Due process of law does not assure to taxpayers that the court
will sustain the interpretation given to a statute by executive
officers or relief from the consequences of misinterpretation by
either such officers or the court; one acting under a statute must
take his chances that such action will be in accord with the final
decision as to its proper interpretation; this is a hazard under
every law, from which there is no security.
It is within the power of the state to tax spirits in bonded
warehouses and require the warehouseman to pay the same with
interest after the taxes due to the United States government have
been paid, and if the warehouseman is given a lien on the spirits
for the taxes and interest paid by him, he is not deprived of his
property without due process of law.
The fact that a warehouseman paid taxes without interest on
spirits in bond under a mistaken interpretation of the statute by
the state officers and subsequently permitted the spirits to be
withdrawn does not estop the state to recover from the warehouseman
interest due on such taxes under the statute, and a judgment
therefor does not deprive the warehouseman of his property without
due process of law within the meaning of the Fourteenth Amendment,
and so
held as to the tax statutes of Kentucky.
A classification of distilled spirits in bond, as distinct from
other property in regard to payment of interest on taxes, does not
constitute a discrimination amounting to a denial of equal
protection of the laws within the meaning of the Fourteenth
Amendment.
94 S.W. 654 affirmed.
This is an action to collect interest on deferred taxes assessed
for the years 1898 to 1902, both inclusive, on distilled spirits
which were stored in the warehouse of plaintiff in error.
The petition of the commonwealth contains a cause of action for
each year, and it is alleged in each that plaintiff in error was
the owner or proprietor of a bonded warehouse in which distilled
spirits were stored, and, as required by law, reported the quantity
of spirits on which the government tax had been paid or was then
due, and the amount of spirits theretofore removed since the
preceding report, showing the years in which
Page 209 U. S. 341
such spirits were assessed for taxation and the number of
packages and their value as assessed. And it is alleged that, by
such reports, which were verified as the law directs, there was
shown to be due the Commonwealth of Kentucky, "as taxes, exclusive
of any interest, the sum of ___ dollars" for the particular year.
It is further alleged that
"the sum so reported as taxes due was incorrect in that there
was not included accumulated interest on the taxes due while the
spirits remained in the bonded warehouse."
The amount for each year is alleged. The petition was amended by
order of the court and made specific as to the tax rate assessed by
the commonwealth for the period of years covered by the petition.
The amendment also stated the valuation fixed by the state board of
valuation on distilled spirits, and the time when the spirits were
placed in bond, when withdrawn, spirits were placed in bond, when
withdrawn, by plaintiff in error.
The answer of the defendant, plaintiff in error here, is very
voluminous. It denies that plaintiff in error was indebted to the
commonwealth for taxes and interest for any of the years mentioned
in the petition, beyond that which was duly paid to the
commonwealth and duly credited by it, "as set out in the petition,"
denies that there is due any interest "from any date whatever," or
any penalty or penalties. It is alleged with much circumstantiality
that plaintiff in error made reports required of him by the law of
the state upon blank forms furnished by the auditor of public
accounts, who was charged with the duty of supervising the
collection of all taxes on distilled spirits, and adjusting and
settling the claims and accounts therefor, and that that officer
verified and approved the reports, and accepted the amounts of
taxes paid with the reports, and issued receipts for and on behalf
of the commonwealth. And it is alleged that, the auditor and
treasurer having accepted the principal sum of taxes without any
interest or penalty, in full satisfaction of the commonwealth's
claim, to permit it to recover any other or further sum "would be
inequitable, unconscionable, and unjust," and that any recovery
Page 209 U. S. 342
would be a total loss to plaintiff in error. That the law was
construed by all the officers of the state government since its
enactment in 1892 to only require the payment of the principal sum
of the taxes. And that such officers have so construed the law and
the subsequent act, known as the revenue law, which was enacted
March 29, 1902, in such manner that no interest or penalties were
exacted of plaintiff in error or any other owner or proprietor of a
bonded warehouse. It is also alleged that plaintiff in error was
not the owner of said spirits, but that they were owned by
nonresidents of the state; that, under the law, the person who paid
the taxes thereon was entitled to a lien to secure the amount so
paid, and would have been entitled to a lien for the payment of
interest and penalties if any had been exacted, and, to enforce the
same, possession could have been taken; but, relying upon the
construction placed upon the law as aforesaid, and believing that
all claims of the state had been fully satisfied, plaintiff in
error permitted the owner thereof to withdraw the same and ship it
out of the State of Kentucky without the payment of any interest or
penalties; that such spirits have long since been consumed, and the
lien thereon lost. And it is alleged that some of the owners are
insolvent and others dead, and hence any recovery against plaintiff
in error will be a total loss to him.
There are a number of argumentative allegations that the
spirits, while in the bonded warehouse, were in the possession of
the United States, and not therefore in the possession of plaintiff
in error, or within the jurisdiction of the State of Kentucky, or
subject to taxation by that state or any of the municipalities, or
subject to any process of the courts of the state. And it is
further alleged or argued that, if the law be construed as the
state in this action seeks to construe it, such law would be an
"unwarranted interference with the scheme and plan of the United
States government, which has been in force for forty years," and
would deprive plaintiff in error and all owners of distilled
spirits "of the rights and privileges secured and guaranteed by the
Constitution of the United
Page 209 U. S. 343
States," and rights secured by the Fourteenth Amendment, which
provides that
"No state shall . . . abridge the privileges or immunities of
citizens of the United States, nor . . . deprive any person of
life, liberty, or property without due process of law, nor deny to
any person within its jurisdiction the equal protection of the
laws."
MR. JUSTICE McKENNA delivered the opinion of the Court.
The Court of Appeals of Kentucky opened its opinion in this case
by saying that the whole question presented was whether the statute
of the state "imposing a tax on distilled spirits in bonded
warehouses" violated the federal Constitution, and particularly the
Fourteenth Amendment thereof. It was also said that the validity of
the statutes under the constitution of the state had been construed
and decided in
Commonwealth v. E. H. Taylor, Jr. Co., 101
Ky. 325;
Commonwealth v. Walker, 25 Ky.Law Rep. 2122;
Commonwealth v. Rosenfield Bros., 118 Ky. 374. And the
court quoted from appellant's brief (plaintiff in error here) as
follows:
"It is not necessary on this appeal that the court shall either
overrule, modify, or change in any manner its opinion rendered in
the case of
Commonwealth v. Rosenfield. In accordance with
the previous opinion of the court in the case of
Commonwealth
v. E. H. Taylor, Jr., 101 Ky. 325, it was held in the
Rosenfield case that the law which imposed the tax and
interest -- the matter in controversy in this action -- is not in
conflict with the Constitution of the State of Kentucky. It has
never been held that this law is not in conflict
Page 209 U. S. 344
with the Constitution and laws of the United States, and this is
the question we now present."
Plaintiff in error, however, seems to broaden his contentions
here, and attacks the construction of the state statutes made in
Commonwealth v. Rosenfield Brothers, and urges either a
different construction than there made or a disregard of the
construction as constituting extortion against him or as depriving
him of his property without due process of law. The basis of the
contention is that he had paid taxes demanded of him under a
different construction, and received the receipt therefor, and that
the state is estopped to make further demands upon him. The
hardship of his situation is strongly presented. He was required,
he urges, to report for assessment and pay taxes on property
belonging to another. He made the report and paid all the taxes
demanded of him. Having completely discharged his legal
obligations, as he supposed, he delivered the property to its owner
and lost the lien which the statute gave him, and which constituted
the legal justification, as he contends, of the charge upon him,
and he is now subjected to liability for interest and penalties for
which he has no security or power to enforce reimbursement. A new
demand is made upon him, he says,
"special in its character and retroactive in its effect, in
violation of the Constitution of the State of Kentucky and of the
Fourteenth Amendment of the Constitution of the United States."
But these contentions, so far as they rest upon a supposed
change in the law, were rejected, in
Commonwealth v. Rosenfield
Brothers, supra, the court deciding that interest was due
under the law of 1892, under which the taxes were demanded and
paid, and as well as under the law of 1902.
A summary of the statutory provisions will make clear the
decision. Section 4105 of the statute of 1892 requires "every owner
or proprietor of a bonded warehouse" to make a report between
certain dates to the auditor of public accounts of the kind and
quantity of spirits in such warehouse on the fifteenth day of
September. The auditor of public accounts is required
Page 209 U. S. 345
to submit the same to the board of valuation and assessment,
which board is to fix the value of the spirits for the purpose of
taxation under the act, and to assess the same accordingly. Notice
is required to be given to the owner or proprietor of the warehouse
of the amount so fixed, and certify the value of the spirits
assessed for said taxes to the auditor of public accounts, and that
officer certifies to the county clerks of the respective counties
the amount liable for county, city, town, or district taxation, and
the date when the bonded period will expire. The report is filed in
the office of the county clerk and certified to the proper
collecting officer. The person or corporation having custody of the
spirits on the fifteenth of September in the year the assessment is
made is made liable for the taxes
"due thereon, together with all interest and penalties which may
accrue, and any warehouseman or custodian of such spirits, who
shall pay the taxes, interest, or penalties on such spirits, shall
have a lien thereon for the amount so paid, with legal interest
from date of payment."
§ 1, Art. V, c. 103, p. 310, Acts 1892. § 4110, §
6, Art V, provides as follows:
"Taxes on distilled spirits which may be assessed while in a
bonded warehouse, and on which the United States government tax has
not been paid or will not become due before the first day of March
after the assessment, shall be due on the first day of January,
May, and September next after the said government tax becomes due
or be paid, or when the spirits are removed from the warehouse, and
the taxes on each year's assessment shall bear [legal] interest as
other taxes."
The statute of 1902 strikes out the words "as other taxes" and
inserts the words "until paid." Upon this change the controversy
turns. The Court of Appeals, in
Commonwealth v. Rosenfield
Bros., supra, said there was a change in words only, not one
in substance or meaning, and unless this be so, it was said, the
legislature had taken "great pains to insert into every section
relating to the subject matter words which meant nothing." And
again:
"We do not know how the legislature could have made it plainer
that state taxes on whisky
Page 209 U. S. 346
in bond should bear interest than by the language used in the
section aforesaid."
The section had been quoted. This was the court's conclusion "as
an original proposition." But it cited as "direct authority"
Commonwealth v. Taylor, 101 Ky. 327, where the "very
question arose." To the contention that the warehouseman has lost
his lien through the construction put upon the act by the state's
fiscal officers, and that the state was therefore estopped from
collecting the interest, the court replied:
"It may be true that this will work a hardship upon the
distiller, but it was his duty, under the law, to pay the taxes and
the accrued interest, and we cannot, in his behalf, waive the
time-honored and conclusive presumption that he knew the law, and
especially is this true since 1897, when the case of
Commonwealth v. Taylor was decided, thus establishing
beyond all question that taxes on whisky in bond bore interest on
the assessments made during the bonded period. Waiving this,
however, it is elementary that the state is not estopped by the
laches of its officers."
But from this situation this Court cannot give relief. Due
process of law does not assure to a taxpayer the interpretation of
laws by the executive officers of a state as against their
interpretation by the courts of the state, or relief from the
consequences of a misinterpretation by either. We do not mean to
indicate that the decision of the court was wrong. It would,
indeed, be difficult to resist the force of its reasoning. At any
rate, it is the province of the courts to interpret the laws of the
state, and he who acts under them must take his chance of being in
accord with the final decision. And this is a hazard under every
law, and from which or the consequences of which we know of no
security.
The assignments of error repeat frequently, and dwell upon the
fact of the power of the federal government over the spirits and
the distillery, and its custody of them, and it is urged that such
power is exclusive of the exercise of any other power whatever, and
such custody has the effect to withdraw, in legal contemplation,
the property from the jurisdiction of
Page 209 U. S. 347
the state, though it is actually present in the state, making
it, indeed, as though it were outside of the territorial limits of
the state. And it is hence concluded that plaintiff in error, by
the law of Kentucky, is made to pay taxes on property belonging to
another person outside of the jurisdiction of the state, and it is
contended the decision of the court giving the laws these effects
denies plaintiff in error the equal protection of the laws, and
deprives him of his property without due process of law.
There are many elements involved in the contention, and it is
not easy, without extending this opinion to a great length, to give
them separate and individual discussion. We will therefore consider
only the main one -- to wit, the power of the federal government
over the spirits and the warehouse and the absolute want of power
in the state to tax them or subject them to its process. This is
the basic principle of the contentions of plaintiff in error,
"for," he says, "the warehouseman cannot be made liable for the tax
on the property if the property itself is not liable for the tax."
There is further argument to the effect that, by reason of the
control of the federal government, the state cannot give, in all
events and against all possibility of the exercise of that control,
to the warehouseman the means to enforce the lien conferred by the
statute to reimburse himself, and he should therefore "be by that
fact discharged from all liability on account of such assessment."
But these contentions rest upon an exaggerated view of the control
of the federal government and the effect of the Kentucky statute.
The scheme of the statute is simple, and it is an exercise of the
power which, we said in
Carstairs v. Cochran, 193 U. S.
10,
193 U. S. 16,
the state undoubtedly possessed, "to tax private property having a
situs within its territorial limits." And this was said in response
to contentions having the same ultimate foundation as those urged
in the case at bar. The proposition was indeed considered as
elemental, and as requiring nothing more than the illustration of
cases. There may be instances where property, though within the
territorial
Page 209 U. S. 348
limits of a state, is not subject completely to the jurisdiction
of the state, and counsel has cited a number of such instances.
Where their example applies, they will be followed. It does not
apply in the present case. There is no conflict between the state
and federal purpose. There is no question of the supremacy of the
latter and its complete fulfillment. "The state does not propose,"
the Court of Appeals said, "to collect the taxes so long as the
spirits are in the custody or under the lien of the federal
government." There is actual accommodation, therefore, of the power
of the state to the rights of the federal government, and a
harmonious exercise of the respective sovereignties of each,
preserving to each necessary power. This is what
Carstairs v.
Cochran decides.
See also Baltimore Ship-building &
Dry Dock Co. v. Baltimore, 195 U. S. 375.
A word more may be necessary as to the contention that the
statutes in controversy, as interpreted by the Court of Appeals of
the state, deny to plaintiff in error the equal protection of the
laws. The ground of this contention is not explicitly distinguished
in the assignments of errors from the grounds of the other
contentions, and in the brief of counsel, the contention is made to
depend upon the view, rejected by the Court of Appeals of the
state, that the act of 1902 made a change in the law, and that only
the owners of distilled spirits in bond are required to pay
interest "upon taxes settled at the time they were due." The effect
of the act of 1902 has been considered, and it is only necessary to
add that the distinction made by the taxing statutes of the state
between distilled spirits in bond and other property does not
constitute a discrimination condemned by the Fourteenth Amendment.
The power of the state to classify persons and property in its
legislation is well established, and the power is not transcended
by the statutes under review.
Billings v. Illinois,
188 U. S. 97.
Judgment affirmed.
