Petition for Writ of Certiorari — Youngstown Sheet & Tube Co. v. Bowers

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LiISNRARK TN

SUPREME COURT. U. 8

ene ne.

Ocroen Tuns, 1

2 14

UNITED STATES PLYWOOD CORPORATION,

Petitioner, f

* vs.

rr OF ALG.

a Respondent.

3

PETITION FOR WRIT OF CERTIORARI TO TREE

SUPREME COURT OF WISCONSIN. _

aa

7297

Rocer C. Mivanan, |

Warn . R¥NKiEwicz,

785 North Water Street,

Milwaukee, Wisconsin,

Counsel for Petitioner.

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i * 75

SSS wes

7— — fee ; 2

INDEX

opinions below ........... abvvavsevedte „ 5

% —˙ A0 l . a

Question presented Bo teas 5 een =a ioe 8

: Constitutional Provision Involved. re 5 3

Statement of ne 5 . 2

Reasong for granting the Writ. es is VV

r eas 2 8293 3 7

Appendix A, Decision of Cireuit Court, Kewaunee ;

„ Ser ck ve ecm be Olan rite aver ekss Scan a

Appendix B, Opinions of ‘Wisconsin Supreme Court. 36

“Appendix G, Judgments of State Courts, ease Meee. as 52

5 Canons ae

Cases.

American Mfg. Co. v. City of St. Louis, 238 Mo. 267,

„142 K W. . FV ae

Shen. Maryland, 12 Wheat. 419, 6 L. Ed. 678. 4

N Gardner- Richardson v. Evatt, 145 Ohio 368 61 N. E. a

2nd 704 JJ ee ER ARO ( ee, ee 5

Hooven & Allison Co. v. Evatt, 224 U. 8. 1 65 S. Ct.

s eve ee res Peep meer eas Waser ely oes os 4, 5, 6

Low v. Austin, 13 Wall 29, 20 I. Ed. 517. 355 .

Washington Chocolate Co. v. King es Wash., 152

Vi é%ÿÄ˙ . ——T Are

United States Constitution, Article I, Section 10,

Clause: N . . ee . 4

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airs o

eC 5

e Gono i .

Ocrozer Term, 1957. ;

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UNITED STATES PLYWOOD CORPORATION,

Petitioner,

ys." 5

CITY OF ALGOMA, ..: 75

te | | Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

‘SUPREME COURT OF WISCONSIN.:.

To: The Honorable Supreme Court of the United States.

Your petitioner, United States Plywood ; Corporation,

respectfully shows:

Rew 7

9 _ OPINIONS OF COURTS BELOW.

The opinion of the trial court, the Circuit of Kewaunee

County (R., pp. 18-45), is not reported officially but is

appended to this. petition in Appendix A.

The majority and minority opinions of the Supreme a,

Court of Wisconsin (R., pp. 66-83) are reported i in 2 Wis.

2d 567, N. W. 2d — and are appended to this peti-

tion in Appendix B. . 3

®

1. The judgment to be reviewed is that of the Supreme

Court of Wisconsin dated and entered January 7, 1958,

and appended to this petition in Appendix C. i if

2. The statutory provision believed to sustain the juris-

dietion of the Supreme Court is 28 U. S. C. 8 1257 (e).

- QUESTION ‘PRESENTED.

Is the levy of a general ad’ valorem tax by-a state’ upon

lumber and veneer imported by and stored in the tax-

payer’s storage yard and warehouse in the. original form

and packages in which they were imported prohibited by

Article I, Section 10, Clause 2 of the United | States States Consti-

tution? — „

IV. g

CONSTITUTIONAL. PROVISION INVOLVED.

The Constitutional provision involved is Article I, Sec-

tion 10, Clause 2 which is as follows:

No state shall, without the consent. cf the 8

lay any imports or duties on imports or exports except.

what may be absolutely e for — its

inspection laws. 3

E

ae 3 7 2

STATEMENT OF THE CASE.

This i is a proceeding to review a judgment of the Wis-

consin Supreme Court affirming a judgment which denied

petitioner’ s claim for refund of a general ad valorem prop-

| * tax paid sigs protest, agsessed upon * goods

NS

— 8 8

e 1 he 3 in the . packages

or form in which imported.

United States Plywood Corporation, the petitioner, con-

under the name ot its Algoma Plywood and Veneer Com-

pany division. On May 1, 1955,.the assessment date of the

general ad valorem tax, it used both foreign and domestic

veneers and lumber in its manufacturing operations (R.,

p. 43). Petitioner is not contesting the impositions of we

tax on imported lumber er and veneer which had entered the

manufacturing process and thus lost their status as an

import. On May 1, 1955, 6

lumbex and its

is the impesition of thx tax on these imports which the. -

pétitioner has contested. °

Foreign veneers were imported wee. petitioner-from

Canada, France and the Belgian Congo. The foreign

veneers were received in Algoma in the original packages

in which they were shipped. They were kept in such pack-

ages, segregated and stored in petitioner's warehouse until

used i in the manufacture of ee enn Finding No.

4, R., p. 43). a

Foreign lumber was imported by n trom On- :

tario, Canada. The lumber was imported in rough, un-

planed form. It was shipped uncrated on railroad cars.

The lumber, when received, was piled in the petitioner’s

storage yard. Both foreign and domestic Kimber must be

kiln dried by the petitioner before manufacture. The im-

ported lumber air dried while in' storage to varying degrees-

depending upon how long. it remained in storage. : Air,

drying reduced the time pequired for kiln drying (Finding :

_No. 5, R., pp. 43, 44). a

There was no co-mingling of foreign and e veneers

or foreign and domestie lumbers so as to cause a loss of

identity (R., p. 27). On May 1, 1955, petitioner had on

>

aa

bk the Cireuit Court for Kewaunee County, affirmed by. the

66-83).

_ eral question of substance’ in a manner in, conflict with |

5 3

hand imported lumber and veneer valued at 6288, 598.00.

The Cireuit Court of Kewaunee County found that one-

half of the foreign lumber veneer, a value of 6144,

296.26, was required to be on hand to meet petitioner's

current 2 — needs as a manufacturer * No.

9, R., p. 44).

Petitioner seeks review or that — of the judgment

Wisconsin Supreme Court, which denied recovery of $2,-

677.46 paid by petitioner under protest with pet to

impor 1 lumber and veneer.

Petitioner ‘contended that the imported 3 ‘and ve-

- heer were imm@ne from. general ad valorem taxation under

Article I, Sectign 10, Clause 2. of the United States Con-

stitution at every stage of the proceedings, qriginally in.

the protest of the assessment before the Board of Review

of the City of Algoma (R., p. 9), then in ‘the Circuit Court

action for refund (R., pp. 4, 5) and ‘thereafter by appeal

to the Wisconsin Supreme Court (R., p. 56). The con-

stitutional issue was discussed in the major portion of the

Circuit Court’s opinion, (R., pp. 18 through 30) and the |

entire opinion of the Wisconsin Supreme Court (R., pp.

nkAsOxsS RELIED ON FOR ALLOWANCE OF WRIT. —

(a) The Wisconsin Supreme Court ‘has decided a fed-.

applicable decisions of this court.

From’ this Court’s decision in Brown v. Méryland, 12

Wheat. 419, 6 L. Ed. 678. (1867), and Low v. Austin, 13

Wall. 29, 20 L. Ed: 517 (1872), to the most. recent case of

Hooven & Allison Co. v. Evatt, 324 UnS. 368; 65 S. Ct. 870

(1945), imports have been held immune from state general

* .

a 8

: taxation, losing the immunity only B subjected to a

manufacturing process ‘or when removed from the original

package or changed from the form of importation. The

Wisconsin Supreme Court has now overruled this eourt's

decision in the Hooven & Allison Co. v. Evatt case by de-

3 Seen imports taxable if required for a manufacturer’ 8

urrent operational needs, even though the imports: are

stored by the importer-manufacturer in · a warehouse and

storage yard i in the original package or form of importa-

tion. The three justices dissenting in the case at bar noted

\that the majority decision was contrary to the Hooven d

Allison Co. v. Evatt decision of this court.- Petitioner sub-

mits that no state court may change the law interpreting

the United States Constitution as declared by this court.

(b) The Wisconsin Supreme Court has decided a fed-

eral question of substance in a manner directly contrary to

decisions of other state supreme courts on the same ques-

tion.

The Ohio Supreme Court i in Gardner-Richardson v. Evatt,

145 Ohio St. 363, 61 N. E. 2d 704 (1945), held that a manu-

facturer’s imports, stored in the manufacturer’s ware-

house for future use, were not subject to general state taxa-

tion because ‘of the constitutional immunity. provision as

interpreted by this court in Hooven & Allison Co. v. Evatt,

supr a.

- Imports of the same ‘character were constitutionally pro-

. tected from general state taxation by the Washington Su-

preme Court in Washington Chocolate Co. v. King County,

21 Wash. 2d 630, 152 P. 2nd 981 (1944), cert. den. 324 U. S.

880. The Missouri Supreme Court also decided imports

stored awaiting use are immune from tax. American Mfg.

Co, v. City of St. Louis, 238 Mo. 267, 142 S. W. 297 (1911).

(e) The question presented is of national concern. If

any doubts exist concerning the immunity of imports needed

for a manufacturer’s current Wand such doubts should

be resolved by this court.

—

5 megs

6 5

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Sian ä — and W store imports ‘for

‘future use. All but three states have general tangible per-

sonal property taxes. Very few states have attempted to

fos imported goods while they remain the property of the

rter and are stored in the original form or * in

which they were received.

Decisions of state courts which recognize the immunity 7%

of imports stored awaiting use pave. been allowed to stand,

as a practical matter, by this urt's denial of Certiorari

in these cases. Immunity of imports from state taxation

also resulted from the Hooven & Allison v. Evatt decision.

Language i in the Hooven case, however, seems to have cre-.

ated a question. as to whether states may tax a manufac-

turer's ‘“‘current operational needs“, as an exception to

the original package doctrine. The Wisconsin majority in

the case at bar relies on a current operational needs

‘exception. The Wisconsin minority takes the position that

a current operational needs“ exception was considered

and rejected by this court. Doubt exists in this tax area

and. should be resolved by this court.

By interposing a current operational needs iN

to the long established original package or form’’ doc-

trine, the Wisconsin Supreme Court has affected the opera-

tions of a large number of manufacturers and businesses

in the United States. Manufacturers import goods with ee

the intention of using these goods in the future. If such

imports dre subject to state taxation by reason of such

intention or the likelihood of such future use, the constitu-

tional provision granting immunity is emasculated and

, nullified. The theory of the exception made by the Wis-

consin Court will subject to tax Virtually all 3 since

kee, if any, manufacturers will store or keep any imports

not intended to be used in the near or immediate future.

Taxing authorities. no doubt have relied on this court’s

Hooven d Allison v. Evatt decision, as well -ds the other

5 aa 3

state court decisions noted 3 in the administration i

their property tax laws. A review by this court will clarify .

a now uncertain tax area. Clarification sa save taxing:.

agencies the expense .of litigation if these jes now.

seek to tax imports as a result of the Wisco ene ourt 8

decision. Tey

Duties on imports are an beet souree of Federal

revenue. Duties paid to dhe federal government purchase

an immunity from state taxation, Brown v. Maryland,

supra. Permitting the states to tax the gotals subjects them

to double taxation, discriminates - ‘against imported goods

and discourages that wider world trade essential to imple-

ment this nation’s foreign relationships. Unless the doc-

trine of Brown v. Maryland, supra, which has. been con-

sistently followed for 160 years is preserved, the Constitu-

‘tional pre-emption of the field of taxation of imports will

be surrendered to the states. An important instrumentality

of national policy available to the ‘federal government thus

will be eroded by state taxation, Byes

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CONCLUSION.

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For the foregoing reasons, this petition for writ of ¢ cer-

tiorari should be 3

Dated March 21, 1958. : o

Respectfully submitted,

Rodn C. MINAHAN,

SWatter P. Rywxkrewicz,

735 North Water Street,

3 ay Milwaukee, Wisconsin,

es ‘Counsel for Petitioner.

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if . .

e ‘ ° paride .

nen of Gent Court of 1 Wisconsin.

. Formal Parts ited.) 1

Memorandum e

>

Plaintiff owns and operates ‘as one of its divisions a

‘plywood. and veneer plant i in the city of Algoma. It paid

its real and personal property taxes for the year 1955 un-.

der protest and brings this action’ against the city under

ec. 74.73 to recover the portions of such taxes claimed

to have been illegally exacted... The action involves ques-

tions of exemptions of imports and excessive valuations.

There is also involved a question of — of taxes.

5 a) Imported e and 2

In the manufacture of its veneered products the plain-

tiff uses both domestic and foreign lumber and veneers.

The lattr is directly imported by plaintiff as importer -

from Canada, France and the Belgian Congo. From Can:

ada comes birch yeneer, from France, French oak veneer,

and from Africa, species of veneer known: as korina and

fuma. The veneers, both foreign and domestic, are shipped

‘to plaintiff in bundles or wooden crates,—mostly the for-

mer. The bundles are secured by metal straps, and they,

like the crates undoubtedly meet all the requirements of

an original package“, as that term is used in the cases

when taxability of imports by a state depends upen

whether the goods are in the original package in which.

they were imported. The foreign lumber is imported by

plaintiff directly from Ontario, Canada. The 5 are

*

1

birch aad cedar... The lumber is . as core material.

When recetved, it is piled in plaintiff’s yard, It is claimed

that each individual piece of lumber in a pile constituted

an original package. The foreign veneers are kept stored .

in a warehouse’ until needed. in manufacture, and, when

needed, the packages are broken, and the individual pieces

then commence their journey through the plant to become

part ‘of a veneered product. 2 ö

Plaintiff reported as personal propexty . to the 1

state’s ad valorem personal: property fax all foreign

’ veneers that had been taken from origindl packages on

May Ist, 1955, and all foreign lumber that had been taken

from piles in the yard to be run through the plant, but

5 claimed, ‘and-still claims, that all imported. veneers in its

warehouse that. remained in unbroken original packages

and all imported lumber that remained in piles in its yard

were. immune from taxation under clause 2 of sec. 10 of

Art. Lof the Federat Constitution, whieh; ev far a here

material, provides:

: “No state shall, without the. Consent of the Congress,

lay any. Imposts or Duties: on Imports or Exports ex-

cept what may be tent necessary for ——

oo inspection Laws 1 ae Sa |

The asserted immunity is based upon N v. Maryand,

12 Wheat. 419, 6 L. ed. 678, and Hooven.d Allison Co. v.

—_— (1945), 324 U. S. 652, 65 8. Ct. 870, 89 L. ed. 1252.

In the last mentioned case (hereinafter referred to as the

Hooven case) the taxpayer was a manufacturer of cordage

and other similar produets in which it used foreign hemp,

which it imported in baies. The question before the court.

was the taxability of the hemp while remaining in bales in

the taxpayer’s warehouse and awaiting use. Such hemp

was regarded. as being i in original packages and non-tax-

able. The Hooven case would be dispositive, in plaintiff’s ’

favor, of the question of the taxability of any part of the

—

11

_ foreign veneers remaining in the warehouse i in their orig- }

inal packages (and likewise dispositive of taxability of,

_ lumber if it be assumed both that each individual piece of

NAlbor constituted an original package and that the lum-

ber did not enter thes manufacturing process until taken

from piles and run through the plant) were it not for the

ne language of the court: f

It cannot be said that the fibers were ene to

manufacture when ‘they were placed in petitioner’ ~

warehouse in their original packages. And it is un-

necessary to decide whether, for purposes of the con-

stitutional immunity, the presence of some fibers in

the factory was so essential to current manufacturing

requirenients that they could be said to have entered

the process of manufacture, and hence were already

put to the use for which they were imported, before

they were removed from the. origiual packages. Even

though the inventory of raw material required to be

kept on hand to meet the current operational needs of

—— a manufacturing business could be thought to have

then entered the manufacturing process, the decision

of the Ohio Supreme Court did not rest on that ground,

and the record affords no basis for saying that any

part of petitioner’s fibers, stored in its warehouse,

were required to meet such immediate current ‘needs.

Hence, we have no occasion to consider that question. 1

(89 L. ed. 1264.)

Acting, no doubt, under the authority of an opinion of

the Attorney General rendered November 10th, 1949 (38

A. O. G. 563), which is to the effect that the Hooven case

did not close the door to taxation of that part of a manu-

facturer’s stock of imported raw materials essential to

current ‘manufacturing operations notwithstanding that

such materials on hand May Ist remajned in their original

packages, the assessor taxed against the petitioner the

value of one-half of the imported veneers then in the tax-

payer’s warehouse in original packages and imported lum-

ber in piles, being of the opinion that one-half of such

12

stock on hand was needed to meet current — re-

quirements.

As I understand one of the 3 1 the taxpayer,

it is to the effect that other portions of the majority

opinion in the Hooven case, by necessary implication, dis.

pel the notion that the supreme court intended to leave

open the question of whether raw materials on hand in

original packages but needed by a manufacturer-taxpayer

to meet his current manufacturing requirements is subject

to an ad valorem personal property tax notwithstanding

that the manufacturer is the importer. T consider, how-

ever, that the express ‘reservation of the question contained

in the language aboye quoted outweighs any implications

to the contrary and requires the conelusion that the ques-

tion with which we are new concerned remains open. I do

not find in Gardner. Richardson v. Evatt (1946), 145 0. 363,

61 N. E. 2d 704, any consideration of the question whether

— portion of a manufacturer’s raw materials as was

needed for current operational requirements was subject

to tax nor any holding that such portion. was not taxable.

That point does not appear to have been considered.

In the Hooven case the court, before reserving theggues-

tion above indicated, in. part said:

It is evident, too, that if the tax immunity of imports,

commanded by the Constitution, is to be reconciled

with the right of the states to tax goods after their

a, e een has become complete and they have be-

a part of the common mass of property within

a state, there must be a point of time when the pro-

hibition ceases, and the power of the state to tax com-

mences. Brown v. Maryland, oa (12 Wheat.

3 51 ed. 686).”. (89 L. ed 1259.) 5

The ee necessity that the 3

is to be preserved at all, survive the landing of the

merchandise in the United States and continue until /

a wuts is reached, — of — determination;

— \

: 13 ‘ . (

when it can a be said that it has become a pari of

the mass of taxable property within a state, is the

same in both cases. (89 L. ed. 1264.)

There is nothing sacrosanct in the original package rule.

_ Goods which come into this country on purchase by one

engaged in the importing business and which are in turn

sold in their qriginal packages to a domestic manufacturer-

user lose their constitutional immunity from state taxation

as imports the moment the sale is made by the importer —

to the manufacturer. They then become taxable to the

manufacturer as in the case of other property. Waring

v. Mobile, 8 Wall. (U. S.) 110, 19 L. ed. 342.

The taxpayer sees in any departure from the dials

package rule. — that is to say, the rule that the immunity

of contents of an original package from state taxation

continues until the package i is broken,—in the instant situ-

ation future problems involving tests which will be much

more ‘difficult of application than the origina! package

test and which, it is claimed, will result. in such lack. of

uniformity, and confusion as to-require adherence to 4

rule that all imports in original packages. continue’ to en-

joy immunity until the package is broken. I do not con-

sider that any sueh difficulties provide sound and sufficient

reasons for exempting a manufacturer from the state’s

personal property tax on that portion of his imported raw

materials which he has himself imported and which remain

in their original packages to the extent that such goods

G. Me needed to meet current operational needs. Lack of an

allibly accurate test does not argue against a power to

In this connection the dissenting opinion of Justice

Black in the Hooven ease should be considered. oc

If we aecept the premise, as I think we abil that im-

ported raw materials in original packages on hand Max

Ist, and required to be on hand at that time to meet the

immediate or current needs of ‘a. manufacturer, have so |

1 . 14

a definitely been ‘kia: out of the ‘stream of commerce and

‘have so finally come to rest in his plant, there, to a prac-

tical certainty, to lose their identity in a manufactured

product, so that it may reasonably be said thut it is at least

highly improbable that such goods will-ever again become’

the subject of sale and transport in their original packages,

then, I think, sugh raw materials must be regarded for all

practical purposes as having irrevocably become a part

of the common mass of property within the taxing dis-

trict: and, by virtue of that fact, subject to the state’s ad

valorem. personal property tax.

By what criterion should a manufacturer’ 8 current or

immediate need of a certain raw material be determined!

In this connection the characteristics of Wisconsin’s ad

valorem personal property tax require further considera-

tion. It is, first of all, a tax that is not a levy i in lien. form

against property but a tax assessed against the owner of

the property. It is assessed as of May Ist. The taxpayer

is néthable. for tax on property that he may own the day

before May Ist but does not own on the latter date; nor

may he avoid the. tax on property which he owns on May

Ist but disposes of on May 2nd. The May Ist circum-

stances are those that control. |

I think that an importer-user of foreign raw tint a

may be subjected to the Wisconsin personal property tax

on such part of such materials remaining in original pack:

ages as he has on-hand May Ist and which he will be re-

quired to have on hand in the immediate future to, meet

his manufacturing needs for the period that would nor-

mally be. required for him to secure additions to the in-

ventory if he placed his order on May Ist, assuming the

conduct of his business in the usual and normal manner. |

To illustrate: Assume a Wisconsin daily newspaper com-

. pany that buys its newsprint from Canada. Its presses use

5 jumbo rolls of newsprint per day, each roll constituting —

4

an original package. Assume’also that an order for news-

print requires 20 days for delivery. Assume further that

the company customarily keeps on hand about 300 jumbo

rolls and that it has on hand May Ist exactly 300 rolls. It

would thus appear that the presence of at least 100 rolls

in the warehouse was indispensable to continuous publica-

tion of the newspaper unless ‘purchases were made from a

nearby domestic owner, in which case the newsprint sO

purchased would not enjoy the immunity, because of the

_ doctrine that a sale by a domestic importer puts an end

to the immunity as an import. Waring v. Mobile, supra.

I do not believe that the intent of the Brown and Hooven

cases would prevent Wisconsin from assessing its per-

sonal property tax against 100 rolls of newsprint om hangt

5 May ist. The situation as it existed on that day was that

the company could not, short of 20 days, import additional

_ newsprint, and unless it had a 20-day supply on hand there

could be no continuous publication of the newspaper with,

newsprint imported by the newspaper company from

Canada. While of the 300 rolls on hand 200 could be re-

garded as surplus stock, certainly 100 rolls constituted the

minimum requirement of current needs and should be re-

garded as being so irrevocably appropriated to use by the

newspaper company as to have entered the process of pub-

lishing a local newspaper. I do not consider that the fact.

that orders placed before May Ist may have assured de-

livery of further newsprint before May 20th argues against

the validity of the suggested criterion in the application

of Wisconsin’s May 1st personal property tax.

There are, of course, other criteria that may reasonably .

be used to determine in 4 practical. manner what raw mate-

rials a manufacturer must have on hand to assure con-

tinuous operations. Counsel for the city has in this case

suggested a „manufacturing cycle’’. test, and it may be

that that test is better thes the one indicated above. The

2%

on hand to meet cur operational requirements. I do

16

„manufacturing cycle” test amply supports the conclusion |

of the assessor that one-half of the foreign imports on hand

May Ist were required to be on hand to meet plaintiff's

immediaty needs:

In its report of taxable personal property, submitted by

the taxpayer pursuant to sec. 70.35 (1) on J ung 7th, 1955,

the oe statement appears (Exhibit 8, page 4):

“‘Non-assessable Raw Materials — A). 200. eee. 20

elne A) Non-assessable Raw Materials consist of

veneers and lumber, which are imported into the United

Itates from Africa, Canada, and France upon which

import duties have been paid to the Customs Depart-

ment of the United States Treasury. These raw mate-

rials.are stored in our raw material storage depot on

May 1, 1955, in their original crates, cartons, bind-

ings, ete., as such were received from Foreign countries

at Ports ‘of Entry.“ 0 .

Without attempting to draw any 1 distinction dete

the lumber and veneers, the assessor determined that one-

‘half the total, or $144,296.26, was taxable because needed

to meet ‘current operational requirements. The assessor

reached his conclusion after study, inspection ‘and observa-

tion of plaintiff's business and methods. Analysis of Ex-

hibit 36, which shows how leng the foreign veneers and

lumber would have lasted had ‘such raw materials on hand

May Ist been used to fill. orders rather than any subse-

quently received materials, sufficiently proves that the tax -

payer had on hand not less than $144,296.26 in value off

foreign veneers and lumber which were required to be

not think that the Feder Constitution requires that the

assessor make separate determinations as to each separate

class or specie of imports so long as the overall result re-

mains within the value of total imports. that have lost

their character as such for purposes of an ad valorem state

0 ®

ESS, 3

tax assessed against the owner. If the criterion suggested

by the Court is à proper one, it may be claimed that the

evidence lacks proof as to how long it would take to obtain

a shipment of some of the imports. The burden of proof

in this respect becomes important, but even though it

rested with the city, Mr. Kambach’s testimony as to the

time it takes to obtain a shipment of French or African

yeneer, together with reasonable probabilities as to the

time it takes to secure shipments of other imports, leaves

the assessor’s determination that imi o the value of

5 intiff fair and a

; being assessable against pla

reasonable to the company. .

What has been said assumes the taxability of lumber, | :

to be limited to operational needs as in the case of veneers. —

That was the assessor’s view. But I think in such respect

he was in error in not regarding a larger portion than one

half of the foreign lumber as being taxable. The tax-

payer did not set aside any particular part of its lumber

storage yard or vencer warehouse for the storage of foreign

materials. Veneers were piled separately according to

specie, without regard to whether the adjacent pile was of

foreign or domestic, origin and without regard to the time

of receipt. A portion of a new shipment of fuma veneer,

for instance, would be placed on a partially depleted pile

of that veneer and could be the first next taken for use.

It is not considered, however, that there was such commin-

gling of foreign and domestic veneers or foreign and domes- -

tic lumber as to cause a loss of identity. N

Most of the foreigu lumber when received was „green.

Apparently most of the domestic lumber was purchased

green also. All lumber when received was piled in a man:

ner to facilitate air drying. While the method of piling

adopted was intended also to prevent decay, it cannot be-

said that this was the dominant purpose. It appears that

air drying never suffigiently removes the moisture content

| 18

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of lumber to permit its use by plaintiff without running

the lumber through the dry kilns. It also appears that

green lumber is not generally run through the dry kilns

without a period of air drying and that it is not “good

business practice’’ so to do. It is the normal procedure

or practice that ahould and does control, and I think, at

least as to the lumber received green—which acedunts for

— of the Canadian lumber—that when it was received

and piled, the dominant purpose was to prepare it for, use

by air drying, thus by a slow but more economical pro-

cess eee in part v t kiln tying would accom-

plish.

There is no evidence as to the proportion of Conan

Humber that was on hand that was received green except

that most df it was. If it be claimed that lumber already

partially air dried but sufficiently dry to be run through

- the dry kilns as a matter of good business practice was

not subjected on piling to the processes of manufacture,

I think that, coneeding the validity of such claim, it, never-

ä theless, becomes clear that green lumber on receipt and

pbpiling entered the . process of manufacture and lost im-

munity as an import. In the Hooven case the court said:

„This Court has pointed out on several occasions that

imports for manufacture cease to be such and lose

their constitutional immunity from state taxation when

; they are subjected to the manufacture for which *

were imported. (89 L. ed. 1264.)

The assessor would have ien warranted in toning all ;

of the green Canadian lumber. When received by ‘the

! taxpayer it was not ready for use if good: business prac-

tices were followed by the taxpayer. When the company

received the lumber it immediately proceeded to make it

ready for use by subjecting it to the air drying. Such air

drying was part of its manufacturing practices.

A further r has been raised in connection with

—

©. 2

se a :

\

f 45 955 : \

\ ee

19

imports, and that is Whether each individual piece of lum

ber constituted. an original package. This Tumber comes

in rough form, that is, unplaned. It is 2 inches thick, of

standard lengths and of s rd widths, such as 4 inches.

or 6 inches. Counsel for the taxpayer cites the case of Dant

4 Russell, Inc. v. Board of Supervisors of Los Angeles

County (Cal. App. 442), 128 P. 2d 389, as authoritatively

deciding that each individual piece of lumber in a shipment

received by the taxpayer from Canada was an original

package. Language in the opinion in that case is to such.

effect. The supreme court of California, however, re-

- versed the decision (133 P. 2d 817 (1943)). While the

reversal. was on other grounds, the same appellate court

that rendered the deeision, later declared that the effeet of

-the supreme court’s decision was to black out Hand leave

without any ‘authoritative value or #tanding’’ the deter-

_ mination that each piece of lumber was an original package

and came to the opposite canclusion. E. J. Stanton & Sons

v. Los Angeles County (1947), 78 Cal. App. 2d 181, 177 P.

2d 804. In the last mentioned case it appears that Stanton

was engaged in the Wholesale and retail lumber business. :

He imported lumber which, as in the instant case, was

- shipped loose,—that is, not bundled or fastened together

in any other way. He was taxed on the portion of the

shipment that remained after sales had been made from

such shipment. The tax was upheld. The supreme court

of California refused a hearing, and the United States su-

preme court denied certiorari. 332 U. S. 766, 68 S. Ct. 75,

92 L. ed. 352. See Simon v. City of Los Angeles (Cal. App.

April. 24th, 1956), 296 P. 2d 381, where the court gives

effect to the decision in the Stanton case as follows: —

The power of the county to tax was thus upheld upon

- the theory that the ‘aggregation of articles imported’

constituted in legal concept an original package which

was broken when some of the parts of the ‘aggrega-

tion’ were sold locally. The case undoubtedly repre-

‘unimportant to the sustainability of the assessment upon

Its real estate consists of two plants, known as the Perry

manner usual in such cases (Exhibits, 13 to 18). No com-

. certain items of personal property. 3 r

based upon ‘allegedly excessive assessments’’, whether of

| attention to sec. 74. 73 (2), which in part provides that

2

\ (

7 : Rea, 5 20 ri ©

‘ ' sents the law applicable to a situation where packaging

is inherently impossible or impracticable. Our Su-

preme Court refused a hearing and the United States

Supreme Court denied @ertigrari. U. S. 766, 68

S. Ct. 75, 92 L. ed. 352. But the Stanton case does not

control imports which actually are in packages. In

such instances the werten is what i is the originat form

or package.“

The evidence here was wet dicted to the 1

of whether the foreign lumber on hand May Ist consisted

of broken or unbroken shipments. Such determination is

the grounds assigned by the assessor.

(b) Excessire Valuation of Real and Personal Property.

Plaintiff operates a large industrial plant in a small city. .

Street Plant and - the Navarino Street Plant. In addition

to the lands which are used industrially plaintiff owns three

residences and three vacant residence lots. The latter six

parcels of real estate. were separately assessed in the

plaint is made of these assessments. The complaint goes

to the valuation of: the industrial lands and buildings and

\

Plaintiff's right to question the taxation of imports does

not necessarily rest on see. 74.73, but its right to a refund

real or personal property, does. Counsel for the city calls 4

No claim shall be allowed and no action shall be

maintained under the provisions of this section unless

it shall appear that the plaintiff. has pas more than

his equitable share of such taxes.“ ä

and to Krom v. Antigo, 220 Wis. 542, Highlander v. Dodge-

a

os

„

—

0

21

ville, 249 Wis. 502, and Yawkey-Bissell Corp. v. Langlade,

261 Wis. 524, which deal with plaintiff’s burden in estab-

lishing that he has paid more than his ‘equitable share of

such taxes“, and urges the Court to dispose of the claims |

of excessive assessments for reasons set forth in his brief

ae follows: . ear —

It is defendant’s position that Highlander v. Dod ge-

ville, supra, rules the case at bar and that plaintiff has

not offered evidence sufficient to cause the Court to

act in weighing the evidence. Even if the assessment

as been in an amount three times the fair market

value of plaintiff’s property, plaintiff could not have

recovered unless it proved that the rest, or a substan-

tial part of the rest, of the property in Algoma had

been assessed on a different basis, such as only twice

its fair market value. The burden of proof is on the

plaintiff, and the presumption exists in favor of the

correctness of the assessment. Under the Krom and

Highlander cases, supra, plaintiff has offered insuffi-

cient evidence, and there is nothing to be considered

by the court except the constitutional question:

“In Yawkey-Bissell Corp. v. Langlade, 261 Wis. 524,

53 N. W. 2d 174 (1952), the taxpayer recovered for

the reason that since ‘the cutover lands in question

were. illegally assessed in 1948 at more than their full

value, and no other property in the township was as-

° sessed at more than one-half of such value, such asséss- =

ment of such lands was clearly illegal. (page 527)

This Holding is a confirmation of the rule in H ighlander

v. Dodgeville, supra, and a practical application of that

rule in setting up the requirements which a taxpayer

must fulfill in order to 8 Plaintiff in the case

at bar has not net those requirements.

„Assuming, as claimed by plaintiff, that the lands,

the buildings, the logs and the repairs and maintenance

parts of plaintiff were overassessed, and that there

was a duplication of assessment in respect to machin-

ery and furniture and fixtures, plaintiff has neverthe-

less, made insufficient showing to entitle.it to recover.

Since plaintiff failed to offer any testimony as to the.

22 re 5

value of the other real estate owned by it in Algoma

and described in plaintiff’s exhibits 13, 14, 15, 16, 17

and 18, plaintiff has failed to. show that its property,

taken as a whole, was assessed at more than its full

market value, and that its property, taken as a whole,

was assessed on a disproportionately higher basis than

the rest of the taxable property in Algoma. The bur-

den of proof is on the-plaintiff, and plaintiff did not

_ even offer evidence to prove that its property, taken

as a whole, was assessed on a disproportionately higher

basis than the rest of the taxable. property. *

The vity’ 8 position in that by simply proving an assess-

ment for more than market value a taxpayer does not make

out a case for ay refund. Plaintiff must go further, it is

argued, and establish by evidence other than the testimony

of the assessor that at least a substantial portion of other

property in the taxing district is not assessed for more

than market value. Merit in the argument is to be found

in the probability that there has not yet been born an

assessor who would admit on the witness stand that his

purpose was to assess all property at 100% or 60% of true

market value, as the case may be, but as to plaintiff be

assessed at a higher percentage. Hence, a rule that would

permit a taxpayer to recover a refund based upon an

excess ‘over. a percentage assessment, which the assessor

will always claim he applied to all similar property, upon

mere proof that in plaintiff’s case the assessor did not

follow his rule, would, as a practical matter, permit plain- .

tiff to make out a case under the statute without proving ©

that ‘the same injustice or error which infects his assess-

ment does not also infect the asséssment of at- least a

substantial portion of ‘the taxpayers in his district.

The city’s contention that the plaintiff failed to prove

that its residence lots and property were. not assessed at

less than full market value requires dismissal of the plain-

tiff? s claims to an ov er-assessment of other of its property

\ *

“

23 „

involves a. question which would deserve serious consider a-

tion in the case of a taxpayer who owns two pieces of prop- .

.erty—say, a merchant who owns a downtown store and

also his residence—and in protesting the assessment of

the store proves only its over- valuation without at the

same time proving that there has been no under-valuation

of his home or the stock of merchandise in his store, on the

theory that he stands before the court askirig an equitable

accounting of his taxes due his city and that he should not

be permitted to recover any amount unless his aggregate

tax hill is too high. While the equitable. considerations in

‘such a situation are apparent, they need receive no more

attention here, because it is obvious that no conceivably

reasonable claim of under-valuation of plaintiff’s residence

property could offset an over-valuation of. plaintiff’s indus-

trial property by. an amount that would leave a net over-

assessment so small, under plaintiff 's theory of values, as

not to deserve consideration under the rule of the Krom

and Highlander cases.

Acts passed by. the 1953 and 1955 legislatures het re-

quire consideration. The 1953 legislature added subsec. _

(4) to sec. 74.73, thereby denying to a taxpayer the right

to maintain a plenary: action, such as the instant one, to

recover as a refund the portion of his taxes which he estab-

lished constituted an unjust share under the decisions of

our supreme court and thus relegated him to. certiorari

proceedings under sec. 70.47 (9) (a) or to invoking the

: remedy before the arten of taxation provided 8 by

sec. 70.85. ‘

. The legislature, * Chapter 111 of the Laws of 1955,

‘jin became effective May IIith, 1955, changed sec. os 49

= 2) to read as: follows :

The. value of all real and personal oper entered

into the assessment roll to which such affidavit is at-

tached by the assessor shall, in all actions and pro-

24

: ceedings. 8 such values, be presumptive evi-

dence that all such properties have been -justly and

equitably assessed in proper eee to each

other.“ i 2 a

Previously the statute made the values appearing on the

roll ‘‘ presumptive evidence 0 the full market value of

the property only. | e

The same legislature, = Chapter 440 of the Laws of.

1955, effective July 26th, 1955, repealed and recreated

subset. (4) of sec. 74.73 so as to again permit suit to be.

brought to obtain a refund of taxes on account of an

excessive assessment. It i is clear that the act which restored

the cause of action did not dispense with or change any

of the requisites of a cause of action under the statute, as.

established by prior decisions, and is, therefore, net here

important.

Counsel for plaintiff does not contend that the change

in sec. 70.49 (2) does not broaden and give more scope to

the presumption accorded an assessment but does contend

that it is inapplicable here because the new statute was

not passed until May 11th, 1955. With this contention I

disagree. The amendment merely changed a rule of. evi-

dence and did not affect any vested right. The change in

*

the rule did not operate to give to an assessment à con-

clusive effect as distinguished from a presumptive effect.

The present statute has application to this action, which

was commenced long after the statute: took effect. Estate

of Sletto, 224 Wis. 178, 181; Will of McNaughton, 138 Wis.

179, 189; Flanders v. Town of Merrimack, 48 Wis. 567, 570.

The assessment in the instant case actually was made after

May 11th, 1955, ‘while under sec. 70.10 assessments are

required to be made as of the close of May Ist, they. need

not be ,completed before the first Monday in July. Tax-

payer’s personal property statement (Exhibit 8), filed ‘in

accordance with sec, 70.35, was not required to be filed

95.

before 11 25th and was not filed until “ame after May

lith. Northern Supply Co. v. City of Milwaukee, 255 Wis.

509, is, clearly, not controllin

Freight on Logs. ‘Complaint. is made because the as-

sessor, in arriving at the true cash value of certain logs

on hand as part of the company’s ray materials, took the

figure: at which the cost of the logs appeared on the com-

pany's books, which was $71,925. This cost, naturally, in-

eluded the freight paid by the company. It appears that

these logs are usually bought from places in northern

Wisconsin and Minnesota, and that the logs. were pur-

chased F. O. B. the landing point or point of origin. Based

upon testimony of Mr. Kambach that on a single occasion,

and for réasons that do not appear, some logs were sold

to a vepeer plant in Menasha, the company assuming the

freight, it is claimed that if plaintiff should not use its

logs but should. sell them instead, it would have to bear

the freight,. and, therefore, in computing the true cash

value, freight which the plaintiff paid should be excluded. .

Naturally, if plaintiff purchased logs from a certain point

in northern Minnesota, paying the freight, and later sold

some of such logs to a plant.in Menasha, the Menasha

buyer would not pay mote than it would cost him to get the

logs from northern Minnesota, and no doubt the freight to

ee would not be more thn to Algoma. This testi-

mony ‘falls far short of proving that the assessor erred

in assessing the logs for $71,925, which was the cost of the

logs to the company as shown on the company’s books.

I perceive no merit in plaintiff’s contention. I think it can

be safely said that, normally, any manufacturer deciding

to sell off part of his raw materials rather. than using them

would have difficulty in realizing cost. As to other items of

raw materials into which freight enters as a part of cost,

no complaint i is made that injustice is done by taking cost

per the company ’s books as being the true cash value. |

is

2 26 e

Repair and ende Parts. The assessor added to

plaintiff’s personal property the company’s repair and

maintenance parts, which were carried on the books in the

amount of $71,360 as prepaid expense, such figure repre-

Venting cost, but which had not been returned as assessable -

property. He valued this property at cost. While it is

argued that this property should not be valued at cost,

plaintiff offered no proof of value whatever, and there is.

nothing in the record in the way of proof that establishes

that cost to plaintiff was not true cash value. Mere claim

that an assessed value is too high falls far short of estab-

‘ lishing a cause of action toy a refund. See the K rom and

Highlander cages, supra. °

Industrial Lands and Buildings. Plaintiff claims that

the assessed valuation of industrial buildings should be

reduced. from $1,297,066 to $586,000, under the proofs

made, and the lands e Chics $101,840 to $16,485, and

. a refund ‘of taxes ordered accordingly. The over-all as-

* . sessment problem which plaintiff's properties create is

-; self-evident. Plaintiff was dissatisfied with the 1954 as-

Sessment and filed a petition with the tax commission for

- 68 reassessment. Instead of ordering reassessment, the

tax commission di ted a stpervised assessment to be

made, pursuant to the statutes, in the year 1955, and to this

méthod of procedure plaintiff did not object. The com-

mission appointed J, D. Semrad to supervise the assess-

ment. Plaintiff protested its assessments before the hoard

of review, and the board confirmed the assessments made.

At the trial plaintiff produced Kenneth Sarles as its

chief expert witness, Richard Bourguignon, who assisted

in preparing an appraisal, also testified in plaintiff ’s be-

half as an expert. Both Mr. Semrad and Mr. Sarles qual-

_. ified as experts, with an imposing experience background,

and they differed radically as to the formula or method

most reliable in determining market value of plaintiff’s

. Comparable ales as a - criterion of value of the

plant were non-existent. The market value of the plant—

land, buildings and fixtures-Zlies in theory. Market value

of the buildings and fixtures independently of the land also

lies in theory. The market value of bare industrial lands

finds some test in the market value of neigh. oring lands.

Conflict between these experts was to be expected. Mr.

Semirad, however, does not stand before the Court as a

paid expert employed by a private litig@mt. He was. em-

ployed by the state tax commission to supervise | a reas-

sessment. i

As to the value of the plants, including a lands,

the testimony of Mr. Semrad sufficiently supports these

values, and they must be sustained. Wisconsin Malting Co.

v. Manitowoc, 225 Wis. 393. It should be noted that the

basis upon which the plaintiff acquired these properties

was not made to appear in ev idence,, Did it or did it not

make its purchase on the basis of certain values being

assigned to the tangible assets of the old company! While

the plaintiff did not buy the assets of the old company but

bought the outstanding capital stock instead, it seems rea-.

‘sonable to suppose that in the negotiations the market

value of the phy sical plant received some consideration.

Duplication, The company reported (Exhibit 8) its

machinery and tools eonstituting personal property at

$98,445, and furniture, fixtures and equipment constituting.

personal property: at $25,053. These were the depreciated

values per- the company’s books. These values were ac-

cepted and reduced to round figures at $98,440 and $25,050,

or a total of $123,490, and assessment was made accord-

ingly. Mr. Semrad was not satisfied, however, to. accept

the depreciated cost figures of machinery and equipment

forming part of the real’ estate, which was all that the

company had supplied him. He called for a statement of

cost as to such items, and received Exhibit 10, which lists 5

1

. . 28 ‘

costs at $1,694,095.92,. depreciation at $879,393, and net

book value at $814,702.92. Because of the great increase ©

in costs in recent years Semrad ‘added 15% to costs and

then reduced that figure by 30% to arrive at present cash

value. No complaint is now made as to such method of

valuation, nor was any proof offered tending to show that

the resulting figures were too high. It developed at the

trial that in furnishing Exhibit 10 the company did not

exclude machinery and equipment falling within the clas- .

sification of personal property, and as a result Semrad

was misled and inadvertently ineluded in the assessment

of $1,363,740 for fixed machinery and equipment in the

Perry Street plant (Exhibit 20) and in the Navarino plant

(Exhibit 19) the above mentioned personal property al-

ready assessed at the sum of $123,490. |

I think that this. showing calls for a holding that plain-

tiff is entitled to a refund in an amount it has satisfac-

torily proved its taxes were increased by the error. And

I think, too, that no time should be.spent on the proposition

that had the error not been made, it may be questionable.

whether the total tax bill would have been less, because *

I believe that had the company listed i in Exhihit 10 only its

machinery and equipment constituting fixtures; Mr. Sem-

rad would: have employed the same percentages that he

actually used in arriving at value. The duplication was

the result of an inadvertent act. It was a mistake. And I

think that it is such a ‘mistake as, under the rationale of

the decision in State ex rel. Pabst B. Co. v. Kotecki, 163

Wis. 101, must be remedied, even though plaintiff did not

produce proof of the value of the fixed maehinery and

equipment forming part of the real estate after 2 N

the duplicated items. 8

Counsel for plaintiff in his computations assumes that

because the company reported the depreciated value May

Ist, 1955, of machinery and equipment constituting per-

4

9

sonal property as idea a certain peivediage of the a N

Ist, 1955, depreciated value ‘of all machinery and. equip- g

ment, whether personal property or rming part of the

real estate (Exhibit 8), the same percentage. must be used:

in reconstructing the cost of machinery: and equipment ag

- pearing on Exhibit 10 and which the assessor used as

starting point. That, of course, ‘cannot he done because of .

the different rates of depreciation that! were applied to

different classes of machinery änd equipment. I think

‘that the refund should be based on hat here appears as

a certainty. Taken as personal pro rty, the tax assessed

amounted to $123,490 K 0185353, or 52,291.39. Taken as

fixtures, the exact tax assessed is not determinable. If, as

fixtures, the same property was taxed at a higher Cum,

plaintiff has not proved the amount. If taxed at a lesser

suin, the city should not be heard to say that ‘although it

collected taxes on this property as.reaP @tate it should

not refund the tax it has also collected on the property as

personalty because there is a failure of definite proof as

to the amount of taxes resulting from the assessment as

real estate. The taxpayer is entitled to a refund in the

amount of $2,291.39, with interest. . ms

In General. Except as respects the coyptitotionality o of

the tax.on imports and the unintended duplication of cer-

tain items of personal property, plaintiff’s complaint in

general simmers down to this: that the city.of Algoma has

assessed its real estate at values that exceed fair market

value and certain of its personal property at values that

exceed true cash value, It asks the Court to reniedy such

situation by adopting its own experts’ ideas of value as to

the lands and bare buildings. In fixing the true cash value

of logs it asks the Court to adopt a.rule based upon an

isolated’ experience that would appear to be contrary to

common practice of manufacturers in valuing their raw

material. As to. repair and maintenance parts it produced’

no evidence of value but yet maintains that. the Court

should cut the asgessor's figures one-half. I think it may

be fairly eaid that what plaintiff in effect seeks to do is

to make an assessor out of the Court. In Buildings Devel-

opment Co. v. Milwaukee, 225 Wis. 357, 364, the court said:

But property owners must, in all but plain cases of

breach of statutory duty, rely on just and fair treat-

ment by assessing authorities, rather than the courts,

for avoidance of intolerable assessments. We perceive

nothing in the record before us to warrant the court

in interfering with the instant assessments. i

Plaintiff contends that the proof gstablishes a cause of

action under sec. 74.73 justifying if not requiring, redue-

tion of building valuations from 61,297,066 to $586,000 —

and land values from $101,840 to $16,485. It is earnestly

argued that reductions should be to the latter figures. Such

a reduction would mean that the land assessment has been

slightly more than six times market value and would con-

vict Mr. Semrad of either an inexcusably neglectful per-

formance of his duties or gross incompetency, although his

history of employment by the tax commission|to supervise

assessments and the study made of values in this case. and

justification of values would indicate the exact contrary.

Does the disparity between land value figures cast more

doubt on the reliability of the testimony of plaintiff 's ex:

perts than on Mr. Semrad? The presumption Orhich the

statute gives to the correctness of an assessor's figures

- would appear to be entitled to its strongest application

‘when an assessment is supervised by an be idl appointed

by the tax commission. :

We certainly do hot here have fae a case of injustion as

was established by “the proofs of Yawkey-Bissel Co. v.

Antigo, supra. Mr. Bosman’s testimony, essentially hear-

say in character, and the evidence as to the assessment of

| the Ba 0m: Lumber Company lands, and the comparison

„

made of their value to that of plaintiff’s tands, fall far

short of éstablishing a case for a refund within the rule

of the H ighlander case. The evidence does not warrant

me in holding that the assessments are so substantially out

of line with other assessments as to impose an inequitable

tax burden. To grant a refund the case must be one in

which the proofs warrant the court in holding, with a

reasonable certainty of being right, that the taxpayer has

paid a certain number of dollars too mu th in relation to

other taxpayers.. This i is not such a case.

Plaintiff proposes a finding to the effect that Mr. . 1

as supervisor made the assessinents without the concur-

rence of Mr. Graf, the city’s assessor, and it is claimed

that the assessment is illegal for that reason. The assessor

‘and the supervisor acted together. Both signed the statu-

tory affidavit attached to the assessment roll. Which of the

two wrote the figures upon the assessment roll is not im-

portant. ;

Plaintiff is entitled toa 1 on account of the bitin:

tion above dealt with, and that is all. As to costa; plaintiff

is entitled, I consider, to a $100 attorney fee and clerk’s

fees, and that other disbursements should be limited to two

days attendance on the part of Mr. Kambach as 4 witness.

I consider that orly his e was essential to the proof

of the duplication.

.

Dated this 24th day of 8 1956.

By the tenis 3

: A M. Daum,

e Ou Judge, .

| | -

} 8 * 7 — 0 x

Findings of Fact and Conclusions “a 1

— (Formal parts omitted?) .

The issues joined in this action having come on for

trial before the above named court and having been tried,

the plaintiff appearing by Messrs. Whyte, Hirschboeck &

Minahan, and defendant appearing by Messrs. Larkin &

Blum and by S. Knudson, City Attorney, and after. hearing

the proofs of the Parties and the N of counsel, and

being advised in the premises,

Now, THEReEForE, I, The Hon. E. M. Duquaine, the judge

before whom the same was tried, Do Decide And Find As

| Be Fixbrxos or Fact.

N Plaintiff is a foreign corporation, licensed to do busi-

ness in the State of Wisconsin, and was the owner of land,

improvements and, personal property within the City of

Algoma, Kewaunee County, Wisconsin, on May Ist, 1955.

2.. The City of Algoma comprises a taxing distriet with- 3

in the State of Wisconsin for the assessment of property

taxes upon land, improvements and personal property.

3. The City of Algoma assessed the real and personal

property of plaintit for taxation as of May Ist, 1955. Such

assessment was a supervised assessment under Wisconsin

Statutes, the supervisor being Mr. J. D. Semrad. The city’s

’ assessor and said supervisor acted together in making the

assessments, and both ‘signed the ‘statutory affidavit at-

tached to the assessment roll. Plaintiff filed written objec-

tions to its assessments, and hearing on the same was held

before the Board of Review of the City of Algoma. The

Board of Review affirmed the assessments. Plaintiff paid

its real and personal property taxes for the year 1955,

under protest, on January 4th, 1956. The city. ‘council took

no action upon plaintiff’s claim for refund, and plaintiff

commenced this action o on | April 2nd, 1956.

*

4. In the — Tip protects: plaintiff uses both

foreign and ‘domestic wood veneers: Foreign veneers are

directly imported by plaintiff as importer from Canada,

France and the Belgian Congo. Such foreign veneers are

received by’ plaintiff at its plant in Algoma in the original

packages i in which they are shipped. They are kept in such

packages and stored in plaintiff’s warehouse until used i in

the manufacture of a verieered product. el

5. Plaintiff also uses both foreign and domestic lumber’

in ‘its manufacturing operations. Foreign lumber is di-

rectly imported by plaintiff as importer from Ontario,

Canada, the species being birch and cedar., The lumber i is

imported in rough form; that is, unplaned. It is 2 inches:

thick, of standard lengths and standard widths, such as

4 inches and 6 inches. It is shipped loose in railroad cars,

the sticks or individual pieces of lumber not being bundled

or fastened together in any other way. Most of the foreign

lumber is purchased and received ‘‘green’’. The lumber

when received is piled in plaintiff’s. storage yard in such

manner as to facilitate air-drying and with the dominant

purpose of subjecting the lumber to air-drying before con-

verting it into a manufactured product. Air-drying does

not sufficiently remove moisture from lumber to enable

plaintiff to use it in its products. Some kiln-drying is neces-

sary to bring the lumber to the degree of dryness requisite

for use by plaintiff.. While green lumber may be wholly

- kiln-dried, it is plaintiff’s practice, and also good business

“practice, to subject green lumber to air-drying before run-

ning the lumber through the dry kilns. That is more eco-

nomical than wholly kiln-drying green lumber. Most of the

foreign lumber — in piles in the storage yard on May

Ist, 1955, was lumber which had been received in green

condition, and all buch green lumber was then being sub-

jected to the: manufacture for which it was iniported.

6. The foreign’ veneers on 1 hand i in. warehouse in original

W

packages and foreign lumber in piles in storage yard on

hand May Ist, 1955, were of the value of $288,593. The

assessor determined that one-half of the imported veneers

and lumber were necessarily on hand to meet plaintiff's

current operational needs as a manufacturer and assessed

against plaintiff for personal property taxes the value of

_ one-half of such foreign veneers and lumber, or $144,296.26. .

The assessor’s determination was fair to the plaintiff, and

it is the Court’s finding that at least one-half of said for-

eig veneers and lamber and of the value of $144,296.26

were required io be on hand because reasonably necessary

to meet plaintiff’s current. operational needs as a manufac-

turer.

I Veneer ies, which were assessed at a valuation’ of

$75,925, were not assessed in excest of true cash value.

Repair and maintenance parts, which were assessed at a

valuation of $7 1,360, were not assessed in excess of true

.. cash value. a eee vA,

8. Plaintiff 8 industria! real W was not assessed

at more than full value which eould ordinarily be obtained

therefor. at private sale.

9. In the valuation of $1,363, 740 placed upon fixed ma-

2 and equipment forming part of the industrial real

e there was inadvertently ineluded by the assessor

ee, of machinery, tools, furniture, fixtures and equipment

eonstituting personal property separately assessed as per-

sonal property at a valuation of $123,490, and on account

of which taxes in the amount of $2,291.39 were levied. No

proof was adduced by plaintiff that fixed machinery and

equipment, excluding the said items taxed as personalty,

had a market value less than $1,363,740

Upon the . Findings, of Fact I make the follow.

ing:

on!

— OF Law. °

1. The a ausorsment of one-half the imported veneers and

lumber on hand May Ist, 1955, at a valuation of $144,296.26

and the levy of a personal property tax thereon based on

such valuation was not. in violation of Article I. section 10,

clause 2, of the United States Constitution.

2. Plaintiff has failed to establish a cause of action for

a refund of taxes based upon real estate being assessed at

more than full market value which could ordinarily be

obtained therefor at. private sale or personal property

being assessed in excess of true cash value or based upon

assessments made against plaintiff being 80 ‘substantially |

out of line with other assessments as to impose an inequi-

table tax burden.

3. By reason of Finding of Fact No. 9, and notwith-

standing Conclusion of Law No. 2, plaintiff is entitled to a

$2,291.39 assessed against the personal. property of the

valuation of $123,490 mentioned in Finding of Fact No. 9.

4. Plaintiff is entitled to Judgment against the defend-

ant for the sum of $2,291.39, together with interest at.5%

from January 4th, 1956, and together with costs in. the:

amount of $100, plus clerk’s fees, plus witness fees for

two days attendance by Mr. Kambach.

Let Judgment be entered accordingly.

Dated this 24th day of October, 1956.

: «By the Court, ‘

E. M. Drau AINE,

ies Circuit .

refund of the personal property taxes in the amount of

. .

. *

36

_ APPENDIX B.

ee and Minority Opinions of Wisconsin Supreme

(Caption, Case No. 120, August Term, 1957. )

Appeal from a judgment of the circuit court for Kewau-

nee County: E. M. Duquaine, Circuit Judge. Affirm

Action by 2 manufacturer against a city to recover taxes

on personal property paid under protest. The property in

controversy consisted in part of wood veneers and lumber

imported from outside the United States, and the validity

vf the tax on such veneers and lumber. was challenged on

thie ground that it was an impost or duty on imports’”’ |

und therefore prohibited by Art. I, Sec. 10, Clause 2 of the

Constitution of the United States. The trial court sustained

_ the validity of the tax and denied recovery thereof. Nui

. tiff appeals.

The trial court made ä findings of fact, the

adequacy and correctness of which are not challenged. - For

present purposes, the facts so found may be summarized

as follows: Plaintiff carries on a manufacturing business

in the city of Algoma. In the manufacture of its products —

it uses both foreign and domestic wood veneers, and both

foreign and domestic lumber. It imports the foreign veneers :

from various nations, and they are received at its, plant

in Algoma in bundles-secured by metal straps, or in wooden

crates, such straps or crates being the original packages

in which they are shipped. The veneers ‘are kept in such

packages and stored in plaintiff's warchouse until used

in the manufacture of veneered products.

The foreign lumber is imported by plaintiff from Canada

in rough unplaned form, in- railroad cars, the individual

pieces not being bundled or fastened together in any way.

Most of this lumber is ‘‘green’’, and must be dried before

being converted into manufactured products. When re-

ceived it is piled i in plaintiff 's storage yard in such a manner

as to facilitate air-drying, and for the dominant purpose

of air-drying it. Air-drying does not remove enough of

the moisture, and the lumber must also be kiln-dried. While

the drying might be done entirely in the kiln, it is more

economical, and is. good business, t to air-dry: it . it is

run through the kiln. ;

On the assessment date, May 1, 1955, foreign veneers aad

foreign iumber thus stored in plaintiff's warehouse and

storage yard had a value of $288,593. The assessor deter-

mined, and the trial court found, that one-half of the im-

ported veneers and lumber, of the valüe of $144,296 were®

required to be on hand because reasonably necessary 6

meet plaintiff’s current operational needs as a manufac-

_ turer. The court held, in an opinion carefully analyzing

the authorities, that the constitutional provision invoked

by the plaintiff did not immunize the imported materials

thus required for current operational needs, icy the city’ 8

| general property tax. .

WINGeERT, J. The question for decision is whether clause -

2, of sec. 10 of Art. I of the Constitution of the United

States prohibits the imposition of: the city’s general prop-

erty tax on the veneer and lumber imported by the plain

. tiff from other. nations, which are still in the original pack-

age or form in which imported, but which are held and

needed for the. manufacturer’ 8 current operational needs.

The constitutional provision. is as follows:

No state shall, without the consent of the Congress,

lay any imposts or duties on imports or exports, ex-

cept what may be absolutely necessary for executing

its cen laws; and the · net produce of all duties

and imposts, laid by any state on- imports or exports,

shall be for the use of the Treasury of the United

States; and all such laws shall be subject to the revi-

sion and control of the Congress. *.*.°’”

—

—

—

The“ purpose of the provision 80 . as it 1 to

impozts appears to have been to prevent discrimination .

against imports by means of taxation, and to prevent tlie:

seaport states through whose harbors most imports then-

came, from taxing the imports of the other states, and

thus burdening the commerce of the latter and continuing

the commercial warfare between the states which it was

one of the main objectives of the framers of the Constitu-

tion to suppress. See Madison, Debates in the Federal

Convention of 1787, August 28, 1787 (Hunt & Scott ed.)

479; Brown v. Maryland, 12 Wheat. 419, 440.

* Established interpretations. As an original proposi-

tion, it might well be doubted that a general property tax

not discriminating against imported goods is an impost .

or duty on imports . The Supreme Court of the United

States has held that sueh a tax is within the purview of

the constitutional provision, however, and of course we

are bound thereby. Low v. Austin, 13 Wall. 29, 345

The leading case on the interprétation of the constitu-

tional provision is Browp v. Maryland, 12 Wheat. 419, in

which a state statute requiring importers of foreign goods,

by bale or package to take out a license and pay a fee

of $50 before selling the goods, was held-to impose an un-

constitutional impost on imports. . The extensive opinion

by Chief Justice Marshall is one of that jurist’s landmark

opinions and characteristically went beyond the neeessities

Jof the particular case, While the Maryland statute was

plainly. discriminatory against imports and might have

been disposed of on that ground, the Chief Justice went

further and deelared in substance that a tax on an imported

article in the hands of the importer is a duty or impost on

21 4 distinguished scholar in this field. the late Prof. Thomas ö

Reed Powell, commenting on the opinions in Hooven d Allison

Co. v. Evatt, 324 U. S. 652, says We could welcome fresh con-

~ sideration whether ‘property taxes should be regarded as eri a

or duties“ sh 58 Harvard Law Review 858, 874. .

1

the Sniper Referring to the above stated purpose of the

a constitutional provision, the-Chief Justice said:

8

it is plain, that the object would be as com-

pletely defeated by a power to tax the article in the

hands of the importer the instant it was landed, as by

a power to tax it while entering the port. 4

. duty on imports is a tax on the article which is ‘paid

©

by the consumer. The great importing States would

thus levy a tax on the non-importing states

(pp. 439.440). ; | ä

3 that the immunity cannot follow the 3

indefinitely, and must end somewhere, the Chief Justice

proceeded:

„But, while we admit that sensi principles of con-

struction ought to restrain all Courts from carrying the

words of the prohibition beyond the object the con-

stitution is intended to secure; that there must bea

point of time when the prohibition ceases, and the |

power of the State to tax commences; we cannot ad-

mit that this point of time is the instant that the artt-

cles enter the country. It is, we think, obvious, that

this construction would defeat the prohibition.’’ (p.

441.)

\ The Chief Justice recognized that it would 15 futile. to

\ try to stake out in advance the line where immunity ceases

|

and

ss

\

the states’ power to tax attaches.

The constitutional prohibition on the States to lay

a duty on imports, a prohibition which a vast majority

of them must feel an interest in preserving, may cer-

tainly come in conflict with their acknowledged power

to tax persons and property within their territory.

* « © Yet the distinction exists, and must be marked

as the cases arise. Till they do arise, it might be pre-

mature to state any rule as being universal in its ap-

plication.’” (P. 441. 1 Le

—

~:9

1 — and we must assume tenatively in view

fe i :

of the language * quoted,? he » suggested the following |

: principle: — |

| ‘It is sufficient for the. present to say, 5 that

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, per-

haaps, 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 con-

stitution.“ (pp. 441-442.))))))

Chief Justice Marshall said much more in tue course

of his lengthy opinion, by way of argument, illustration

and dictum, and on another branch of the case held that

the Maryland statute was also invalid under the commerce

clause of the constitution (Art. I, sec. 8). It is no dis-

paragement of the great Chief. Justice to point out that

some of his dicta have not been followed by the court in

later cases,“ as for example, that to the effect that the

- principles laid down in Brown v. Maryland, supra, would

apply equally to importation from a sister state (12 Wheat.

_ at 449). It has later been held consistently that goods

brought from another state are not imports within the

meaning of Art, I, see. 10 of the United States Constitu-

tion. Woodruff v. Parkham, 8 Wall. 123, 136, American

Steel & Wire Co. v. Speed. 192 Wis. 500, 520. Likewise ~

his original package doctrine has been eee! as a

N 7 “But he (Marshall ). nad too much of an ‘inatinet for the

„ Practical to attempt rigidities which could not possibly bind the

future * * * and so his views were often téntative and suggestive ;

they conveyed eross-currents of doctrinie and purposed ambiguity.’

Frankfurter, The Commerce Clause, 44-45.

3. © © the rule announced in Brown v. Maryland has at

times been severely criticized * and has in some cases been

narrowly. restricted in its application“ . Black, J., dissenting

in Hooven ¢ Allison Co. v. Evatt, 324 U. 8. 652. BRR.

41

criterion of immunity of interstate shipments under the

commerce clause, from state taxation. Sonneborn Bros.

v. Cureton, 262 U. S. 506.

While Brown v. Maryland dealt with a statate prohibit-

ing sale of imported goods by the importer without pay-

ment of a license fee, it has been accepted as authority for

the broader proposition that the imported goods them-

selves cannot be taxed while held in the importer’s ware-

house in the original package, for resale. Low v. Austin, 13

Wall. 29, 34, May v. New Orleans, 178 U. S. 496, 507. Im-

munity does not depend upon a showing that the tax is in

‘fact discriminatory against imports. Richfield Oil Corp. v.

State Board, 329 U. 8. 69, 76. After the merchandise has

once been sold by the importer, however, it is taxable as

other property, even though remaining in the original

package. Waring v. Mayor, 8 Wall. 110, 122.“ If the goods N

aré taken out of the original outer package, even before

sale, their immunity as ‘‘imports’’ ceases though they

are still in smaller original packages. May v. New Orleans,

178 U. S. 496, 508-509.

Brown v. Maryland, supra, and most of the earlier cases

dealt with attempts to tax. directly or indirectly, goods

held for resale. The leading case on state taxation of im-

ports held by the importer for use in manufacture is

Hooven d Allison Co. v. Evatt, 324 U. S. 652, decided. in

1945. In that case it was held that bales of hemp brough

from the Phillipine Island and stored in a manufacturer’s

‘warehouse in Ohio preliminary to use in the manufacture

of cordage were imports in the hands of the importer

within the meaning of Art. I, sec. 10, United States Con-

stitution, and under Brown. v. Maryland, supra, were

immune from state. ad valorem taxes (pp. 664-668). Four

justices dissented from that feature of the decision now

CV

4. A pledge of the goods by the importer has been held to

terminate their immunity.. Southern Pac. Co. v. Calexico, 288

Fed. 634, 641.

_ 42 3

birth in an opinion by Mr. Tustiee Black, 324 U. 8.

at 688.

In Hooven ck Allison Co. v. Evatt, supra, the court rec-

ognized that the constitutional immunity from state taxa-

tion is lost when imported goods are put to the use for

which they were imported, or when the original packages

in which they were imported are broken (324 U. S. 652, at

665, 666). “However, the majority was unwilling to ter-

minate the constitutional immunity when the goods reached

the factory warehouse in the original package.

But no opinion of this Court has ever said or in-

timated that imports held by the importer in the

original package and before they were subjected to

the manufacture for which they’ were imported, are

“liable to state taxation.“ (p. 666.) J

On ‘the contrary, the majority affirmed the dictum of

Chief Justice Taney in License Cases, 5 How. 504, 575.

“Indeed, goods imported, while they remain in the

hands of the importer, in the form and shape i in which

they were brought into the country, can in no just

sense be regarded as à part of that mass of pfoperty

in the state usually taxed for the support of state.

government.“ (324 U. S. at 660.) g

Nevertheless the. majority cautiously limited the decision

to the case before it, holding that ‘‘It. cannot be said that

the fibers were subjected to manufacture when they were

placed in petitioner's warehouse in their original pack-

age.“ (p. 667); and expressly saved the question which

is before us today.

Zs

And it is unnecessary to decide — for pur-

, Poses of the constitutional immunity, the presence of

some fibers in the factory was so essential to current.

manufacturing requirements that they could be said to

have entered the process of manufacture, and hence :

were already put to the use for which they were im-

ported, before they were removed from the original

„

43

packages. Even though the inventory of raw material

required to be kept on hand to meet the current opera-

tional needs of a manufacturing business could be

thought to have then entered the manufacturing proc-

ess, the decision of the Ohio Supreme Court did not

rest on that ground, and the record affords no basis

for saying that any part of petitioner’s fibers, stored

in its warehouse, were required to meet such immediate

current needs. Hence we have no occasion to consider

that question.“ Hooten & Allison . v. Evatt, 324

U. S. 652, 667. | — ; :

Even this carefully limited decision commanded the sup-

port of only five of the justices. The other four dissented

in an opinion by Mr. Justice Black, who considered that

every conceivable relationship the bales of hemp had once

“borne to the process of impottation had ended, and that

therefore they were no longer immune as imports; and also

pointed out that.to accord them constitutional immunity,

from property taxes would effect a discrimination in favér

of foreign as against domestic products. 324 U. S. af

686-691.

To sum up the state of the law to date, it appears that

imported goods are immune from even non-discriminatory

taxes on general property until sold by the importer, or

. removed from the original packages i in which imported, or

put to, the use for which acquired, as where placed in

process of manufacture. The Supreme Court has held, by

the narrowest of margins, that the mere warehousing of

the goods preliminary to manufacture Coes not of itself 7

terminate the immunity: The application of the tax to raw

materials gored at the importer’s factory, which, though

still in the original package, are essential to current manu-

3 requirements has been expressly left undecided.

Tue imported lumber. The lumber in issue was im-

es from Cenada in earloads of individual pieces not

bundled or fastened together, and was unloaded and piled

° 44 ©

a in plaintiff's storage * to facilitate air-drying. We

have little difficulty in holding that it had ceased to be

immune from the my” . general property tax on the assess-

ment date.

The lumber is not protected from taxation by the original

package doctrine, for it was unpackaged, unless the freight

ear be considered a package, in which case it was removed

from the original package when unloaded. The individual

sticks of lumber themselves are certainly not packaged or

packages in any reasonable sense of the term. E. J. Stan-

ton & Sons v. County of Los Angeles, 78.Cal. App. (2d)

181, 188, 177 P. (2d) 804, 808. Cert. den. 332 U. S. 766.

Moreover, these pieces of lumber had entered the proe-

ess of manufacture“, and thus had been ‘‘put to the use

for which they were imported’’ (Hooven & Allison Co. v.

. Evatt, 324 U. S. 652, 657, 666) when they were stacked for

air-drying, since the drying of the lumber was essential to

manufaeture, and therefore a first step in the manufactur-

ing process. It was not necessary that the lumber be

sawed up in order to place it in process of manufacture.

The imported article consisted of a combination of wood

and diffused water. Drying. separates the wood from the

water ;.sawing separates wood from wood. If the lumber

had not been air-dried, it would have had to be kiln-dried

for a longer time. Obviously it would be in procegs of

manufacture when drying in an artificially-fired kiln.

Removal of water is no less a manufacturing operation

when performed out of doors by solar heat. :

Insofar therefore as the judgment holds the lumber tax-

able, it must be affirmed.: .

3. The imported veneers. These present a much Hag cate

question. They were still in the original packages in which

they were imported, consisting of metal straps around

bundles of pieces in most cases, and of wooden crates in

&

thers. We assume for present purposes that straps hold-

ng bundles of pieces are a package. The veneers had not

en subjected to any process to alter their form or chemi-

al composition, but had merely been stored in plaintiff ’s

varehouse to await processing. 3

*

If no other facts appeared, and on the assumption that

traps around a bundle make a package, we would be con-

trained to hold the veneers immune from the city’s tax

on the authority of Hooren & Allison Co. v. Evatt. 324

U. S. 652, discussed above, notwithstanding the dissent of

the maximum minority from that decision and our own

philosophical doubts about its correctness. But there are

other facts in the present case which in our opinion are

sufficient to distinguish it from that one. |

In the instant case it was found as a fact by the trial

court, and the finding is not challenged by appellant, that

the veneers which were actually taxed were required to be

on hand because reasonably necessary to meet plaintiff’s

current: operational needs as a manufacturer. In making

that finding, the trial court recognized the ‘practical fact

of industrial life, that if a manufacturer is to maintain the

continuity of operation that is essential to efficiency and

ability to meet competition and thus stay in business, he

must at all times maintain on hand at his plant and ready

for immediate use, a certain minimum stockpile of raw

materials; and from that fact he stated the following con-

-¢lusion : yi a A |

„f we accept the premise, as I think. we should, that

imported raw materials in original packages on hand

May Ist, and requifed to be on hand at that time to

meet the immediate or current needs of a manufac-

turer, have so definitely been taken out of the stream

of commerce and have so finally come to rest in his

plant, there, to a practical certainty, to lose their

identity in a manufactured product, so that it may

reasonably be said that it is at least highly improbable ©

/

. 46 ; *.

- that such goods will ever again become the subject of

sale and transport in their original packages, then, I

think, such raw materials must be regarded for all

practical purposes as having irrevocably become a

part of the common mass of property within the taxing

district and, by virtue of that fact, subject to the

_ state’s ad valorem personal property tax.“

The trial court’s finding brings the present case. squarely «

within the category which was expressly left undecided in

Hooven & Allison Co. v. Evatt, 324 U. S. 652, 667, quoted

page 8 above, and which we may therefore decide on its

merits.

We think the trial court was right in holding that the

minimum stockpile of veneers which the manufacturer, had

to have on hand to meet current requirements was in sub-

stance being put to the use for which the raw materials

were imported, even though not yet removed from théir

wrappings or subjected to any physical or chemical change:

As to such goods, a rule which would make taxability de-

pend upon the eutting of some metal bands or removal of -

a @ wrapping, would be too artificial and mechanical to com-

mend itself. We think it would be equally mechanical, and

disregardful of realities, to hold. that the manufacturer

must inaugurate some process of physical or chemical

change before the goods can be considered as put to the

use for which they were imported or can be regarded as a

part of the mass of property which may be taxed for the

support of state government, Foreign commerce, like

commerce among the several states, is not a technical

legal ‘conception, bat a’ practical one, drawn from the

course of business. Swift & Co. v. United States,. 196

U. S. 375, 398. As a practical matter, the minimum current

operational requirements of materials which the manu- i

facturer had assembled in his plant for purposes of im-

mediate availability, for change in form were in use in

*

47

and devoted to the manufacturing enterprise, as much as

if they were being dried, heated, reshaped, chemically

treated, or otherwise chafiged in form or composition. The

purpose for which the veneers were imported was to meet

the requirements of a going manufacturing concern; and

one of such requirements was the presence of a stockpile

equal to minimum current manufacturing requirements. As

a practical matter, a manufacturing enterprise cannot be

carried on successfully without having curtent operational

requirements of raw materials on hand, especially where it

takes a considerable time to get more of the matérials after

ordering them, any more than it éan be carried on without

changing their form or composition.“ The decision under

review, merely recognizes ‘and gives significance to that

fact of industrial life.

We appreciate that there arè expressions in the Pee 7

of the U. S. Supreme Court which may be eited against the

conclusion we have reached; but they must be read in con-

nection with the facts of those cases. No case has been

brought to our attention, ner have we found any, in which

the facts on which the trial court based its decision in the

present ease were found to exist and were brought to the

attention of the Supreme Court. In the one case where

the argument was made, it, was rejected and decision was

specifically reserved on the point, because the record did

not afford a basis for saying that any part of the imported

material was required to meet immediate operational needs.

Hooven d Allison Co. v. Evatt, 324 U. S. 652, 664, 667.

We think it accords with sound policy, and does no vio-

lence to either the purpose or ‘the words of the. constitu- a

5. Respondent's brief puts the proposition pieturesquely as

follows: If, when dawn broke over Algoma on the first day of

May, 1955, appellant had everything on hand except the imported

raw materials necessary to meet current manufacturing’ Tequire- -

ments, it is reasonable to assume that appellant would have been

. out of the manufacturing business., at least n

tional provision, to hold that the city may tax the imported

veneers in question. We are satisfied that the rule we

are. adopting preserves the immunity of imports long

enough to serve all purposes for which the provision was

adopted. The tax is not discriminatory, for it applies alike

to all comparable property in the city, regardless of origin.

The city has furnished a quid pro quo, by extending its

police and fire protection to the veneers and lumber as to

other property. The tax -cannot prejudice foreign com-

merce, nor afford a means by which seaport or border

states. can burden the others or wage commercial warfare

against them by taxing their imports, fear of which activ.

ity was the motive for mine the constitutional pro

vision.“ 8

On the other hand, to bold that the f of e

goods extends to the point claimed by appellant, would

work an affirmative: discrimination against domestic ma-

terials and against manufacturers using domestic ma-

terials, and would enable the importing manufacturers ‘to

obtain police, fire and other local protection and benefits.

without paying for them. While such discrimination also

results from some application of the constitutional pro-

vision in question by which we are bound, it is nevertheless

proper to consider it as a relevant factor in determining

whether the immunity should be extended beyond the abso-

lute conipulsion of the decisions of the court of last resort.

It is argued that the original package rule is easy to

6. After a penetrating commentary on the majority and minor-

ity opinions in Hooven & Allison Co. v. Evatt, supra, the late

Prof. Thomas Reed Powell said: The immunity must survive

to the extent that neither the goods nor dealings in them are,

under any circumstances of time or place or condition, taxed or

. taxable because of their origin. To say that it must prevail

against inclusion in general assessments after arrival or else be

destroyed is to take an animistic view of the goods themselves

as sacred objects and to forget the commercial aspects of foreign

trade And domestic * 56 Harvard Law Review, 858, 875.

49

administer, while it may be difficult to determine when

imports have ceased to be imports as a result of becoming

part of the stockpile required for current operational

needs. We think, however, that the reasons both of con-

stitutional law and policy against further extension. of the

‘immunity from state and local taxation outweigh mere

problems of administration. Current operational require-

ments are a fact, not a fancy; and like value, they can be

determined by the assessing authority, albeit sometimes

with difficulty: The original package rule itself may pre-

dent substantial administrative difficulties. See Mr. Jus-

_ tice Black's dissent in Hooven & Allison Co. v. Evatt, 324

V. S. 652, 691; and E. J. Stanton & Sons v. County of Los

Angeles; 78 Cal. App. 2d 181, 186, 177 P. 2d 804, 807. In

taxation, absolute certainty cannot be had or expected, as

the numerous cases on valuation pointedly illustrate.

By the Court.—Judgment affirmed.

Brown, J. (Dissenting in part, concurring in part.) As

an original construction of Art. I, Sec. 10, Cl. 2, U. S.

Constitution, I would have little difficulty in agreeing with

the dissenters in Hooven ck Allison Co. v. Evatt (1945),

324 U. S. 652, 688, 142 Ohio St. 235, that when imported

5 goods or raw ‘materials have reached the place where the ~

importer- intends to put them to the use for which they

were imported and he stores them until he needs them, a

non - diseriminatory ad valorem tax upon them does not

offend the Constitution even though the goods or materials

in such storage remain in their original package. The

diffieulty would be even less in agreeing with the majority

of this court that part of the goods are taxable.

But I must recdgnize that-this is not an original prop-

osition and the dissenters’ view in Hooven ck Allison v.

Evatt, supra, is that of a minority. The majority in that

case reiterated the law as it has been established by an

eae until put to use or sold or otherwise disposed of by the

not our province to modify it or to declare exceptions to it.

JJJꝗ˙à“ Mary-

land (1827), 12 Wheat. 419, that the constitution protects

imported items against local taxation while they are in

their original packages and have not been disposed of or

used by the importer. For examples see Low v. Austin

(1871), 80 U. S. 29; Anglo-Chilean Corp. v. Alabama

(1933), 288 U. S. 218, 225 Ala. 141, as well as Hooven &

Allison Co. v. Evatt, supra.

In the latter case, the majority cold, p. 666:

„ * © no opinion of this Court has ever said or in-

timated that imports held by the importer in the

original package and before they were subjected to

the manufacture for which they were mrad are

liable to state taxation. n

And, further, p. 667:

It cannot be said that the fibers were a to

manufacture when they were placed in petitioner's

warehouse in their original packages.

The law, as I read it, is well settled by the de-

cisions of the supreme court of the United States that

importer materials in their original packages are. not sub.

ject to a state tax. The veneers now in question satisfy all

these conditions of immiitiify ; and, like the fibers in Hooven

& Allison, have not been subjected to manufacture. It is

our proper province to apply that oft-stated law. It is

The argument. unsupported by the record, was made

dy the tax collector. in Hoovend A Allison Co.v. Evatt, supra.

that some of. the materi ils were so essential to current

manufacturing requirements that they might be deemed

to have entered the manufacturing process and so were

taxable, as already put to use although still in their

— 2 In vale to this the court said (p. *

0

7

51

there was no necessity and no occasion to 8 that

question. I cannot agree with the majority of our court

that the form of the rejection’ of the argument changed

the established law. The decision, in fact, refused to

change it. Therefore I, consider that this court is still,

bound to apply the law as it has been so often declared

and as it remained when the court got through with Hooven

4 Allison Co. v. Evatt, supra. We, as a state court, have

not been invited nor ure we authorized to create an excep-

tion- to the principle so often stated by the United States

supreme ‘court, that in the original package, unsold and

unused imported materials are tax exempt. It is not for

us to say that their immunity is lost when the day of use

draws near. The United States supreme court was asked:

to make that — in the law. It would not. We should

not. i

. Therefore, | think we must reverse, as ste the veneers...

Respecting the lumber, the learned trial court found .

that the method of piling it had the dominant purpose of

readying it for use. That finding makes it possible, I 1

think, to agree that the manufacturing procéss had begun

when the pile. was. constracted. Therefore I am’ able to

concur in the decision that the lumber lost its status as an

import and is taxable, though the ground that half of it is

taxable because of. current ‘manufacturing | needs is un-

tenable.

I am authorized to say that Mr. Justice Currie and Mr.

_dastice Steiale coneur in what is said here.

2

%

| APPENDIX o.

7 Judgments of State Courts.

State of Wisconsin. Cireuit Court. Kewaunee County.

Unie Srarzs Se Conro-

RATION, a Foreign Corporation,

if,

| vs. Judgment.

Crrr or Alon, a Wisconsin Mu- . ne

5 W Corporation, 5 eas

Defendant. |

The Court having by order herein, dated January 10th,

1957, directed that Judgment be entered herein in favor

; -of the plaintiff and against the defendant; ‘which order is

on file herein;

. Now, THEREFORE, In Pursuaner of such order and On

heme of Larkin & Blum and S. Knudson, ee for

said defendant, eer

Ir is avsupcep That the plaintiff have and recover of and

from the defendant the sum of $2,536.00...

Dated this 11th day of January, 1957.

Buy the Court. nite

8 s, Onv¹ J. ALBRECHT,

(Scal) : : . Clerk.

Judgment of Wisconsin Supreme Court.

And afterwards, to-wit: on the 7th day of January, A

D. 1958, the following proceedings were had in said cause

in this Court: 3 5 | Sees

* .

Urra States Piywoop Coaro-

RATION, a — corporation,

. Appellant, N 8

ae 8 8

Crry or ALcoma, a Wisconsin mu-

nicipal corporation, . .

. Respondent. |

This cause came on to be heard on appeal 3 the

jndgment of the Cireuit Court of Kewaunee County and

was argued by counsel. On consideration whereof, it is

now here ordered and adjudged ‘by this Court, that the

judgment of the Cireuit Court of Kewaunee County, 3

this cause, be, and the same is hereby, affirmed with costs

against the said appellant taxed at the sum of -Ninety-

nine Dollars and No Cents ($99. 00).

Justices Brown, Currie and Steinle dissent.