Banker Bros. Co. v. Pennsylvania, 222 U.S. 210 (1911)

BANKER BROTHERS COMPANY v. COMMONWEALTH OF PENNSYLVANIA.

ERROR TO THE SUPERIOR COURT OF THE STATE OF

PENNSYLVANIA.

No. 72. Argued November 17, 1911.—Decided December 4, 1911.

The relation of vendor and vendee, and not that of principal and agent, exists where the manufacturer sells goods to another under exclusive contract and delivers goods only on payment of draft attached to bill of lading.

In this case held, that goods manufactured in another State and delivered only, in pursuance of contract, after payment of draft attached to bill of lading, are at rest and subject to the laws of the State while in the hands of the consignee before delivery by him to a purchaser from him, notwithstanding the consignee only ordered them after a contract with the purchaser had been made.

Where the relation of principal and agent exists between one spiling goods in one State which are manufactured in another State and the manufacturer, sales made by the former within his own State are not interstate commerce transactions but are subject to the taxing power of the State.

Where the transaction of sale of an article manufactured in another State is wholly intrastate, as between vendor and vendee, it does not become interstate and immune from state taxation because the purchaser pays freight from the place of manufacture or because the purchaser obtains a warranty direct from the manufacturer.

The facts, which involve the constitutionality of a statute of Pennsylvania taxing sales of automobiles, as enforced in this case, are stated in the opinion.

Mr. Edward J. Kent and Mr. Harvey A. Miller for plaintiff in error:

Robbins v. Shelby County, 120 U. S. 489; Wilton v. Missouri, 91 U. S. 275; Brennan v. Titusville, 153 U. S. 289; Lyng v. Michigan, 135 U. S. 166.

The automobile sold is always actually ordered and the order signed by the purchaser submitted to the factory at Buffalo, New York, where it must first be accepted, after which the automobile is shipped to fill the order to the particular individual named therein.

Mr. George H. Calvert, with whom Mr. John C. Bell, Attorney General of the State of Pennsylvania, Mr. James M. Magee, Mr. Donald Thompson and Mr. Murdoch Kendrick, were on the brief, for defendant in error:

Merchandise, even though an article of interstate commerce, is subject to state taxation, provided the act imposing such tax does not attempt to regulate interstate commerce or discriminate against it. Brown v. Maryland, 12 Wheat. 436; American Steel & Wire Co. v. Speed, 192 U. S. 520; Emert v. Missouri, 156 U. S. 320; American Express Co. v. Iowa, 196 U, S. 146; Darnell v. Memphis, 208 U. S. 119; Phillips v. Mobile, 208 U. S. 479.

Upon receipt of the automobile by Banker Brothers Company, it had reached its destination and was at rest in the State within the meaning of that rule. General Oil Co. v. Crain, 209 U. S. 228; Brown v. Houston, 114 U. S. 622; Pittsburg Coal Co. v. Bates, 156 U. S. 578; Diamond Match Co. v. Ontonagon, 188 U. S. 96.

The act levying the tax does not attempt to regulate interstate commerce and does not discriminate against it. Robbins v. Shelby Co., 120 U. S. 501.

The right of the State to tax trades, professions, and occupations, cannot be questioned by the Federal Government. Knisely v. Catterei, 196 Pa. St. 628; Ficklen v. Shelby County, 145 U. S. 1.

Mr . Justi ce Lamar delivered the opinion of the court.

The Banker Brothers Company, a corporation doing business in Pittsburg, was charged, as retail venders, with a tax of 1 per cent on $351,000 on sales of automobiles to persons in Pennsylvania under a statute of that State. It denied liability on the ground that the sales were interstate transactions. A decision of that point involves the question as to whether Banker Brothers Company acted as principal or as agent of a New York manufacturer.

It appears that the George N. Pierce Company was engaged in the business of manufacturing automobiles in Buffalo, and in 1905 made a contract by which it agreed “to build for and sell automobiles to Banker Brothers Company at twenty per cent less than list price. Deliveries to be f. o. b. Buffalo as soon as practicable after order for deliveries are received. Payments to be made in cash.”

The Banker Brothers Company kept no machines in stock except those used for demonstration, and were allowed to sell only within a restricted territory on terms stipulated by the manufacturer. The purchaser of the machine was to pay at least ten per cent when he signed a printed form addressed to Banker Brothers Company requesting it “to enter my order for-------- motor car, for which I agree to pay the list price f. o. b. factory, as follows: $---------upon signing this order, and the balance upon delivery of the car to me.”

It is contended that Banker Brothers Company were agents and the Pierce Company an undisclosed principal. It is urged that the sale was an interstate transaction between the manufacturer and the purchaser, with Banker Brothers Company merely acting as an agent which looked after the delivery of the machine and collected the purchase price.

This is one of the common cases in which parties find it to their interest to occupy the position of vendor and vendee for some purposes under a contract containing terms which, for the purpose of restricting sales and securing payment, come near to creating the relation of principal and agent. But as between Banker Brothers Company and the Pittsburg purchaser, there can be no doubt that it occupied the position of vendor. As such it was bound by its contract to him and under the duty of paying to the State a tax on the sale.

These were mere incidents of the intrastate contract of sale between Banker Brothers Company and the purchaser in Pittsburg, who was not concerned with the question as to how the machine was acquired by his vendor, or whether that company bought it from another dealer in the same city or from the manufacturer in New York. The contract was made in Pennsylvania, and was there to be performed by the delivery of the automobile and the payment of the balance of the purchase price. See * American Steel & Wire Co. v. Speed, 192 U. S. 500; American Express v. Iowa, 196 U. S. 133, 146. The court properly held it was not an interstate transaction, but taxable under the laws of Pennsylvania.

UNION PACIFIC RAILROAD COMPANY v. UPDIKE GRAIN COMPANY AND CROWELL LUMBER AND GRAIN COMPANY.

ERROR TO THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.

Nos. 353, 354, 355, 356. Argued October 18, 1911.—Decided December 4, 1911.

Interstate Commerce Commission v. Differibaugh, ante, p. 42, followed to effect that under the Interstate Commerce Law, as amended by the act of June 29, 1906, c. 3591, 34 Stat. 584, 590, elevation of grain is included in transportation, and, subject to the power of the Commission to determine the reasonableness of the payments, carriers can compensate owners of grain in transit for elevation services rendered in connection therewith.

Although a carrier may have had an ulterior motive in establishing a general rate of compensation for services rendered to it in connection with goods in transit, the real consideration is the service rendered; and even if the carrier does not realize the desired benefit it cannot deprive one actually rendering the service of the compensation on the ground of non-compliance with regulations of an association of which the carrier is a member and over which the party rendering the service has no control.

A carrier must treat all alike. It cannot pay one shipper for services rendered to his goods in transit, and, by enforcing an arbitrary rule, deprive another shipper rendering similar services of compensation therefor.

A rule apparently fair on its face and reasonable in its terms may, in fact, be unfair and unreasonable if it operates so as to give one an advantage of which another similarly situated cannot avail.

In this case held, that the Union Pacific Railroad Company could not refuse to pay the owner of an elevator located on other railroads compensation for elevating grain similar to that paid to owners of elevators located on its own railroad on account of failure to return cars within an arbitrary and unreasonable time fixed by the Union Pacific; but also held that such cars should be returned within a reasonable time in order to entitle the parties rendering service to compensation therefor.

178 Fed. Rep. 223, affirmed.

The facts are stated in the opinion.

Mr. Maxwell Evarts, with whom Mr. F. C. Dillard and Mr. Henry W. Clark were on the brief, for plaintiff in error.

Mr. Edward P. Smith, with whom Mr. Constantine J. Smyth was on the brief, for defendants in error.

Mr. Constantine J. Smyth and Mr. Edward P. Smith, with whom were Mr. Nelson H. Loomis, Edson Rich, F. C. Dillard, R. W. Blair and E. H. Crocker, filed a brief for plaintiff in error on motion to dismiss.

Mr . Justic e Lamar delivered the opinion of the court.

In 1899, the Union Pacific found it desirable to have grain unloaded at its terminals in Council Bluffs in order that cars might be promptly returned for use on its line. In consideration that Peavey would there erect and maintain an elevator, it agreed to pay him 1^ cents per hundred for elevating grain. It subsequently made similar contracts with what are called “ Peavey Companies” which had elevators along its tracks in the cities of Omaha, South Omaha and Kansas City, terminal points of the Union Pacific. Thereafter it agreed, on certain conditions, to pay for similar service by elevator companies in the same cities, even though the elevators were not located immediately on the railroad tracks. It thereupon filed a Tariff Circular with the Commission, in which the Union Pacific recited that “to expedite the movement, and to secure the prompt release and return of equipment, an allowance . . . will be made” to elevators performing the service on through grain in carloads, transferred by the elevators at the points named:

“No allowance will be made when more than forty-eight hours elapse between time of delivery ... to the elevator, or connecting lines and the release and return of the empty cars to the Union Pacific.”

222 U. 8. Opinion of the Court.

That company was and is a member of a railway association, which regulated the switching, loading and unloading of cars. One of its rules provided that:

“Cars received loaded in switching service must be confined to switching territory and when made empty must be returned to the owner if a direct connection within that territory or otherwise to the road from which received or may be loaded in accordance with Rule 2 a, b or c.

Rule 2 (a). “Loaded via any route so that the home road will participate in the freight rate; (b) loaded to the road from which originally received, if such loading is in the direction of the home road, but not otherwise; (c) loaded to an intermediate road in the direction of the home road.”

As the Peavey elevators were located alongside the tracks of the Union Pacific, these rules did not affect their right to recover for elevation service. But, as the elevators of the defendants in error were located on the lines of other railroads in Omaha and South Omaha, it frequently happened that cars, after being unloaded at their elevators, were not returned to the Union Pacific, and that others were not returned within 48 hours. In those cases the Union Pacific refused to make payment for unloading these cars. The defendants in error filed a complaint with the Commission, asking for reparation. An order to that effect having been granted, they brought a joint suit for reparation.

After hearing evidence showing the amount of grain elevated for which payment had not been made, and considering the tariff and rules of the switching company, the court directed a verdict in favor of each of the plaintiffs for the amount shown to be due them. The judgment as modified was affirmed by the Circuit Court of Appeals, 178 Fed. Rep. 223, and the railroad brought the case here. There are forty assignments of error, but they need not be separately considered, as the case must be determined by a few controlling principles:

1. The Union Pacific’s contention that payment for reparation cannot be made to the owner who stores and mixes the grain must first be considered.

The long mooted question as to whether elevation was such a part of transportation as to bring it within the jurisdiction of the Interstate Commerce Commission was answered by the act of June 29, 1906, 34 Stat. L. 584, 590, c. 3591, in which Congress declared that “the term ‘transportation’ shall include . . . all . . . facilities of shipment, . . . irrespective of ownership, . . . and all services in connection with the . . . elevation, and transfer in transit . . . and handling of property transported.” Carriers were required “to provide and furnish such transportation upon reasonable request therefor.”

This act was passed after the decision by the Commission in 1904 (10 I. C. C. 309), that the Peavey contract was valid, and after the recommendation in its report for 1905 (p. 11), that it should be given authority to determine whether the allowance paid to the owner was just. The statute must be taken as a legislative recognition of the long-continued practice and a declaration that the incidental advantage derived by the owner was not undue.

In pursuance of the authority thus expressly conferred the Interstate Commerce Commission, in April, 1907 (12 I. C. C. 86), fixed the allowance for elevating grain at % of a cent per hundred pounds, being actual cost, with no allowance whatever for profit. Its final order (14 I. C. C. 315), prohibiting any payment to the owner who performed this transportation service was reversed, as being beyond the jurisdiction of the Commission, because Congress had expressly permitted such payment to be made {Interstate Commerce Commission v. Diffenbaugh, Same v. Peavey, ante, p. 42). The language of the statute and this decision answer the Union Pacific’s contention that it was unlawful to pay these companies for transportation services.

3. For elevating grain from like foreign cars the Peavey Companies were paid because their elevators happened to be located on the Union Pacific tracks. But if the rule is valid against the plaintiffs, it would put it in the power of the carrier to say which elevator should be paid, and which not paid, for performing the same transportation service. It could load grain belonging to the plaintiffs into foreign cars, and in spite of the service rendered by them to the carrier in unloading, no payment would be made, because these foreign cars, under the rule, were not returned to the Union Pacific. It is not necessary that any such improper purpose should be shown to exist. It might have existed, and if so, could not be proved by the injured party. The power to make such a discrimination would prevent the enforcement of any regulation frequently having such operation.

The carrier cannot pay one shipper for transportation service and enforce an arbitrary rule which deprives another of compensation for similar service. To receive the benefit of such work by one elevator without making compensation therefor would, in effect, be the involuntary payment by such elevator of a rebate to the railroad company, for it would enable the railroad to receive more net freight on its grain than was received from its competitor located on the railroad’s tracks. This cannot be directly done, nor indirectly by means of regulation. A rule apparently fair on its face and reasonable in its terms may, in fact, be unfair and unreasonable if it operates so as to give one an advantage of which another similarly situated cannot avail himself.

4. The trial court was right in holding that the railroad company must make reparation by paying for the elevation of grain in those cars not returned in forty-eight hours, because they belonged to the switching company, or to a road which had a direct connection in the switching territory (2 a), and in those which when emptied were routed so that the home road participated in the freight rate (2 b).

But while elevators off the tracks of the Union Pacific cannot be affected by unreasonable rules tending to deprive them of just compensation, neither can they disregard the obligation promptly to unload, so that the cars might be put in service as soon as practicable. This was conceded by the defendants in error, and they accepted the ruling that they were not entitled to recover for elevating grain out of some 200 cars, which could have been unloaded and returned in a much shorter time, but which they detained beyond the forty-eight hours.

Mr . Justi ce Mc Kenna and Mr . Justic e Hughes concur in the result in view of the decision in Interstate Commerce Commission v. Differibaugh, Same v. Peavey, ante, p. 42.