerce Clause.

Earlier decisions suggested that state tax statutes might

be invalidated on Commerce Clause grounds without

considering their practical operation and effect. For

example, in Spector Motor Service, Inc. v. O’Connor,

340 U.S. 602 (1951), the Court held invalid a state

franchise tax on the ground that the tax was imposed

upon the privilege of engaging in interstate commerce.

The Spector approach deemed “irrelevant any considera-

tion of the practical effect of the tax.”

In declaring the California statute unconstitutional,

the Court of Appeal essentially followed the anachronis-

tic Spector approach. The court held that the differentia-

tion on the face of the statute between interstate and

foreign commerce was per se unconstitutional and re-

quired no evidence whatsoever of the practical effect

of the statute.

The Spector approach adopted by the Court of Ap-

peal has been rejected by this Court. Complete Auto

Transit, Inc. v. Brady, 430 U.S. 274 (1977). In Com-

plete Auto, the Court upheld the validity of a tax

similar to that stricken in Spector after considering

its practical operation and effect:

There is no economic consequence that follows

necessarily from the use of the particular words

[of the statute] and a focus on that formalism

merely obscures the question whether the tax pro-

duces a forbidden effect. . . . Accordingly, we

now reject the rule of Spector Motor Service,

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274,

278 (1977).

=

Inc. v. O’Connor, that a state tax on the “privilege

of doing business” is per se unconstitutional when

it is applied to interstate commerce, and that

case is overruled."

In order to determine the validity of the California

statute it is necessary to consider the effect the statute

has upon interstate commerce. It would be an exercise

in formalism to declare the statute unconstitutional

based on speculative concerns of burdening interstate

commerce. Moorman Mfg. Co. v. Bair, 437 U.S. 267,

280. The burden of proving that the statute has an

unlawful effect rests upon Respondents, the parties

attacking the statute.’®

B. Respondents Failed to Establish That the Statute Has Any

Effect on Interstate Commerce.

The potential effect of the California statute which

the Court of Appeal assumed to be present is that

the different tax treatment accorded foreign and domes-

tic goods originating outside California and traveling

through California to destinations outside the State

could result in the foreign goods having “a competitive

Id. at 288. More recently, the Court scrutinized the prac-

tical operation of a state tax statute attacked as discriminatory

in First Federal Savings and Loan Association v. State Tax

Commission, 437 U.S. 255, 259 (1978), and upheld the tax,

holding that the federal savings and loan associations attacking

the statute:

|H]ave not, however, established that it is unfairly burden-

some in “practical operation.” The record does not indicate

that federal associations have suffered a significant handicap

in competing with state institutions, or that any other

federal policies have been thwarted. (Emphasis added.)

(Citation omitted. )

Metropolitan Casualty Ins. Co. v. Brownell, 294 U.S. 580,

584 (1935); Brown v. Maryland, 25 U.S. (12 Wheat.) 262,

263 (1827).

niin

advantage over interstate goods of the same nature

and’ competing in the same market.” (Pet App. 11).

This, however, was a gratuitous assumption on the part

of the lower court. There is no evidence in the record

whatsoever to support it.

In order to show such an adverse effect on com-

petition by interstate goods in the markets of other

states, it would be necessary at a minimum to prove

each of the following factors: (1) There must be

a volume of traffic in goods brought into California

from other states for shipment out of the state in

interstate commerce; (2) Such interstate goods must

be comparable to foreign goods similarly brought into

California for shipment out of the state; (3) The

interstate goods must be subjected to California prop-

erty tax and the foreign. goods must be exempted

from such tax by reason of Section 225;'' (4) The

interstate and foreign goods must be shipped to markets

in gther states where they compete against each other.

No evidence was offered to prove any of the fore-

going factors. The claimed discriminatory effect on

competition is therefore hypothetical and speculative.

‘There are a number of reasons for believing that inter-

state as ‘well as foreign goods may never become subject to

California property tax. As the Court pointed out in Michelin

Tire Corp. v. Wages, 423 U.S. at 288, state property taxes

on goods can easily be avoided by the use of modern methods

of transportation such as air freight, containerized packaging

and railroads. In addition, it is common knowledge that mer-

chants have for years avoided the property tax by letting their

inventories become depleted shortly before a given tax date

and then replenishing them shortly thereafter. See Keesling,

Michelin Tire Corporation v. Wages: The Demise of the Original

Package Doctrine, 50 So. Cal. L. Rev. 719, 725 (1977).

—,

Even if these factors are assumed to exist, they would

not establish the extent of the effect, if any, on com-

merce.'* At most, the effect of the tax on competition

in the markets of other states would be highly at-

tenuated.

C. The Effect of the Statute, if Any, Is too Insubstantial to

Place an Undue Burden on Interstate Commerce.

Assuming arguendo the existence of an effect on

competition, the question remains whether such effect

requires invalidation of the exemption under the Com-

merce Clause. At most, the policies of California may

have resulted in a slight ripple effect on competition

in markets outside of California. Respondents must

show that the California exemption has a substantial

effect which places an undue burden on interstate com-

merce.” The imposition of an ad valorem property

tax such as that involved in Michelin has been char-

acterized by the Court as having an insubstantial effect

on the demand for the goods so taxed. Department

of Revenue v. Association of Washington Stevedoring

Cos., 435 U.S. 734, 753 (1978).

Furthermore, even assuming a substantial adverse

effect on commerce, in order to determine whether

this constituted an undue burden it would be necessary

18The extent of the effect was de minimis. See text accom-

panying footnote 12, supra.

'"Ninpert v. Richmond, 327 U.S. 416, 424 (1946). See

also Gregg Dyeing Co. v. Query, 286 U.S. 472, 481 (1932):

“Discrimination, like interstate commerce itself, is a prac-

tical conception. We must deal in this matter, as in

others, with substantial distinctions and real injuries.”

==

to make “the delicate adjustment between the national

interest in free and open trade and the legitimate

interest of the individual States in exercising their taxing

powers.””” This determination requires an examina-

tion of “the unique characteristics of the statute at

issue and the particular circumstances in each case.”

No such characteristics or circumstances were con-

sidered by the Court of Appeal. In light of the history,

purpese and background of the statute,” its attenuated

and problematic effect on commerce, and the lack

of any precedent for an extension of the Commerce

Clause to invalidate any such effect, Section 225 should

be upheld.

_*°Boston Stock Exchange v. State Tax Commission, 429

U.S. 318, 329 (1977). “Complete Auto recognized that a

state has a significant interest in exacting from interstate com-

merce its fair share of the cost of state government.” Department

of Revenue v. Association of Washington Stevedoring Cos., 435

U.S. at 748.

“1Boston Stock Exchange v. State Tax Commission, 429

U.S. at 329. -

“The statute providing for the exemption in question was

enacted in 1975 and became effective while the original package

doctrine was still in effect. Notwithstanding the Constitutional

immunity then accorded imports, it was well established that

the state could tax other goods, including goods in their orig-

inal packages, brought into the state from other states.

Thus, there is little question but that the statute was valid

at the time enacted. Cf. First Federal Savings and Loan Associa-

tion v. State Tax Commission, 437 U.S. 255 (1978). The

Legislature in enacting the statute involved was not displaying

an unfriendly discriminatory attitude toward interstate commerce,

but was simply following a pattern which had existed from

time immemorial. Even after the decision of this Court in

Michelin the different tax treatment of goods in interstate com-

merce was not due to any deliberate attempt or unfriendly

attitude on the part of the California Legislature, but rather

was due to the passive continuation of the status quo ante

with respect to goods brought in from other states.

a,

Conclusion.

For the reasons set forth herein, the opinion of

the California Court of Appeal, Second Appellate Dis-

trict, should be reversed.

Respectfully submitted,

FRANK M. KEESLING, Esq.,

ANDREW S. GARB, Esq.,

Attorneys for Petitioner.

THOMAS W. HENNING, Esq., and

LOEB AND LOEB,

and

ANN K. SMITH, Esgq., and

JONES, HALL AND ARKY,

Of Counsel.

EXHIBIT A.

Ala. Code tit. 40, § 40-9-6 (1975) Sf,

Ariz. Rev. Stat. §42-631 (1956), Ariz. Rev. Stat. §42-

632 (Supp. 1957-1978)

Ark. Stat. Ann. $84-417 (Supp. 1979)

Cal. Rev. & Tax Code §225 (West Supp. 1979)

Colo. Rev. Stat. §§39-1-102, 39-1-104 (1973)

Conn. Gen. Stat. §§12-95a, 12-108 (1979)

D.C. Code §47-641 (Supp. 1978), D.C. Code §47-

1204 (1973) :

Fla. Stat. §196.0011 (1977)

Ga. Const. of 1976, art. VIII, $I, para. IV

Idaho Code §§63-105 W, 63-105 X (1976)

Rev. Act of 1938 $19.21, Ill. Rev. Stat. ch. 120,

§500.21 (1977)

Ind. Code §§6-1.1-10-29, 6-1.1-10-30, 6-1.1-10-30.5

(Supp. 1978)

Iowa Code §§ 427.1, 427.16 (1975)

Kan. Stat. §79-201f (1977)

Ky. Rev. Stat. §132.095 (1970)

La. Const. of 1974, art. 7, §21

Me. Rev. Stat. Ann. tit. 36, $655 (West 1978)

Mass. Ann. Laws ch. 59, §2 (Michie/Law. Co-op

1978)

Mich. Comp. Laws Ann. $211.9 (Supp. 1979-1980)

Miss. Code Ann. §27-31-13 (1972)

Mo. Rev. Stat. $137.093 (1969)

Mont. Rev. Codes Ann. $84-202(4) (Supp. 1977)

eniaien

Neb. Rev. Stat. $77-1226.01 (Supp. 1978)

Nev. Rev. Stat. $§361.160, 361.163, 361.165 (1977)

N.J. Stat. Ann. §54:4-3.20 (West 1960)

N.M. Stat. Ann. §§ 7-36-7, 7-36-14 (1978)

N.C. Gen. Stat. §105-275 (Supp. 1977 & Supp. 1978)

Ohio Rev. Code Ann. $5701.08 (Page 1973)

Okla. Stat. Ann. tit. 68, $2425 (West Supp. 1978-

1979)

Or. Rev. Stat. $§307.801, 307.820, 307.830, 307.840,

307.850, 307.990 (1977)

S.C. Code §§12-37-1110, 12-37-1120, 12-37-1130, 12-

37-1140, 12-37-1150 (1976)

S. D. Compiled Laws Ann. $10-4-28 (1967)

Tenn. Code Ann. $67-5180 (1976)

Tex. Rev. Civ. Stat. Ann. art. 7150 f (Vernon Supp.

1978-1979)

Utah Code Ann. §§59-2-18, 59-2-19 (1973)

Wis. Stat. §70-111(10) (1977)

Wyo. Stat. §39-1-201 (1977)

6 TE ET LS WOES Fe

— SO ee re er