Petition for Writ of Certiorari — Los Angeles County v. Scandinavian Airlines System, Inc. (No. 354)

IN THE.

Supreme Court of the Cinited States

October Term, 1961

fF.

No. ev

~

THE COUNTY OF LOS ANGELES and

the CITY OF LOS ANGELES,

Pi litione oe

VS, )

BC ANDINAVIAN ATRLEAES SVS-

TEM, INC. a New York corporation,

Re sponds ie.

PETITION FOR WRIT OF CERTIORARI TO

THE SUPREME COURT OF THE STATE

OF CALIFORNIA.

HAROLD W. KENNEDY,

County Counsel

and

ALFRED CHARLES DE FLON.

Deputy County Counsel

Hadl ot Nediiadmistration

DOW Wrest Temple Street

Los Aneeles P2. California

Aflorie AS for Petitioners.

WESTERN PRINTING COMPANY WHITTIER OXBCW 86-1722

TOPICAL INDEX

Payre

Opinions Below Bn ramen ) |

Grounds “pon Which Dainidition of this owt

Is Invoked =... a

Questions Presented for iow 5 oO TO

Constitutional Provisions, Treaties silk Statutes

Involved —.... Re gi ese Se wea.

Pintemet of the Case... .................. |

The Facts ......... a een eae

Reasons for Granting Writ 20.

1. Summary of Argument 000000 |...

2. The Commerce Clause Does Not Prohibit the

Subject Tax Beeause (1) It Is Not Diserimin-

atory, (2) It Does Not Constitute a Direct Bur-

den on Foreign Commerce, and (3) It Does Not

Constitute the Basis for Taxation Constituting

Multiple Burdens” Upon Foreign Commerce. ..

3. The Instant Tax Does Not Constitute a Duty

of Tonnage Because It Ils An Ad Valorem Tax

Apportioned According to the Benefits, Oppor-

tunities and Protections Afforded the Respond-

I ns wis

4, No Treaty to Which the United States Is a Party

Exempts the Subject Airplanes from State Tax-

ERO Na aa TE ONT ERYCR er Le

The Instant Tax Does Not Exceed the Limita-

tions Imposed Upon the States by Due Process

Clause, Fourteenth Amendment, United States

Constitution see NEE Ac re

a

Conelusion

2

14

24

il Index

TABLE OF CASES AND AUTHORITIES CITED

Cases Page

American Stevedores v. Porello, 330 U.S. 446, 452-

453, 91 L. Ed. 1011, 1017-1018 (1947) 00...

Best and Co. v. Maxwell, 311 U.S. 454, 85 L. Ed.

275 (1940) . ekki

Braniff Sieger. Nebraska State Board, 347 U S.

500, 98 L. Ed. 967 (1954) ......... ... ae 8, 19, 20,

Burnett v. Brooks, 288 U.S. 378, 77 L. Ed.845 ....... 12,

Caminetti v. United States, 242 U.S. 470, 490, 61

L. Ed. 442, 455 (1917) .

Chicago v. Willett Cipasicn. ‘344 U. S. 514, 97 L. Ed.

509 (1953) PSone os

Coe v. Errol, 116 U.S. 517, 99 L. Ed. 115 (1886) .

Cooley v. Board of Wardens of Philadelphia, :

How. (53 U.S.) 298, 13 L. Ed. 996 (1851) ...............

Flying Tiger Line, Inc., v. County of Los Angeles,

D1 Cal. 2d 314, 333 P. 2d 323 (1958) 0. 3,

Freeman v. Hewit, 329 U.S. 249, 253, 91 L. Ed. 265,

272 (1946) . oaks ee CoE 16, 22, :

Galveston, H. & Ss. ee R. Co. v es 210 U.S. 217,

225 52 L. Ed. 1031, 1036 (1908) noc. |

Hays v. Pacific Mail S. 8. Co., 17 How. (58 U.S.)

596, 15 L. Ed. 254 (1855). ccc 9, 12, 17, 2

Memphis Steam Laundry v. Stone, 342 U.S. 389,

395, 96 L. Ed. 436 441 (1952) occ cece

Michigan-Wisconsin Pipe Line Co. v. Calvert, 347

U.S. 157, 166, 98 L. Ed. 583, 591 (1953)...

Morgan v. Parham, 16 Wall (83 U.S.) 471, o1 L. Ea.

303 (1873) ou... GG Reena ee ite a eter AA ie fa

28

.. 1d

bieitex 1

Page

Nippert ve City of Richmond, 327 U.S. 416, 425,

GW) L. Ed. 760. 705 (1946)... ets '

Northwest Airlimes, Ine. ve Minnesota, 399 it s.

292 SSL. Ed. we 2 | Gee eee | a

Old Dominion S. S. Co. v. Virginia, 198 U.S. 299,

305, 49 L. Ed. nce, 1062 (1905) ....... ....... TUNE OOUee Ld

Ott v. Mississippi Valley Barge Line Co., 336 SUS

169, 174. 93 L. Ed. 585, 589 (1949)... 30

Passenger Cases, 7 How. (48 U.S.) 282, 402, 12 L.

Kd. 702, 752 (1849) . Seba ge Wetcon arise ds hoa ean 15

Portland Cement Co. v. er 308 U.S. 450,

458,3 L. Ed. 2d 421,427 (1954)........ Rae Par eens 1

Postal Telegraph Cable Co. v. Adams, 155 U.S.

688, 695-696, 39 L. Ed. ses 315 (1895) .......... 15, 16

Pullman’s Palace Car Co. . Commonwealth of

Pennsylvania, 141 U.S. 18, _ 35 L. Ed. 613, 616

fg eres PRT LAT MN ting LPT A eel oP RR ET NOTRE "ER NC 15

Slick Airways v. County of bie Angeles, 140 Cal.

App. 2d 311, 295 P. 2d 46 (1956) . ........... Bs

State Tonnage Tax Cases, 12 Wall. (79 US.) 204.

207-214, 20 L.. Bd. SHU, Sis (1A)... 13, 3.

Transportation Co. v. Wheeling, 99 U.S. 273, 283,

25 t.. Fd, 493 400 (ISB) on ... ae ee

United States v. Bennett, 232 U.S. 299, 58 LL, Ed.

612 (1914) Boe eee Reiley rar Neg s. sire 21

Western Live Stock v. Bureau et Give Te, 303 U. S.

25, 255-256, 83 1.. Ed. 424, S28 (1907)... OH

Western Union Telegraph geil Vv. Taggert,

163 TLS. 1. 14. 41 LL. Fd. 49. 54 (1896) 5

lV Index

Page

West Point Wholesale Grocery Co. v. City of Opel-

ika, 354, U.S. 390, 1 L. Ed. 2d 1420 (1957) .. ...........

Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444,

i, Oe oe

Authorities

Beale, Jurisdiction to Tax, 32 Harvard Law Review

__. Spereeannnonne esata casotnecn eiesasiaMiahag AE. ecasteaasevcralecaaions .18, :

California Constitution, Article XIII, See. 1 .......

California Constitution, Article XIII, See. 10 .......

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

Convention and Protocol between the United States

of America and Sweden, 54 Stat. 1759, T. S. No.

SR iet Sacer aed aie Hl mies See EMMONS SS 4, 13,

Lowndes, Spurious Conceptions of the Constitu-

tional Law of Taxation, 471 Harvard Law Review

oe a a ee 92,

Note: Multiple Taxation: The Implications of

Burnett v. Brooks, 47 Harvard Law. Review 307... :

Note: ‘Taxation—Inheritance Taxes—Power of a

State to Tax Intangible Property Owned by Dom-

iciled in a Foreign Country, 84 U. Penn. Law Re-

i)

NE FE ciniisiiatassgianes<cccdethgpeins ected te rie 24

Note: Validity of Federal Estate Tax on Securities

Owned by Non-Resident Alien, 42 Yale Law Jour-

WPS. hai es Cre or err yy Gee 24

Page, Jurisdiction to Tax Tangible Movables, 1945

Winco Law Review 12 21

Powell, Taxation of Things in Transit, 7 Virginia

Law Review 167 ..... sc aiiecases a abecaccaeiccaia ss: tern 18, 19

State Tax Guide, Prentice-Hall (1960) at 204... 10

3

28 ee 1257 (3) anu 2101 _.

IN THE

Supreme Court of the United States

October Term, 1961

THE COUNTY OF LOS ANGELES and

the CITY OF LOS ANGELES,

Petitioners,

Vs.

SCANDINAVIAN AIRLINES SYS-

TEM, INC., a New York corporation,

~ Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE SUPREME COURT OF THE STATE

OF CALIFORNIA.

Petitioners, the County of Los Angeles and the

City of Los Angeles, respectfully pray for Writ of

Certiorari to the Supreme Court of the State of Cali-

fornia to review the judgment thereof hoiding that for-

eigen owned and based aircraft making regular, recur-

ring entries into the State in foreign ‘commerce are

constitutionally Humune from State ad valorem prop-

erty taxation apportioned and allocated in accord with

the benefits, opportunities and protections afforded

such property by the States.

—,

Opinions Below

This case was tried on the pleadings. The trial

court, the Superior Court of California for the County

of Los Angeles, without written opinion overruled pe-

titioners’ general demurrer to respondent's second

amended complaint. The material facts alleged in said

complaint were by stipulation of the parties admitted

to be true, and judgment was entered for respondent.

The intermediate California appellate court, the

California Distriet Court of Appeal, Second District,

Division Two, rendered a written opinion holding the

subject tax valid. Said opinion is unreported in the

official California reports but is reported in 6 Calli-

fornia Reporter 694 (West Pub. Co.) and is set out

hereinafter in Appendix B.

J

There are three separate opinions by members of

the California Supreme Court. The opinion of the

majority, by Associate Justice Peters, is reported 56

Adv. Cal. 1-32, 363 P. 2d 25-44, and is hereinafter set

out in Appendix A 1-47; a separate concurring opinion

of Associate Justice Dooling is reported 56 Adv. Cal.

32, 363 P. 2d 44, and hereinafter set out in Appendix

A at 47-48; the dissenting opinion of Associate Justice

Traynor ( coneurred in by Chief Justice Gibson) whieh

would hold the instant tax valid is reported 56 Adv.

Cal. 32-38, 363 P. 2d 44-48, and hereinafter set out in

Appendix A at 48-58.

Pe ae

The judginent of the California Supreme Court.

the court below, in conformance with that) court's

practice is the final paragraph of the majority opinion :

~The judgment [of the trial court holding the instant

tax invalid] is affirmed." 56 Adv. Cal. at 22. 365 DP. 2d

at 44. App. .1 at 47. :

Grounds Upon Which Jurisdiction

of this Court Is Invoked

1. The judgment of the Califorma Supreme Coum

here sought to be reviewed was rendered and entered

on May 29, 1961.'

2. The statutory provisions which confer juris-

diction to review the judgment in question by Writ of

Certiovarl are 28 ULS.C., Sees. 1257 (3) and 2101.

: Questions Presented for Review

1. Whether or not the Commerce Clause and the

Tonnage Clause (Art. I, See. 8, Cl 3 and Ait. I. See.

10, Cl. 3. Uiited States Constitution) prohibit the

States from laying upon foreign-owned and foreign-

based aireraft flying regularly in foreign commerce an

ad valorem property tax measured by and apportioned

according to the time said aircraft are physically within

said States.

1 The opinion of May 29, 1961 was modified by the California Suprear

Court on June 21, 1961 ‘56 Adv. Cal 93°. Reference threughout is only te

the modified opinion

—

2. Whether or not the ‘Convention and Protocol

between the United States of America and Sweden”

(4 Stat. 1759, Treaty Series No. 958) exempts from

State ad valoren: property taxation aircraft owned by

Swedish nationals, which make regular, recurring com-

mercial entries into the States.

3. Whether or not, when the United States by

treaty provides for exemption from State ad valorem

taxation of aircraft, owned by nationals of Sweden and

therein based, the implication against diseriminatory

State taxation contained in the Commerce Clause,

United States Constitution, prohibits the States from

so taxing all other foreign owned and based aircraft

making regular, recurring commercial entries into the

States.

Constitutional Provisions, Treaties and

Statutes Involved

The California Supreme Court premised its decision

herein upon the Commerce (Art. IT, See. 8 Cl. 3) and

Tonnage Clauses (Art. 1, See. 10, Cl. 3) of the United

States Constitution, and upon Articles IT and NITT of

the Convention and Protocol between the United States

of America and Sweden, dated March 23, 1939, ef fec-

tive January 1, 1940 (54 Stat. 1759, T.S. No. 958).

Respondent airline also depends upon the Due Process

*Said treaty 1s reproduced herein in its entirety as Appendix ©

re: ha

Clause of the Fourteenth Amendment as one of its as-

serted grounds for invalidity of the subject tax. (See

respondent's complaint, par. XN, R. Cl Tr. 6.)

Petitioners levied the subject tax pursuant to the

eeneral authority granted by the following constitu.

tional and statutory provisions of California law:

California Constitution, Articie-XNITT, Sec. 1:

All property in the State... not exempt under

the laws of the United States shall be taxed in

proportion to its value... .

California Constitution, Article NETL, Sec. 10:

“All property... shall be assessed in the

County, City and County, town or township or

district in which it is situated...”

California Revenue and Taration Code, See.

201:

‘Al property in this State, not exempt under

the laws of the United States or of this State, is

subject to taxation under this Code.”

The California Courts have previously held that

these provisions of Californta law empower the State

of California and its subdivisions to levy apportioned

ad valorem preperty taxes upon alreraft used as im-

strumentalities of interstate and foreign commerce.

Flying Tiger Line, Ine. v. County of Los Angeles, 51

Cal. 2d 314, 333 2. 2d 323 (1958): Shel Atrways rv.

County of Los Angeles, 140 Cal. App. 2d 31h. 295 2.

2d 46 (1956).

a

The California Supreme Court in this case explicitly

disavowed decision herein upon State grounds: “We

expressly refrain from any decision upon plaintiff's

[respondent's] contention that neither the California

Constitution nor any statutory provision provides a

basis for the instant tax.”’ 51 Adv. Cal. at 31, 363 P. 2d

at 44, Appendix A at 46.

STATEMENT OF THE CASE

The Facts

This case was tried upon the pleadings only, peti-

tioners having demurred generally to respondent air-

line’s Second Amended Complaint for Refund of Taxes

(R., Cl. Tr. 1-8)*, as further amended by Stipulation

and Order Re Amendment by Deletion of [sic] Second

Amended Complaint for Refund of Taxes (R.. Cl. Tr.

11-12).

Respondent airlines corporation ‘tis the United

States representative of Scandinavian Airlines Sys-

tem, a Consortium organization composed of three for-

eign air carriers: Danish Airlines, Norwegian Airlines

and Swedish Airlines”? (R., Cl. Tr., 2). For purposes

5The record herein has not been printed. It is very brief. though, and con-

sists only of the transcript of proceedings in the California Superior Court.

(the trial court) and the modified opinion of the California Supreme Court.

Said transcript contains the Amended Complaint. general demurrer thereto.

stipulation for judgement and judgment. Thus. the facts herein are to be gleaned

from said amended complaint or from the California Supreme Court's modified

opinion, or from both. Reference to the record herein will be exclusively to the

ae Transcript and such reference will be noted by the designation “R..

. Tr

—_ (—

of sunplification, respondent has been treated through.

vut this litigation by the courts (56 Adv, Cal. at 6, fn. 1,

363 P. 2d at 27, fn. 1, Appendix A at 3, fn. 1) and by

the parties hereto as having precisely the same legal

status as the owners of the subject aircraft. The taxed

airplanes are owned by nationals of either Denmark.

Norway or Sweden and eaeh plane has its home base

in one of those countries. |

In November, 1954, respondent commenced a pas-

senger air service between Los Angeles [International

Airport (located within the geographic boundaries of

each of petitioners) and Copenhagen, Denmark. Re-

spondent’s “planes stop enroute to Cayada, but touch

the United States only at Los Angeles International

Airport” (56 Adv. Cal. at 6, 363 P. 2d at 27, App. A at

4). Each week respondent's planes made two trips te

Los Angeles. One plane would arrive in Los Angeles in

the early afternoon on Tuesday and depart a day and

one half later on early Thursday morning, and another

plane would arrive during early Saturday afternoon

and would depart Los Angeles early on the following

Monday morning. An apportioned property tax assess-

ment of said planes was made in March, 1955 by taking

the average value of the thirteen aircraft making tae

flights. multiplying such amount by the fraction of the

vear that respondent had a plane in Los Angeles, and

then multiplying said product by the ratio of assessed

value to market value extant within Los Angeles. Said

—

assessment was then multiplhed by the tax rate to obtain

the amount of the tax ($11,240.46) levied against re-

spondent whose planes had an average value of

$12,341,000 and spent 0.4077 plane-years in Los Angeles

in 1955. (R., Cl. Tr., 3-4).

During the period for which the tax was levied

The operations of all three airlines were taxed on an

unapportioned basis by their respective home country

[sic] for the period material to this complaint, and in

Norway a property tax was levied on the entire value

of the aireraft referred to above which were registered

in Oslo as home port.”’ (R., Cl. Tr., 3.)

REASONS FOR GRANTING THE WRIT

1. Summary of. Argument

Braniff Atrways v. Nebraska State Board, 347 US.

500, 98 L. Ed. 967 (1954), this Court held that the

States may, consistently with the Commerce Clause and

the Due Process Clause of the Fourteenth Amendment,

United States Constitution, levy ad valorem property

taxes upon aircraft making regular, reeurring stops

therein in interstate commerce even though said air-

craft were owned by non-domiciliaries and based in

other States, where said taxes are apportioned to re-

flect the benefits, protections or opportunities afforded

such aireraft by the taxing States. The facts of this case

are similar to those in Braniff except that here the

aureraft are owned by foreign nationals and are for:

i

eign based. rather than being domestically owned and

based, and they {ly in foreign rather than in interstate

cotmmerce, In the case at bar the California Supreme

Court. relying principally upon the decision of this

Court in Hays vo Pacifie Mail SS. Co. V7 How. (58

U.S.) 596, 15 LL. Ed. 254 (1855). held that aircraft en-

gaged in foreign commerce are taxable only at the home

port or the domicile of the owners thereof. The Cali-

fornia Supreme Court is of the opinion that the Hays

ease stands for the proposition that when vehicles of

commerce enter upon international waters, or otherwise

upon the international domain, they become taxable

only at the domicile of the owners or the home base.

and that the Mays case therefore compels said holding

In this case now at bar.

This case is of considerable importance nationally.

[t will become inereasingly important as the volume

of international air traffie with the United States is

handled more and more by foreign air carriers and as

the imstrumentalities thereof beeome more valuable!

‘Mr. Stuart S. Tipton. President Air Transport Association of Ameria saves

in his recent article “A State of the Industry and Progress Repert.” Vol 74

Aviation News No. 18 (May 1, 1961) 71: “The relative position of the US

Flag airlines in the air travel market between the US. and foreign countries

deteriorated sharply in 1960. Although the market consists primarily of US

citizens more than 6 out of every 19 the US. airlines share of the market

dropped to 51.8 per cent. It had been 56.7 per cerit the previous vear

“Foreien air carriers. who in 1950 carried about 25 per cent of this traffic

thus increased their share in 1960 to 48.2 per cent. If this trend continues

and there are no signs that it will be interrupted-. 1961 will cain the ominous

distinction of veing the year that the United States surrendered the lead to

foreign airlines in the carriage of US internotional ait taffi

“The growth and development of the entire US. certificated air carne:

system is affected by this development Under US negotiatine policies over

—

All of the States of the United States including the

District of Columbia, except Delaware, Hawai, New

York and Pennsylvania, levy an ad valorem tax on

tangible personal property. Stale Tar Guide, Prentice

Hall (1960) at 204. Foreign air carriers land upen

airfields of the several states just as do the domestic

carriers, Foreign air carriers use the facilities of, and

within, the several States, just as do the United States

domestic carriers. The foreign carriers derive the same

benefits, opportunities and protections from the States

into which they venture as do United States carriers.

Almost everyone would agree that multiple taxation

of instrumentalities of international commerce is un

desirable. But it does not follow that relief from: such

multiple international taxation should be accomplished

by artificially refined construction and interpretation

of the Commerce Clause, United States Constitution.

Accommodation among nations in this respect should be

effected by treaty. The Courts, beeause of the very

nature of the governmental powers with which thev

the years. not only have more foreign airlines been added in this market but

more and more have been given rights to penetrate the domestic U.S. field.

“One foreign airline operating from the U.S. west coast to Europe. for ex.

ample, diverts more than $4 million annually from U.S. transcontinental air-

lines—an amount greater than the entire net profit of the domestic trunkline.

in 1960.

._ “Meanwhile. U.S.--Flag airlines are facing new developments abroad. Air-

lines of foreign countries, primarily in Europe, are banding together in pools

and combines—aaviding services and revenues on specific routes. In some cases

air protectionism is becoming evident with some nations party to a pool or

combine tending toward restriction of U.S. airline operations.

“To avoid a repeat of the deterioration of our merchant marine. -the United

States Government quickly and intelligently must reappraise its policies in thi.

critical area.” (pp. 78-79)

~—

are vested, are particularly Incompetent to resolve con:

flicts in international taxation. Not only do they not

have the power to make positive law, but also they lack

control over both of the governments causing the tax

ings conflict.

It would seem, too, with respect to aireratt owned

by citizens of the United States, based in one of the

States and (lying exclusively in foreign commerce, that

the home port State could not tax domestic planes at

mull value beeause practical account must be taken of

the power of foreign nations to tar United States

planes which there land. In Flying Tiger Line, Ine. v.

County of Los Angeles, AV Cal. 2d 314, 335 2. 2d 282,

eort. denied 359 U.S. 1001, 3.1L. Ed. 2d 1031 (1958), the

California Supreme Court held, in recognition of the

fact that foreign nations could tax aireraft based in

California and engaged in foreign conmerce, that Cali

fornia could tax sueh planes only at sueh fraction of

their value as equalled the proportion of their tine

spent in California, Now, however, 1m precisely the

converse situation the California Court) holds, that

under the federal Constitution the States may not tar

foreien owned aid based aireraft and that such prop

erty is taxable only by the home port. Et would seen that

many judicial resolution of the problems of interna

tional taxation recognition must be accorded the fact

that foreign nations do have the sovereign power te

tax United States aireraft) making contacts there

= on

with and flyiig in international commerce. [f the

States should tax at full value American planes based

in the United States and flying in international com-

merce, said planes will then be subjected to the possi-

bility of multiple taxation. It would seem only proper

then for the Courts to recognize the power of the States

within the limits established by orthodox Constitutional

interpretation to tax foreign owned and. based aircraft

flying into the United States. The policy of this Court

underlying its decision in Burnett v. Brooks, 288 U.S.

378, 77 L. Ed. $45, that problems ef international mul-

tiple taxation should be resolved by Congressional act

or treaty rather than by Constitutional construction,

should be followed in this case. The Constitution has

been intended to span the generations and therefore

should not be interpreted so as to freeze its meaning to

conform to and be compatible with the current. tax

practices of foreign nations. (Who would doubt that

the tax herein would have been held valid by the Cali-

forma Court if the tax practice throughout other parts

of the world were apportioned taxation /)

To reach its result herein the California Court put

aside orthodox and established prineiples of Constitu-

tional law. It had to cull from Hays v. Paerfie Mail

S.S, Co., 17 How. (ULS.) 596, 15 L. Ed. 254 (1855). the

entirely new doctrine that when instrumentalities of

commerce enter the international domain they become

taxable only by the home port or domicile of the owner.

ie

The California Supreme Court also decided, cou-

trary to past decisions of this Court, that ad valorem

property taxation by a State of property which has

situs therein is prohibited by the Duty of Tonnage

Clause. Slote Tonnage Tar Cases, V2 Wall. (79 Us.)

POL, PIS-2I4, 20 1. ed, 870.378 (IST): Transportation

Co. r. Wheeling, 99 US. 273, 285, 25 LL. Ed. 412, 415

( ISTH). Also. by a process of strained const ruction the

Califormia Supreme Court held the instant tax: to he

prohibited by the Convention aud Protocol between the

United States of America and Sweden (i+ Stat. W099,

Tos. No. 958, Appendix © herein) even chough said

treaty by its very terms does not apply to State prop-

erty taxation. |

We submit that the tax administrators of other

States will not be justified in following the decision

herein of the California Court as authoritative upon

the Constitutional issue involved because the opinion

supporting said decision ts based upon a se ries of prem

ises many of which are contrary to prpciples of Con-

stitutional law heretofore propounded by this Court.

In Chicago v. Willett Company. 344 U8, 574, O7 LL. Ed.

559 (1953), a ease wherein the Hlineis Supreme Court

held invalid under the Commerce Clause an ordinance

of the City of Chicago laying a tax upon trucks trans-

porting goods within said city for hire, this Court

soranted certiorari to review this judgment fof the

Hlineis Court] because it raises questions of impor

tanee to the Nation’s major transport tation centers

pas” oe

344 U.S. at 576, 97 L. Ed. at 568. We submit that the

instant case raises ‘‘questions of importance to the

Nation's major transportation centers’ comparable to

those raised in Chicago ve. Willett Company and is

therefore deserving of consideration and decision by

this Court.

2. The Commerce Clause Does Not Prohibit the Sub-

ject Tax Because (1) It Is Not Discriminatory, (2)

It Does Not Constitute a Direct Burden on Foreign

Commerce, and (3) It Does Not Constitute the Basis

for Taxation Constituting “Multiple Burdens” Up-

on Foreign Commerce.

None of the limitations upon the States’ taxing

power by this Court inferred over the vears from the

Commerce Clause has been exceeded by the instant tax.

In analysis of Commerce Clause limitations upon

State taxing power it is not necessary to depend upon

the distinction between permitted and prohibited State

police power regulation of commerce discussed in

Cooley v. Board of Wardens of Philadelphia, 12 How.

(53 U.S.) 298, 13 L. Ed. 996 (1851). This Court has

frequently said that ‘*not every law that affeets com-

merce among the States is a regulation of it in a con-

stitutional sense’’ (Galveston, IT. & S. AL R. Co. v.

Texas, 210 U.S. 217, 225, 52 L. Ed. 1931, 1036 (1908) :

Chicago v. Willett Company, 344 U.S. 574, 576, 97 1.

Fd. 559. 563). and that even though vehicles of inter-

=< a

state and foreign commerce are subject: to exclusive

regulation by Congress “Lt is equally well settled that

there is nothing in the Constitution or laws of the

United States which prevents a State from taxing per-

sonal property, employed in interstate or foreign com:

meree, like other personal property within its juris-

diction “ Pallman’s Palace Car. Co. v. Common wealth

of Pennsylvania, AL US. 18, 25. 35 L. Ed. 613, 616

(1891); see also, Western Union Telegraph Company

re Taggart, 105 US. 1, 14, 41 L. Ed. 49, 54 (1896) ; Post-

al Telegraph Cable Co. v. Adams, 109 U.S. 688, 695-696.

2g LE. Ed. B11, 315 (1895); Passenger Cases, 7 Tlow.

(48 U.S.) 282. 402, 12 L. Ed. 702, 12 (1849): Old

Dominion S. S. Co. v. Virginia, 198 U.S. 299, 305, 49

L. Ed. 1059, 1062 (1905). Thus, ad valorem property

taxation of instrumentalities of commerce, foreign oF

interstate, ix not in itself inconsistent with the prohi-

hitions of the Commerce Clause.

This Court has often said that only certain types

of State taxes are forbidden by the Commerce Clause:

(1) Discriminatory taxes are proscribed, Best and Co.

ve Marwcll, BU OULS. 454, 85 L. Ed. 275 (1940) Nippert

r City of Richmond, 32% U.S. 416, 425. 90 L. Ed. 760.

765 (1946): West Porm Wholesale Grocery Co. v. City

of Opelilea, 954 U.S, 390, 1 1. Ed. 2d 1420 (1957):

Portland Cement Co. v. Minnesota, B58 U.S. 450, 458.

31. Ed. 2d 421, 427 (1959): Mens plas Steam dosundry

1 Stone. BAZ VS. 389, 395, 96 L. Ed. 436, 441 (1952).

(2) State taxes constituting a dircet barden pon cour

een

merce are prohibited. ‘It is settled that where by way

of duties laid on the transportation of the subjects of

interstate commerce, or on the receipts derived there-

from, or on the occupation of business of carrying it

on, a tax is levied by a State on interstate commerce,

such taxation amounts to a regulation of such com-

meree and cannot be sustained. But property inoa

State belonging to a corporation, whether foreign or

dcmestic, engaged in foreign or interstate commerce,

may be taxed, or a tax may be imposed on the corpor-

ation on account of its property within a State.” Postal

Telegraph Cable Co. ve. Adams, 155 U.S. 688, 695-696,

39 L. Ed. 311, 315. ‘* Because the greater or more threat-

ening burden of a direct tar on commerce is coupled

with the lesser need to a State of a particular source

of revenue, attempts at such taxation have always been

earefully serutinized .. 2° Freeman v. Hewit, 329

U.S. 249, 253, 91 L. Fd. 265, 272 (1946). (3) State

taxes upon the instrumentalities of ecommerce cannot

impose the possibility of multiple burdens thereon.

That is, State taxes eannot be such ‘‘that they have

placed on the ecommerce burdens of such a nature as

to be capable, in point of substance, of being imposed

. with equal right by every state which the commerce

touches, merely because interstate commerce is being

done, so that without the protection of the commerce

elause it would bear cumulative burdens not imposed

on loeal commerce.” Western Lire Stockh ve Burean of

Revenue, 303 U.S. 250, 255-256, 83 L. Ed. 828, R28

(1937).

oo

[tis quite obvious that the mstant ad Valorem prop-

erty tax, apportioned to reflect the fraction of the

vear the planes were in Los Angeles County, does not

execed the limitations of any of the foregomne tests and

that therefore the instant tax is valid so far as the Com

meree Clause is concer aed. 7 Numerous eases have up

held state levies where it is thought that the tax does

not operate to discriminate against commerce or Une

duly burden it either directly or by the possibility of

multiple taxation resulting from other taxes of the

Kaine sort being mnposed by other states. Mrchigan-

WWiseousin Pipe Line Co. ve. Calvart, 34% US. 157, 166,

98 L. Ed. 583, 591 (1953).

As above-noted he California Supreme Court In-

rerred from Hays vo Pacifie Mail 8.8. Co. Ve How.

(58 U.S.) 596, that when a vehicle of commerce enters

upon Intern ational waters, or otherwise inte the liter:

national domain. it becomes for that reason taxable

oly at its home port or at the domicile of its owner.

(a6 Ady. Cal. at 11-12, 3638 2. 2d at 30-31, Appendix

A at 11-14.) In Hays this Court held that a non-home-

port, non-domiciliary state into Which an ocean goine

vessel happened in the course of its trading and com

mercial operations could not levy an Unapportioned

tax thereon because the vessel did not acquire sifies for

taxation in the several ports inte which it entered. The

decision in Mays was reydered before this Court had

adopted the principles of apportioned taxation and

when the idea was held by this Court, and otherwise

ie

almost universally entertained, that migrating personal

property could have only one situs for texation—either

the place where permanently located or, in the absence

of permanent location, at the domicile of the owner.

[tis plain that the court had no notion that the ships

were excinpt from taxation because used as instruments

of interstate comnierce, It was recognized that they

were taxable where they had their situs. The basis of

the decision must therefore be that temporary pres-

ence is not enough te establish a situs for property

away from its owner's domicile. Insofar as the court

hints at practical reasons, it points to the possibility

of multiple taxation if temporary presence is enough

to confer jurisdiction. It contents itself with this,

without going on to mention that such multiple tax-

ation would interfere with the course of interstate

trade...’ Thomas Reed Powell, Taration of Things

tn Transit, 7 Virginia Law Review 167, at 170 (1920).

In his ‘* Jurisdiction to Tax.’ 32 Harvard Law Review

587 (1919) Professor Joseph H. Beale explained the

defect of the Hays tax:

2. ..The tax is levied for a year’s protection:

it is known that this particular chattel will re-

quire protection only. for a short time. To exact

a tax based on a vear's protection would be unfair:

no other tax is provided for by the law. If there

were provision for a daily tax this could lawfully

be exacted even from property temporarily with-

in the state, for such property is of course within

the jurisdiction of the sovereign. Any method pro-

oe

vided by statute for exacting a really fair tax from

such property is constitutional” 7 Virginia Law

Review at 598.

This Court in Braniff Airways vo Nebrashea State

Board, 347 Us. 500, 98 L. Ed. 967 (1954) alse inti-

nated that the viee of the Hays tax was that it was

not apportioned by the non-domiuciliary taxiny state

according to the benefits, protections and opportunities

afforded the taxed property: The first two cases

[Hays v. Pacific Mail S. oS. Co, supra, and Morgan v.

Parham, 16 Wall. (83 U.S.) 471, 21 Lb. Ed. 308 (1873) |

were efferts to tax the entire value of the ships as

other local property, without apportionment, when they

were used to plow the open seas.” 347 U.S. at 600, 98 1.

Id. at 977.

Neither this Court in its decisions nor any of the

learned Constitutional commentators have ever asserted

that Instrumentalities of conmiineree which enter the im,

ternational domain are simply for that reason alone

subject to rules of taxation entirely different from

those applicable to velie¢les of commerce whieh remain

entirely within the United States. No one seems te

doubt today that if. a non-domicihary state imposed an

ad valorem tax Upon instruments of interstate com,

merece apportioned according to the benefits. oppor-

tunities and protections afforded the taxed) property

that sueh tax would be held valid even though the in-

strumentalities ventured inte the mternational domain,

—20—

Brau ff Airways v. Nebraska State Board, 347 U.S, at

600, 98 L. Ed. at 977; Beale, Jurisdiction to Tar, 32

Harvard Law Review at 598. Therefore, this Court's

decision in Hays depended upon its then existing con-

cept of situs—that migrating property had only one

situs for taxation—and not upon an unspoken theory

of entry into international waters as urged by the Cali-

fornia Supreme Court.

The California Supreme Court was obviously dis-

turbed by the fact that the Scandinavian nations could

tax their domiciliaries with respect to the subject air-

craft, that such tax could be measured by the full value

of the aircraft, and that any. taxation by one of the

several States might cause a cumulative tax burden

upon foreign commerce: **When such a vehicle becomes

an instrument of communication with foreign nations it

is apparent that the apportioned basis of taxation is

unworkable because the courts of this country can ex-

ercise no control over the foreign taxing authorities,”

56 Adv. Cal. at 22, 363 P. 2d at 38, Appendix A at 30.

We respectfully submit that the California Supreme

Court is improperly attempting to achieve a delicate

and refined adjustment of the law of international tax-

ation by a strained construction of general principles

of federal Constitutional law and by construing pro-

visions of our Constitution in such manner as to ae-

commodate the current tax practices of other nations.

We believe that the tax power of the States should be

accommodated to the tax power of foreign nations, and

-—

Vice versa, but that such accommodstion should be ae

complished by Congress or by the President and Senate

through exereise of the treaty making powers.

It is true that the Seandinavian nations may tax

these atreraft on the basis of their full value. Sueh

power of taxation in the Seaidinavian countries is not

based upon any rule of s¢fas as pronounced in lays ev.

Pacifie Mail S. 8S. Co. VW How. 596, but rather upon

the power of nations to tax their citizens on account

of property owned thereby, wherever located, and in-

dependent of woether or not the taxing nation pro-

vides any direct benefits, opportunities or protections

to the property so taxed. Cuited States ve Bennett,

232 US. 299, 58 L. Ed. 612 (1914): Page, Jurisdiction

to Tar Tangible Movables, 1945 Wisconsin Law Review

125, 158-140. In exercising their national taxing pow-

ers the Scandinavian nations may not feel constrained

by such principles and Timitations as underlie our

federal Commerce and Due Process Clauses. How-

ever, the current tax practices of foreign nations should

net govern or influence the interpretation of our fed-

eral Constitution as they apparently have the Cah-

fornia Supreme Court in this case. That Constitutional

interpretation and construction should be imdependent

of the taxing practices of others was the view of the

late Chief Justice Stone. Northicest Arrlines. Tne. 0.

Minnesota, 322 US, 2902, 88 LL. Fd. 1283 (1944) (dis-

senting opinion): "Phe extent to whieh one state may

constitutionally tax the instruments of interstate trans

a

portation does not depend on what other states may

happen to do, but on what the taxing state has consti-

tutional power to do.”* 322 U.S. at 326, 88 L. Ed. at

1303. And in Coe v. Errol, 116 U.S. 517, 29 L. Ed. 715

(1886), this Court said ‘*1f the owner of personal prop-

erty within a State resides in another State which

taxes him for that property as part of his general

estate attached to his person, this action of the latter

State does not in the least affect the mght of the State

in Which the property is situated to tax it also. It is

hardly necessary to cite authorities on a point so ele-

mentary.”’ 116 U.S. at 524, 29 L. Ed. at 718. See also

Freeman v. Hewit, 329 U.S. 249, 91 L. Ed. 265: **The

immunities implicit in the Commerce Clause and the

potential taxing power of a State can hardly be made

to depend, in the world of practical affairs, on the

shifting incidence of the varying tax laws of the var-

ious States at a particular moment.’* 329 U.S. at 256,

91 L. Ed. at 274. In Burnett v. Brooks, 288 U.S. 378,

77 «LL. Ed. 845 (1953), this Court held valid under the

Due Process Clause of the Fifth Amendment a federal

tax on intangibles located within this country, but

owned by an English citizen who had died domiciled in

Cuba. In commenting upon this case Professor Charles

lL. B. Lowndes, ‘*Spurious Conceptions of the Consti-

tutional Law of Taxation.”” 47 Harvard Law Review

628 (1934) states:

“There is a valid distinction from a practical

point of view between multiple state taxation and

nif

multiple international taxation. Pt is possible te

sponsor a coherent system of restrictions upon

duuble taxation When you control all the claimants

who are competing for the tax. Interstate mutiple

taxation can be regulated by the Supreme Court

because it controls all the factors in the problem.

On the other hand, in the contest over international

taxation, the Supreme Court is an inadequate ar-

biter since it can coerce the action of only one of

the principals to the controversy—the United

States. If, in a given sitaation, the Court denies

the nation the power to tax, there Is no assurance

that foreign governments will reciprocate. The

result would be that this country would be forced

to abnegate a source of revenue without any ad-

equate assurance of a corresponding benefit: from

other governments. In interstate multiple taxation

the competing considerations are the state's claim

to be immune from undue economic and adminis-

trative vexation. In international multiple tax-

ation the nation’s need for revenue is) balanced

against the hardship upon the alien who is sub-

jected to a tax by this country and his own, The

severity of his burden may be mitigated by treaty

or the benevolence of his.own government. At any

rate, the Supreme Court will have ne part of it.

International double taxation is a matter for leg-

islative or executive action rather than judicial

action, and this is the substantial result of Barnett

vr. Brooks.’ 47 Uarvard Law Review at 634-635.

It seems also to have been the consensus of muy

law commentators that) problems of international

5

double taxation should be alleviated and resolved by

treaty rather than by construction and interpretation

of the constitution. Note: Multiple Taration: The lm-

plications of Burnett v. Brooks, 47 Harvard Law Re-

view 307 (1933) ; Note: Laration—Inherttance Tares—

Power of a State to Tax Intangible Property Owned

by One Domiciled ina Foreign Country, 84 Univ. Penn.

Law Review 794-795 (1936) ; Note, Validity of Federal

Estate Tar on Securities Owned By Non-Resident

Alien, 42 Yale Law Journal 1277-1279 (1933).

3. The Instant Tax Does Not Constitute a Duty of

Tonnage Because It Is An Ad Valorem Tax Ap-

portioned According to the Benefits, Opportunities

and Protections Afforded the Respondent’s Air-

craft.

A ground asserted by the California Court as basis

for invalidity of the subject tax is violation of the Duty

of Tonnage Clause. The majority of the California

Court states that a Duty of Tonnage as proscribed by

the federal Constitution is ‘ta duty levied as a con-

dition to being allowed to enter or leave port; such a

duty represents an interference with commerce; and,

no state is at liberty to interfere with foreign con-

merce... There is no logical reason why the stated

principles should apply only if the preposed tax is

hased upon the gross tonnage of a vessel and be imap-

plicable if the same tax is based upea the vessel's

value.”” 56 Adv. Cal. at 24-25 A453 P. 2d at 39-40, Ap-

25>

pendix A at 34-35. Thus the Caltorna Court lenoOres

the eases of this Court and holds that an ad) valorem

property tax is proseribed by the Tonnage Clause. That

the distant tax isa perniutted ad valorem: proaperty tas

and nota Duty of Tonnage clearly appears froma epi

ions of this Court: (Panes levied by a State upon ships

and vessels owned by the citizens of the State as prop

crty, bascd ona valuation of the same as pre porta, are

not within the prohibition of the: Constitution. buat at

is equally clear and undeniable that tines levied bya

State upon ships and. vessels as cuistruments of com

meree and navigation are within that clause of the im

strtument whieh prohibits the States from: levying any

duty of tonnage, Without the consent of Congress. —

(emphasis added) State Tonwige Tar Cases, V2 Wall.

(TO US.) DOE PID-214, 20 1. Bd S70, 573 CISTI. See

alse Treas portation Conv. Wheeling, 99 EUS, 273, 288.

P51. Bd. 412. 415 C1879).

4. No Treaty to Which the United States Is a Party

Exempts the Subject Airplanes from State Tax-

ation.

The Califorma Court as a greand for holding the

subject tax invalid: states that the treaty: between the

United States and Sweden forbids such tax: * bn our

opinion, the language of the various treaties and agree

ments clearly eliminates the possibility of loeal prop

erty taxation only insofar as concerns Those urplanes

awned and registered in Sweden 696 AC. at 30, 23

—26—

P. 2d at 43, App. A at 45-4). The Swedish-American

treaty relied upon as exempting airplanes of Swedish

domiciliaries from taxation is the “Convention and

Protocol Between the United States of Amertea and

Sweden” respecting double taxation effective January

1, 1940, 54 Stat. 1759, ULS. Treaty Seres No. 958, Ap-

pendix (. Article | of said treaty recites:

The taxes referred to in this Convention are:

“(a) Inthe case of the United States of Amer-

1ea:

(1) The Federal income taxes, includ-

Ing surtaxes and excess-profits

taxes.

(2) The Federal capital stock tax.

“(b) In the case of Sweden:

(1) The National income and property

tax, including surtax.

(2) The National special pr:-certy tax.

(3) The communal income tax.

“It is mutually agreed that the present Con-

vention shall also apply to any other or additional

taxes imposed by either contracting State, subse-

quent to the date of signature of this Convention,

upun substantiaily the same bases as the taxes

enumerated herein.”

It is plain from the above that the treaty does not

apply to State property taxation. But the California

Court then refers to Article NIU, subdiv. (2) of said

treaty for support of its conclusion that said treaty

a; som

renders respondent's Swedish planes iuntne from the

subject tar:

“Tn the case of all other forms of property,

the tax may be levied only in that contracting state

where the taxpayer has his residence or, in the case

of a corporation or other entity, in the contracting

State where the corporation or other entity has

been created or organized.”

In concluding that said Swedish treaty exempts

plaintiff from the subject tax as applied to Swedish

owned Planes the California Court does viclence to the

precise, explicit language of Art. Lo of the treaty pro-

viding that it applies only to the Swedish ** National

special property tax’ CArt. [) and such ‘other or

additional taxes imposed by cither contracting State,

subsequent to the date of signature of this Convention,

upon substantially the same bases as the taxes enumer-

ated herein’ -- which, of course, would include any

property taxes thereafter imposed by the United States

or the States.

Where said treaty refers in Art. NETL subdiv. 2.

to property taxes it must refer to the Swedish "Na-

tional special property tax’ and such other property

taxes enacted by Sweden or the United States after

the date of the signature of said convention, Sueh con-

Struetion of said treaty as we here suggest does not do

Solenee to any portion of the language of the treaty

as does the interpretation by the majority of the Cah-

-_—

23—

fornia Supreme Court. Further, our interpretation ts

consistent with the position taken by the Senate For-

eign Relations Committee when urging ratification of

said United States treaty with Sweden: **(‘TJhe United

States makes no agreement respecting any of our State

or local taxes”’ (Report of the Senate Foreign Rela-

tions Comm., Exec. K, 76th Congress, Ist Session

(1939). Statements by legislative committees are ma-

terial facts to be considered in interpreting their works

if such are ambiguous. .lmerican Stevedores v. Porello,

330 U.S. 446, 452-453, 91 L. Ed. 1011, 1017-1018 (1947) :

Caminetti v. United States, 242 U.S. 470, 490, 61 L. Ed.

442, 455 (1917).

The California Supreme Court further holds that

the Swedish-American treaty (which it asserts exempts

Swedish planes from the instant tax), because of the

juxtaposition of the federal Commerce Clause, alsy

causes the exemption of the Danish and Norwegian

planes from the instant tax. The California Court says

that for California to tax Danish and Norwegian planes

when the Swedish planes are exempt from taxation

by treaty would be for California to discriminate with

respect to foreign commerce—which is forbidden by

the Commerce Clause. Such, of course, is an erroneous

argument. The Commerce Clause does not guarantee

equal treatment of instruments of commerce in all

cases. It merely forbids discriminatory treatment by

the States. The applicable California laws apply equal-

Iv to the planes of all legal entities in respondent air-

29

line s position. Tf unequal treatment is afforded Dan-

Ish and Norwegian citizens because of the taxation of

their aireraft and the exemption of Swedish aircraft.

such diseriniantion has been wrought only by federal

Treaty. The California Court’s argument can easily

he disproved by refernece to the more familiar field

of interstate comunerce. If in the exereise of its com-

mereial power the federal Coneress cho: - to exempt

one type of property moving in interstate Commerce

from State taxation, certainly the argument would not

he vahd that all other property moving in interstate

conmnerce is therefore and thereby exempt from. all

State taxation. Such ivalid conclusion, however, is

the necessary consequence of the position of the Cali-

fornia Court.

5. The Instant Tax Does Not Exceed the Limitations

Imposed Upon the States by Due Process Clause,

Fourteenth Amendment, United States Constitu-

tion.

Respondent airline has urged herem that the mstant

tax offends the requirements of Due Process, Four-

teenth Amendment, CoS. Constitution OR. Cl Tr... 6).

The aivline’s argument has been principally that the

possibility of multiple taxation is forbidden by Due

Process, Fourteenth Amendment, as well as by the

Commerce Clause, and that. because the domicilary

Hations possess the power te tax the subject aircraft

=

at full value, any taxation by the States would submit

said aircraft to the possibility of multiple taxation.

See opinion herein of the California District Court of

Appeal, 6 Cal. Rptr. at 696, Appendix B at 3. This

Court has said that **So far as due process is concerned

the only question is whether the tax in practical oper-

ation has relation to opportunities, benefits, or pro-

tection conferred or afforded by the taxing State.”’

Ott v. Mississippi Valley Barye Line Co., 336 U.S. 169,

174, 93 L. Ed. 585, 589 (1949). Also to the same effect

are Wisconsin v. J. C. Penney Co., 311 U.S. 435, 44,

85 L. Ed. 267 (1940); Braniff Airways v. Nebraska

State Board, 347 U.S. 590, 600, 98 L. Ed. 967, 977. And,

as already noted hereinabove the tax practices of an-

other jurisdiction are immaterial in determining the

power of a State to tax under limitations of the Due

Process and Commerce Clauses. Freeman v. Hewit,

329 U.S. 249, 256, 91 L. Ed. 265, 274; Northwest Atr-

lines, Inc. v. Minnesota, 322 U.S. 292, 326, 88 L. Ed.

1283, 1303; Coe v. Errol, 116 U.S. 517, 524, 29 L. Ed.

715, 717-718. Thus it world seem that the instant tax

apportioned according to the time respondent’s planes

are Within Los Angeles County clearly conforms to

requirements of Due Process, Fourteenth Amendment.

a

CONCLUSION

For the reasons above-stated it is respectfully sub-

tuitted that the judgment of the California Supreme

Court should be reversed.

HAROLD W. KENNEDY,

County Counsel

And

ALFRED CHARLES DE FLON,

Deputy County Counsel

Counsel for Petitioners,