No, 12246
I N T E SUPREME C U T O THE STATE O MONTANA
H OR F F
1973
GARRETT FREIGHTLINES, I N C , ,
a corpora t i o n ,
P l a i n t i f f and Respondent,
T E MONTANA RAILROAD AND PUBLIC
H
SERVICE COMMISSION e t a l . ,
Defendants and Appellants.
Appeal from: District Court of t h e F i r s t J u d i c i a l District,
Honorable Nat Allen, Judge presiding.
Counsel 02 Record:
For Appellants :
F f l l i a m E. 0 ' ~ e a x yappeared, Helena, Montana
d
John P, Atkins argued, Helena, Montana
For Respondent :
Bolkovatz and Romine, Helena, Montana
Walter H, Bolkovatz and William Romine argued,
Helena, Montana
- - - - -
Submitted: January 25, 1973
Decided : YfiR 15 1973
Fileda #Pf? 1 5 19'13
Mr. C h i e f J u s t i c e James T. Harrison delivered t h e Opinion of t h e Court.
Plaintiff-respondent Garrett Freight1 ines, Inc., hereinafter
designated Garrett, is a common c a r r i e r of general commodities engaged i n
both i n t r a s t a t e and i n t e r s t a t e comnerce, operating pursuant t o a u t h o r i t y
granted by the I n t e r s t a t e Comnerce Comission and t h e Public Service Com-
mission of the S t a t e of Montana.
Garrett brought this action i n the d i s t r i c t court of the f i r s t judi-
c i a l d i s t r i c t , i n and f o r the county of Lewis and Clark, seeking a declaratory
judgment t h a t sections 8-101 and 8-1 27, R.C.M. 1947, a r e unconstitutional and
f o r the issuance of a permanent injunction enjoining t h e Public Service
Commission from exacting t h e gross revenue f e e from Garrett under s e t t i o n
8-127, R.C.M. 1947. The Pub1 i c Service Comnission, hereinafter designated
Commission, f i l e d a motion t o dismiss on t h e grounds t h a t the complaint f a i l e d
t o s t a t e a claim upon which r e l i e f could be granted. The d i s t r i c t court d i s -
missed the complaint. On appeal t o t h i s Court the judgment was ordered vacated
and t h e cause was remanded w i t h d i r e c t i o n s t o obtain f u r t h e r information per-
t i n e n t t o the issues. See Garrett Frt. Lines v. Mont. Ry. Comm'n, 153 Mont.
380, 457 P.2d 469.
After t h e f i l i n g of answers t o interrogatories by both p a r t i e s , the
cause came t o t r i a l on September 20, 1971. After both p a r t i e s submitted evi-
dence through oral testimony and e x h i b i t s , the court, s i t t i n g without a jury,
entered i t s findings of f a c t , conclusions of law and judgment i n favor of
plaintiff. T h i s appeal followed.
The s t a t u t o r y provisions herein involved a r e section 8-101 (h) , R.C .M.
1947, which exempts from the operation of the Montana Motor Carrier Act:
' * * * motor vehicles used i n carrying property consist-
ing of agricul tural comnodi t i e s (not including manufactured
products thereof), i f such motor vehicles a r e not used i n
carrying any other property, or passengers, f o r compensation,
* * * (and) t h e transportation of property by motor vehicle
w i t h i n any c i t y , town, o r v i l l a g e with a population * * *
of l e s s than f i v e hundred (500) persons, or w i t h i n t h e -
commercial areas thereof as determined by t h e board * * *."
The Montana Motor Carrier Act i n section 8-127, R.C.M. 1947, provides:
"In addition t o a l l other 1 icenses, fees and taxes im~osed
upon motor vehicles i n this s t a t e and in consideratioh of
. - - -
. - - -. -.
the use of the highways of this s t a t e , every motor c a r r i e r
holding a c e r t i f i c a t e of pub1 i c convenience and necessity
* * * shall * * * f i l e w i t h the board * * * a statement "
showing the gross operating revenue of such c a r r i e r f o r the
preceding three (3) months of operation, or portion thereof,
and shall pay t o the board a fee o f f i v e hundred seventy-
f i v e thousandths (.575) of one (1) per cent of the amount
of such gross operating revenue * * * and i n the event t h a t
such c a r r i e r operates in i n t e r s t a t e commerce, the gross
operating revenue of such c a r r i e r w i t h i n t h i s s t a t e shall
be deemed t o be a l l the revenue received from business be-
ginning and ending within t h i s s t a t e , and a proportion
based upon the proportion of the mileage within t h i s s t a t e
t o the e n t i r e mileage over which the business i s done of
revenue on a l l business passing t h r o u g h , into or o u t of
t h i s s t a t e * * *." (Emphasis added).
On March 1, 1968 Garrett f i l e d with the Commission i t s quarterly
report of gross operating revenue, together with i t s check f o r $5,830.17,
representing the amount due the State of Montana for the preceding quarter
in accordance with section 8-127, R.C.M. 1947. B way of l e t t e r accompany-
y
ing the gross revenue report and check, Garrett advised the Commission t h a t
such payment was being made under protest pursuant t o sections 84-4501 and
84-4502, R.C.M. 1947,
Garrett has continued t o remit i t s quarterly report of gross operat-
ing revenue t o the Commission since the original protest date. Both parties
stipulated on July 21, 1968:
" * * * a l l future payments made under protest of the gross
revenue tax, hereinafter t o become due and paid by Plaintiff
before final determination of P l a i n t i f f ' s cause of action,
shall become part o f , and be included i n , P l a i n t i f f ' s com-
plaint dated April 29, 1968, and that i t will not be neces-
sary for Plaintiff t o f i l e a separate action f o r the recovery
of such future payment."
In i t s complaint, Garrett has alleged t h a t Chapter 1 of T i t l e 8 ,
R.C.M. 1947, has deprived i t of due process and equal protection of the law
i n violation of Art. 111, Sec. 27 of the Montana Constitution and the Four-
teenth Amendment t o the Constitution of the United States; and also, t h a t
said s t a t u t e s are in violation of the Comnerce Clause.
The d i s t r i c t court made findings and conclusions to the e f f e c t t h a t
the a1 1egations of Garrett were correct and entered judgment thereon. Whi 1e
the d i s t r i c t court d e a l t with many matters raised by Garrett w do n o t find
e
i t necessary t o discuss a l l of them since the cause can be disposed of by
deciding whether the revenue col 1ected by the Pub1 i c Service Commission
under section 8-127, R.C.M. 1947, constitutes an unconstitutional levy under
Article 111, Sec. 27, of the Montana Constitution and the Fourteenth Amend-
ment of the Constitution of the United States in t h a t said levy denies Garrett
uniformity of taxation, i s discriminatory, confiscatory, prohibitive, arbi-
t r a r y , and i s a tax on the privilege of doing business.
Secondly, whether the formula used t o compute the revenue due the
State of Montana under section 8-1 27, R.C .M. 1947, i s arbitrary , unreasonable,
indefinite, and lacks precision.
In regard t o the f i r s t issue, t h i s Court finds that the revenue
collected by the Public Service Commission under section 8-127, R.C.M. 1947,
constitutes an unconstitutional levy under Article 111, Sec. 27, of the
Montana Constitution and the Fourteenth Amendment of the Constitution of the
United States in that said levy denies Garrett uniformity of taxation, i s
discriminatory, confiscatory, prohibitive, a r b i t r a r y , and i s a tax on the
privil ege of doing business.
Section 8-127, R.C.M. 1947, does not include private c a r r i e r s f o r
payment of the gross revenue tax when carrying t h e i r own commodities upon
the highways of the State of Montana. Section 8-101 ( h ) , R.C.M. 1947, ex-
empts from a l l provisions of the Motor Carrier Act motor vehicles used in
carrying property consisting of ordinary 1ivestock or agricultural commodities ,
supplies and materials f o r construction and maintenance of highways, supplies
and materials f o r logging and mining operations, and f o r the transportation
of newspapers, newspaper supplements, periodicals and magazines. This Court
holds, and the d i s t r i c t court so found, that these exemptions and exclusions
deprived Garrett of the r i g h t of uniformity i n taxation, discriminating
against Garrett in the company's i n t e r s t a t e operation, being a r b i t r a r y class-
i f i c a t i o n s , lacking any reasonable basis f o r determination, and being
unreasonably discriminating between Garrett and the exempt motor vehicles.
This Court i n the case of Hayes v. Smith, 58 Mont. 306, 314, 192 P.
615, s e t the formula f o r classification as follows:
"The authority of the s t a t e t o make a proper c l a s s i f i c a -
tion of property for the purpose of taxation is s e t t l e d
beyond controversy i n t h i s jurisdiction. (Citation
omitted). B u t a proper classification implies that there
e x i s t real differences as between the subjects constituting
the different classes, and excludes the idea of arbitrary
selection. "
On the subject of classification i n State v. Sunburst Refining Co.,
73 Mont. 68, 235 P . 428, t h i s Court held that the classification must be
reasonable, in that i t must be based upon substantial distinctions which
r e a l l y make one class different from another. In State ex r e l . Griffin v .
Greew 104 Mont. 460, 67 P.2d 995, 111 A.L.R. 770, t h i s Court held that
arbitrary and unreasonable classifications are not permissible.
The record here discloses t h a t the chain store operations with t h e i r
large warehouses, which have come into being i n recent years, have received
the advantage of the exclusion of private c a r r i e r s from paying the gross
revenue tax. These business concerns have acquired t h e i r own vehicles and
accomplished t h e i r own hauling without paying any tax, resulting in an u n -
reasonable discrimination in favor of such c a r r i e r s , since the p l a i n t i f f
cannot be competitive in price because of the gross revenue tax.
Also the record shows that section 8-127, R.C.M. 1947 i s discrimin-
atory in t h a t railroads haul freight into t h e i r stations by t r a i n which then
must be delivered by common c a r r i e r on Montana highways. The wholly owned
trucking subsidiaries of the railroads make these deliveries. There i s no
s t a t u t e or board rule regulating the agreement between the r a i 1roads and
t h e i r wholly owned trucking subsidiaries as to the charge or allocation of
revenue made between the trucking subsidiary t o the parent railroad. The
trucking subsidiary only has t o pay a gross revenue tax on the amount i t
charges the railroad for i t s services, whether such amount i s f a i r and com-
p e t i t i v e t o other common c a r r i e r s or not. There being no rules or regula-
tions or a law providing f o r the amount of such charges, the situation r e s u l t s
in a discrimination against Garrett, a common carrier, in favor of rail -
road trucking subsidiaries who are a1 so holders of certificates of pub1 ic
convenience and necessity .
Counsel for the Pub1 ic Service Comission capably and extensively
argue that the revenue collected under section 8-127, R.C.M. 1947, is not
an unconstitutional levy under Article 111, Sec. 27, of the Montana Con-
stitution and the Fourteenth Amendment to the Constitution of the United
States, in that the levy does not deny Garrett uniformity of taxation, is
nondiscriminatory, is nonconfiscatory, is not prohibitive, is not arbitrary,
and is not a tax on the privilege of doing business. The crux of the argu-
ment centers on the case of Rwy. Com. v. Aero Mayflower Tran., 11 9 Mont.
118, 131, 172 P.2d 452, Affirmed 332 U.S. 495, 92 L.Ed. 99, 68 S.Ct. 167.
Therein this Court stated:
" * * * In addition the exactions must be such as are
reasonably necessary for the purposes mentioned (i .e. build-
ing and maintaining highways), and must not be discrimina-
tory as between state and interstate carriers. It further
appears to be the established rule of the federal courts to
require the interstate carrier who challenges the right of
the state to impose such licenses and taxes to affirmatively
show that the exactions demanded are not necessary for the
purposes mentioned or are discriminatory. In other words the
burden is on the carrier to show wherein the exactions are
unlawful as to him."
This Court also stated:
" * * * The courts are not authorized to substitute their
views for those of the legislature. We can only consider
the legislation that has been had, and determine whether
or no its necessary operation results in an unjust discrim-
ination between the parties charged with its burdens. It
is enough that the state has secured a reasonably fair
distribution of burdens, and that no intentional discrimin-
ation has been made against nonresidents."
Relying on these two passages, this Court finds that Garrett has met the
burden of showing that the levy was discriminatory. We also find that an
invidious discrimination has taken place against Garrett.
Garrett's witnesses in their testimony indicate that the number o f
private carriers not subject to the gross revenue tax is substantial, and on
the increase yearly. The witnesses further showed that Garrett is in compe-
tition with its own customers. These customers are electing to become private
c a r r i e r s i n an alarming number of cases, and they a r e not subject t o t h e
gross revenue tax.
Of equal concern and of grave importance is the use t h a t such
private c a r r i e r s make of the Montana highways.
Testimony of G a r r e t t ' s witness and exhibits from the records of
t h e Gross Vehicle Weight Department of t h e S t a t e of Montana, show t h a t
there a r e a t o t a l of 164,176 vehicles, including commercial vehicles, farm
vehicles and loggers and livestock vehicles using Montana highways. Answer
t o interrogatories propounded by t h e p l a i n t i f f t o t h e defendant shows t h a t
there a r e 17,015 vehicles issued permits from t h e Montana Railroad Comnis-
sion. T h i s makes a net of 147,161 commercial vehicles using the highways
of the S t a t e of Montana which a r e exempt from paying any gross revenue tax.
The s i z e of the vehicles and the weight carried by them is comparable t o
the vehicles used by the p l a i n t i f f .
G a r r e t t ' s Exhibit 12 i s only a small, p a r t i a l l i s t of some of the
known private c a r r i e r s and this exhibit l i s t s 166 t r a c t o r s and 157 t r a i l e r s
of 26,000 pounds and up. The records of the S t a t e Department of Revenue,
Motor Fuels Division,show the miles travel led by a l l vehicles subject t o
the fuel tax. From these records i t i s shown t h a t the exempt vehicles and
privately owned vehicles travel millions of miles on t h e highways of the
S t a t e of Montana. A few such c a r r i e r s ' travel i s a s follows: Associated
Food Stores, 640,550 miles; Buttrey's Food, 918,969 miles; Beatrice Foods,
295,661 miles; Continental Oil , 872,657 mi 1es; Safeway Stores, 1,853,779
m i 1es; Petrol ane Supply, 343,604 m i 1es ; American Oi 1 Company, 1,553,207
miles; Ryan Grocery, 190,730 miles; and Royal Logging, 379,817 m i 1es.
I t cannot be denied t h a t the exempt vehicles and private c a r r i e r s
make a s much and as arduous use of the highways a s do the p l a i n t i f f and
similar c a r r i e r s . There is no d i s t i n c t i o n or j u s t c l a s s i f i c a t i o n of t h e
exempt c a r r i e r s and private c a r r i e r s as they a r e a l l engaged i n business
f o r a p r o f i t and use the highways of the S t a t e of Montana in such business.
I t appears t h a t the exemptions and the exclusion of private c a r r i e r s is a
result of successful lobbying and not because of any real classification
distinctions. To classify has been defined as "To group or segregate in
classes which have systematic re1 ations. " (Webster 's New Coll egiate
Dictionary, Second Edition). From such definition the exempt vehicles
and private carriers seem to be excluded on an arbitrary basis rather than
on a classification of systematic relations.
The legislature in its 1969 session added to the exemptions the
transportation of newspapers, newspaper supplements, periodicals or maga-
zines, or those tow trucks and wreckers designated exclusively in towing
abandoned, wrecked or disabled vehicles,and ambulances. TOW trucks and
ambulances appear to have a valid classification as they are for the bene-
fit of the public and usually used in emergency situations. However, the
exemption of newspapers and supplements again appears to be arbitrary,
The legislature in 1971 passed a new section providing the exemption for
the transportation of 1 ivestock by motor carrier by a bona fide farmer or
rancher or raiser of livestock in his own vehicles, or when such farmer or
rancher or raiser provides transportation for the livestock of another
farmer, rancher or raiser of livestock between farm and farm, ranch and
ranch, pasture and pasture, or to a point. All of such activities are
similar to those of Garrett, a business for profit using the highways of
the State of Montana.
All this goes to show the vast difference in fact situation here
from that in Peter Kiewit Sons' Co. v. State Board of Equalization,
Mont., , 505 P.2d 102, 30 St.Rep. 32. In that case a complaint was
raised as to the pub1 ic contractors ' 1 icense act being unconstitutional
because the levy was not uniform and was discriminatory. We there held
that since it appeared that all public contractors had to pay the tax, that
all members of the class were treated alike. Under the facts there we also
held that a distinction between public and private contractors was not
arbitrary and capricious; it being clear from the record that the public
contractors' license act was intended to operate as a revenue enforcing
measure a s pointed out i n the opinion and a l i k e s i t u a t i o n did not appear
a s t o private contractors.
The second issue is whether the formula used t o compute the revenue
due the S t a t e of Montana under section 8-127, R.C.M. 1947, i s a r b i t r a r y ,
unreasonable, i n d e f i n i t e and lacks precision. The formula i n question i s :
Intrastate: .575 of one per cent (1%) of gross operating revenue,
(G.O.R. x ,00575 = amount due)
Interstate: ,575 of one per cent (1%) of gross operating revenue.
Gross operating revenue i s defined a s , "A proportion
based upon t h e proportion of the mileage w i t h i n t h i s
s t a t e t o t h e e n t i r e mileage over which t h e business is
done * * *."
Montana miles x t o t a l gross revenue x ,00575 = amount due)
Total miles
Garrett, under the provisions of t h i s formula and section 8-1 27,
R.C.M. 1947, must report t o the Railroad Comnission t h e gross operating
revenue of such c a r r i e r and pay a tax thereon. N provision e x i s t s i n
o
this s t a t u t e , nor does the Commission provide through r u l e s and regulations,
f o r deductions of items included i n the gross revenue t h a t have no r e l a t i o n
t o the use of the highway by Garrett. These items include the loading and
unloading c o s t s , such items a r i s i n g outside t h e S t a t e of Montana, i n t e r c i t y
pickup and del ivery charges, many outside the S t a t e of Montana, c o s t of
i n t e r c i t y pickup and del ivery charges, coll e c t on del ivery f e e s , storage
charges, return delivery charges, and vehicle detention o r demurrage charges.
None of these charges, by any formula or reasoning, can be said t o
r e l a t e t o the use of t h e highways of the S t a t e of Montana by Garrett, and
they a r e included in the gross revenue f o r the purpose of tax determination.
N provision of the s t a t u t e or regulations of t h e Railroad Commission provide
o
an adjustment where Garrett has made a refund t o a shipper. The taxes a r e
paid upon t h e amount o r i g i n a l l y reported, and no c r e d i t i s allowed f o r a
refund.
A tax having t o be paid upon items which have no relationship t o
the use of Montana highways i s a t a x on i n t e r s t a t e commerce, a burden on
, i n t e r s t a t e commerce and a violation of the Commerce Clause of the United
States Constitution.
The exaction imposed by section 8-127, R.C.M. 1947, not being
related t o the use of the highway, i s a tax only on the income producing
a b i l i t y of a vehicle, i t i s confiscatory, and the s t a t u t e does not take
into consideration Garrett's p r o f i t or loss from the trucking operations.
Garrett, according t o the record, expends the s m of $1.24 for each do1 l a r
u
of revenue produced i n i n t r a s t a t e operation. Obviously i f the formula
f o r computing tax eliminated those items which have no relationship t o the
revenue producing a b i l i t y of the vehicle as such, the loss r a t i o in the
State of Montana of Garrett 's i n t r a s t a t e operation would be l e s s .
W hold that the gross revenue formula has no relationship to the
e
use made by G a r r e t t ' s vehicles i n travelling the highways of the State of
Montana and the tax varies according to the volume of i n t e r s t a t e business.
The Montana Supreme Court in the Rwy. Com. v , Aero Mayflower Tran., 119 Mont.
118, 172 P.2d 452, stated:
"The company contends t h a t i n fixing the exactions imposed
upon i t , no distinction i s made between large and small
vehicles, or heavy and l i q h t loads, nor the number of miles
travel led over t h e highways. here i s merit in t h i s con-
tention. The heavier the load and the qreater the number
of miles travel led the greater the wear-and t e a r on the
roadway. I t i s obvious-that the tax s e t u p in section
3847.27 (section 8-127, R.C.M. 1947) was f o r the purpose
of meeting t h i s situation. A short t r i p and a l i g h t load
would bring the c a r r i e r b u t l i t t l e revenue whereas the
heavier t r a f f i c and; 1onger hauls would produce more revenue
and require more taxes. * * *" (Emphasis supplied).
G a r r e t t ' s testimony of witnesses and exhibits has shown t h a t heavy
loads and long hauls do not always produce more revenue. Plaintiff's
E x h i b i t 1 depicting an actual transaction, shows two shipments travelling
the same miles i n Montana w i t h similar commodities and similar weights b u t
travelled different distances outside of the State of Montana. Load A
produced more revenue b u t paid l e s s tax than Load B which produced l e s s
revenue and paid more tax. This resulted from the number of miles travelled
by Load A outside the State of Montana i n an i n t e r s t a t e shipment. This
exhibit and testimony also confirms t h a t the amount of t a x varies in pro-
portion t o the volume of i n t e r s t a t e business and is a burden on i n t e r s t a t e
commerce,
E x h i b i t 2 demonstrates that two shipments travelling the same miles
in Montana, b u t having different weights and different comodi t i e s resul t S
in the heavier load by 11,000 pounds producing l e s s revenue than the l i g h t e r
loaded vehicle. The one w i t h the heavier load paid l e s s tax than the one
with the l i g h t e r load. This exhibit shows t h a t the weight of the load does
n o t determine the amount of the tax t o be paid since the heavier load had
a lower revenue r a t e than the l i g h t e r load.
Exhibit 3 depicts two vehicles carrying approximately the same weight,
same Montana miles, b u t different products, one vehicle producing a revenue
of $347.60 and the other a revenue of $172.80, resulting in a tax on one
vehicle being l e s s than the other. This again was because of the higher r a t e
on one commodity than another. The tax was n o t related to the use of the
highway. There were other exhibits t o l i k e e f f e c t , and i t was apparent from
them t h a t trucks with heavy loads do not always produce more revenue than
trucks w i t h lighter loads. A major factor i s the r a t e of the commodity being
shipped. Garrett's expert witness t e s t i f i e d as t o the important factors in
determining a r a t e . The density of a product being shipped i s more important
because of the limited cubic space and weight carrying capacity of the c a r r i e r
t r a i l e r s operating over the highways. The less dense products would have a
higher r a t e than the higher density products.
From Garrett's exhibits and testimony of i t s witnesses, i t appears
that a proper conclusion i s t h a t section 8-127, R.C.M. 1947, and the tax
exaction therein, i s based upon the income producing a b i l i t y of the vehicle
in i n t e r s t a t e commerce rather than the use of the highway. The inequities
are obvious and numerous and the tax not being f o r the use of the highway
must be f o r the privilege of doing business, placing a burden on i n t e r s t a t e
commerce contrary t o the Commerce Clause of the United States Constitution.
To be valid the tax must be compensation reasonably related t o the use made
of the highways of the state. It appears that under the present act the
amount of taxes is not dependent upon such use. It does not rise with an
increase in mileage travelled or weight of the vehicle, but only upon the
income producing ability of the vehicle. The tax does not relate to degree
of wear and tear incident to the use by the motor vehicles of the highway
of different sizes and weights, except as to the income producing ability.
The tax is proportioned solely to the earning capacity of the vehicle and
not to the use of the highway, and thus has no reasonable relation. It is
the income that is taxed, and Garrett's exhibits show that this results in
very grave inequities in the computation of the tax.
As we have noted herein the revenue collected under section 8-127,
R.C.M. 1947, is an unconstitutional levy under Article 111, Sec. 27, of the
Montana Constitution and the Fourteenth Amendment to the Uni ted States
Constitution; and, further, the formula used to compute the revenue due
thereunder is arbitrary, unreasonable, indefinite and lacks precision.
As to both situations heretofore shown the revenue collected is not
in consideration of the use of the highways but rather a tax upon the privilege
of doing business.
For these reasons no nece
on this appeal and the judgmen
We concur:
Associate Justices
Mr. J u s t i c e Gene B. Daly and Mr. J u s t i c e John Conway Harrison dissenting:
W respectfully d i s s e n t , having i n mind t h e burden t h a t must be
e
carried by a p l a i n t i f f when he launches a constitutional a t t a c k on a s t a t u t e
enacted by the Montana l e g i s l a t u r e as approved i n Great Northern U t i l i t i e s
Co. v. Public Service Commission, 88 Mont. 180, 220, 293 P.294, in this
1anguage :
" ' I n the case of s t a t u t e s passed by the l e g i s l a t i v e
assembly and assailed a s unconstitutional , t h e question
is not whether i t i s possible t o condemn, b u t whether
i t i s possible t o uphold. W stand committed t o the
e
r u l e t h a t a s t a t u t e will not be declared unconstitutional
unless i t s n u l l i t y i s placed, i n our judgment, beyond
reasonable doubt. "I
The problems here were before this Court, i n p a r t , i n t h i s Court's
ruling i n Peter Kiewit Sons' Co. v . S t a t e Board of Equalization, Mont.
-9 505 P.2d 102, 30 St.Rep. 32, decided January 10, 1973. The central
issue i n Kiewit was tax discrimination based on c l a s s i f i c a t i o n between pub-
l i c and private contractors. The same problem a r i s e s in the i n s t a n t case
between public motor c a r r i e r s and private motor c a r r i e r s . The reasons and
purposes f o r the tax may d i f f e r but the underlying problem of an alleged
unconstitutional c l a s s i f i c a t i o n resulting i n tax discrimination remains the
same.
In Kiewit, there was an in depth discussion including most of the
Montana and federal c i t a t i o n s on t h e question of c l a s s i f i c a t i o n f o r taxing
purposes between contractors doing public work and contractors doing private
work. There the court s a i d , quoting w i t h approval language from S t a t e ex
.
re1 Schul tz-Lindsay v. Board of Equalization, 145 Mont. 380, 403 P.2d 635:
"Since t h a t was the same point raised i n Schultz-Lindsay, a
review of t h a t decision will give us a view of Montana law
on the issue of tax discrimination. There, we s t a t e d t h a t
the l e g i s l a t u r e may impose a license tax on c e r t a i n occu-
pations and not on others, as long as ' a r b i t r a r y and u n -
reasonable c l a s s i f i c a t i o n s ' are not permitted. Schultz-
Lindsay, p. 398.
"In Schultz-Lindsay a t p. 390, the Court c i t i n g S t a t e v.
Sunburst Refining Go., 73 Mont. 68, 235 P. 428, s t a t e d
t h a t i n making such c l a s s i f i c a t i o n s :
"'Equal protection of the law is seldom, i f ever,
obtained; and because of the very f r a i l t y of human
agencies, the a u t h o r i t i e s a l l recognize t h e r i g h t of
the l e g i s l a t i v e branch of government t o make reason-
able c l a s s i f i c a t i o n s of subjects f o r property or
occupation taxes * * * and i f the c l a s s i f i c a t i o n i s
reasonable, and i f a l l of t h e subjects w i t h i n a qiven
c l a s s a r e accorded the same treatment, the l e g i s l a t i o n
cannot be said t o deny t o anyone w i t h i n such c l a s s
the equal protection of the jaw, even though the
burden imposed upon h i m may be more onerous than t h a t
imposed upon a member of another c l a s s . [Citing cases]
B u t t o j u s t i f y such discriminatory l e g i s l a t i o n , and avoid
the condemnation of the Fourteenth Amendment t o the
federal Constitution, t h e c l a s s i f i c a t i o n must be reason-
able -- t h a t i s , must be based upon substantial d i s t i n c -
tions which r e a l l y make one c l a s s d i f f e r e n t from another.
[Citing case] (Emphasis ours. ) '
"Later i n the same opinion a t p. 392, the Court said:
"'The constitutional safeguard against unjust discrimin-
ation in l e g i s l a t i o n of this type i s well defined by the
decisions everywhere, and t h a t i s , t h a t t h e c l a s s i f i c a t i o n
must be reasonable, not a r b i t r a r y , and must r e s t upon
some ground of difference having a f a i r and substantial
r e l a t i o n t o the object of the l e s i s l a t i o n , so t h a t a l l
persons similarly circumstanced shall be treated a l i k e .
Mills v. S t a t e Board of Equalization, 97 Mont. 13, 31,
33 P.2d 563.' (Emphasis ours.)"
Applying then, t h e above language, the f a c t t h a t the operation of
section 8-127, R.C.M. 1947, creates the c l a s s motor c a r r i e r s f o r h i r e hauling
nonexempt commodities over Montana highways, does not per se render the
s t a t u t e unconstitutional. I f the c l a s s i s based on a substantial d i s t i n c t i o n
t h a t r e a l l y makes one c l a s s d i f f e r e n t from another, as s e t f o r t h above, t h e
c l a s s i f i c a t i o n is reasonable and constitutional. I t would appear t h a t there
i s a s sound, i f not sounder, factual basis f o r t h e d i s t i n c t i o n between public
c a r r i e r s f o r h i r e and private c a r r i e r s n o t f o r h i r e than between public
and private contractors.
The exempt commodities contained in section 8-101, R.C.M. 1947,
merely conform t o those exemptions granted t o i n t e r s t a t e c a r r i e r s f o r h i r e
under the I n t e r s t a t e Commerce Act, Part 11, Motor Carriers, 49 U C
SA $ 303(83,
and a r e thus preempted from s t a t e regulation when moving i n i n t e r s t a t e
commerce. Baltimore Ship. & Reciv. Ass'n v. Public U t i l . Com'n of Cal., 268
F.Supp. 836, (DC Cal. 1967), affirmed 389 U.S. 583, 88 S.Ct. 694, 19 L ed 2d
Plaintiff-respondent Garrett has presented a convincing case of
"onerous" burden on i t when compared t o private haulers such a s Safeway and
Buttreys e t c . , a l l private and outside t h e c l a s s i f i c a t i o n . This i s probably
t r u e , but our case law above c i t e d d i s t i n c t l y and squarely s t a t e s t h a t t h i s
makes no difference so long as those w i t h i n t h e given c l a s s a r e accorded
t h e same treatment. So, this argument would be i r r e l e v a n t when directed
t o t h e matter of c o n s t i t u t i o n a l i t y , but not so i f directed t o the l e g i s -
lature.
This leaves the matter of the railroad and i t s subsidiary c a r r i e r s
t o be considered. The subsidiary c a r r i e r of the r a i l r o a d being w i t h i n
the c l a s s under consideration. The argument t h a t t h e subsidiary c a r r i e r
f o r h i r e has an arrangement with the railroad t o " f i x " i t s r a t e s and thus
pay l e s s tax on the same formula must f a i l f o r t h e obvious reason t h a t
section 8-127, R.C.M. 1947, which authorizes the tax or f e e , does not
authorize or contemplate t h i s kind of s i t u a t i o n and i f t h e p a r t i e s complained
of have found a "loophole" through " r a t e " f i x i n g , then this is a matter t o
be brought t o t h e a t t e n t i o n of the proper Montana authority. I t has no bear-
ing on t h e c o n s t i t u t i o n a l i t y of section 8-127, R.C.M. 1947.
W believe whether the burden imposed by the s t a t u t e i s "discrimin-
e
atory" o r "confiscatory" was decided by t h i s Court i n Rwy. Com. v.Aero
Mayflower Transit Co., 119 Mont. 118, 136, 172 P.2d 452, c i t e d i n t h e majority
opinion, when the Court c i t i n g from Hilger v . Moore, 56 Mont. 146, 182 P. 477
and Travelers' Ins. Co. v. Connecticut, 185 U.S. 364, 22 S.Ct. 673, 46 L ed
949, said:
" * * * the v a l i d i t y of this l e g i s l a t i o n does not depend
on t h e question whether the courts may see some other
form of assessment and taxation which apparently would
r e s u l t i n greater equality of burden. The courts a r e not
authorized t o s u b s t i t u t e t h e i r views f o r those of the
l e g i s l a t u r e . W can only consider the l e g i s l a t i o n t h a t
e
has been had, and determine whether or no i t s necessary
operation r e s u l t s i n an unjust discrimination between t h e
p a r t i e s charged w i t h i t s burdens. "
Aero Mayflower was affirmed by the United S t a t e s Supreme Court, 332
U.S. 495, 502, 68 S.Ct. 167, 92 L ed 99. There t h a t court spoke concerning
the s t a t u t e as "prohibitive" i n this language:
I' * * * i t i s not material t o the v a l i d i t y of e i t h e r tax
t h a t the s t a t e a l s o imposes and c o l l e c t s t h e vehicle
r e g i s t r a t i o n and license f e e and the gallonage tax on
gasoline purchased i n Montana.
" 'Common carriers for hire, who make the highways
their place of business, may properly be charged an extra
tax for such use. ' Clark v. Poor, supra (274 U.S. at 577,
71 L ed 1200, 47 S.Ct. 7021"
The "arbitrary" feature of this kind of tax has been treated in
other jurisdictions. In New Jersey a flat rate tax of 112 cent per mile
was held constitutional in Safeway Trails, Inc., v. Furman, 4 N.J. 467,
1
197 A.2d 366, 376, citing from Capitol Greyhound Lines v. Brice, 399 U.S.
"A mileage tax is normally considered to be prima facie
compensatory because it is directly proportional to
road use. But a formula not related to road use will be
upheld unless the challenger shows that the result of
the tax is an unreasonable burden on interstate carriers ."
Garrett's claim that this is a 'tax on the privilege of doing busi-
ness" was again directly answered in Aero Mayflower by pointing out that
the act itself provides "in consideration of the use of the highways of
this state" motor carriers for hire will be required to pay a gross revenue
fee.
The challenge to the tax formula itself as being "arbitrary", "un-
reasonable", "indefinite" and "lacks precision" does not square with the
record or decided cases in this area, Garrett's comptroller, Mr. Hawkins,
testified on cross-examination that he had never had any trouble applying
the formula. By Garrett's own admission, it would seem the formula is
neither "indefinite" nor does it "lack precision".
As to the issue of section 8-127, R.C.M. 1947, being "unreasonable",
the logic on that point is difficult to follow. It is claimed that the
tax "bears no relationship to the use of Montana highways". An examination
of the formula itself seems to make the relationship between the two obvious.
In the New York case of Mid-States Freight Lines, Inc., v. Bates,
200 Misc. 885, 111 N.Y.Sa568, 573, cert.den. 345 U.S. 908, 97 L ed 1344, the
court upheld the validity of a taxing formula challenged as not being truly
compensatory for road use, stating:
"The formula employed by a state to exact reasonable
compensation from carriers for the privilege of using
its highways is not of crucial importance. The court
has recognized the practicable impossibil i ty of devising
a formula which will result in exact or mathematical
precision in equating the tax to the privilege conferred.
Rough approximation, rather than precision will suffice
and if the tax is not unreasonable it will be upheld.''
It is therefore, our opinion that the burden to be carried by
plaintiff-respondent in a successful constitutional challenge has not been
met and the judgment of the trial court should b e H e r s e d .