Youngstown Sheet & Tube Company v. Bowers – Oral Argument, Part 1: United States Plywood Corporation v. City of Algoma – November 12, 1958 (44)

Media for Youngstown Sheet & Tube Company v. Bowers

Audio Transcription for Oral Argument, Part 1: Youngstown Sheet & Tube Company v. Bowers – November 12, 1958 (9) in Youngstown Sheet & Tube Company v. Bowers
Audio Transcription for Oral Argument, Part 2: Youngstown Sheet & Tube Company v. Bowers – November 12, 1958 (9) in Youngstown Sheet & Tube Company v. Bowers
Audio Transcription for Oral Argument, Part 2: United States Plywood Corporation v. City of Algoma – November 13, 1958 (44) in Youngstown Sheet & Tube Company v. Bowers

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Earl Warren:

Number 44, United States Plywood Corporation, Petitioner, versus City of Algoma.

Mr. Minahan, you may proceed.

Roger C. Minahan:

Mr. Chief Justice, Justices, may it please the Court.

This case is here on a writ of certiorari to the Supreme Court of Wisconsin, which affirmed a Circuit Court decision denying a refund of a tax paid by the petitioner.

The tax was on imported goods.

The petitioner operates a plant at the City of Algoma, Wisconsin, where it manufactures plywood products.

Wisconsin’s personal property tax, this was an ad valorem general personal property tax, is levied on May 1 of each year on the goods on hand on that date.

The petitioner in its manufacture uses lumber imported from Canada and veneers imported from Canada, France and the Belgian Congo, and had such lumber and veneers on hand on that date.

The lumber imported from Canada is cut in Canada, rough, unplaned form and then shipped by railroad to Algoma, Wisconsin.

Charles E. Whittaker:

Where is that?

Roger C. Minahan:

Algoma is on the western shore of Lake Michigan in the northern part of the State.

Charles E. Whittaker:

(Inaudible)

Roger C. Minahan:

Oh, no.

No, over on Lake Michigan.

Charles E. Whittaker:

On Lake Michigan?

Roger C. Minahan:

Yes.

Charles E. Whittaker:

All right.

Roger C. Minahan:

The lumber is loaded loose on cars.

It’s not packaged in anyway or fastened together.

When the lumber reaches Algoma, it’s unloaded and stacked in the storage yard of the petitioner adjacent to the petitioner’s plant.

The stacking is done in a manner to prevent rotting of the lumber and it air dries during the course of that period it is in the storage yard.

The stacking is done by separating the sticks so that air can gain access to the individual sticks.

And it is stacked in piles which are called packages and which are not to be confused with the kind of packages we talked about under Brown versus Maryland, for instance.

But they are of identical size for the purpose of moving them in one unit into the dry kiln.

Each of the — or all of the lumber must be kiln-dried before it used in the manufacture of plywood.

The lumber’s imported is not commingled in any way with any domestic lumber.

Shipments are not commingled but occupy separate stacks convenient or an — of a size —

William J. Brennan, Jr.:

You mean by that shipment is actually compelled which shipment arrives in one day?

Roger C. Minahan:

Yes, Your Honor.

William J. Brennan, Jr.:

That’s (Inaudible) made of separate pile (Inaudible)

Audio Transcription for Oral Argument, Part 2: Youngstown Sheet & Tube Company v. Bowers – November 12, 1958 (9) in Youngstown Sheet & Tube Company v. Bowers
Audio Transcription for Oral Argument, Part 2: United States Plywood Corporation v. City of Algoma – November 13, 1958 (44) in Youngstown Sheet & Tube Company v. Bowers

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Roger C. Minahan:

Yes, it is, Your Honor.

William J. Brennan, Jr.:

(Inaudible) to make a separate pile, say, lumber (Voice Overlap) —

Roger C. Minahan:

Yes, Your Honor.

We do.

That however — I don’t want to — I — I can’t say it’s the purpose of it.

It is the action of getting a stack of a size which will fit the dry kiln.

And that’s the way it’s taken out of the yard into the dry kiln when it’s needed for manufacture.

William J. Brennan, Jr.:

Can you tell us by looking at it —

Roger C. Minahan:

Yes, Your Honor.

You can.

William J. Brennan, Jr.:

(Inaudible)

Roger C. Minahan:

Not only by looking at it, but it is identified with a tag as well.

The trial court found that on the testimony that the dominant purpose of the taxpayer in this case was to stack this lumber for the purpose of air drying it, to take advantage of the air drying.

Though — the trial court also found that another purpose was to prevent rotting which would inevitably follow if the lumber was not separated by sticks and air could be in access to lumber in the stack.

Earl Warren:

Was it equally available for processing the moment it arrived there with the time at — let’s say after it had been there a couple of months for drying purposes?

Roger C. Minahan:

Yes, Your Honor.

And it was brought into the plant from time to time as needed without regard to how long it might’ve been in the yard.

Though it was admitted that if the lumber is permitted to air dry, it reduces to some extent the time required in the dry kiln.

Earl Warren:

Therefore —

Roger C. Minahan:

However, it must be dry kiln.

Earl Warren:

Therefore, the expense?

Roger C. Minahan:

Therefore, the court found — the trial court found reducing expense because reducing time in the dry kiln.

Yes, Your Honor.

Earl Warren:

And it was — and I suppose, they were kept in separate packages for — for that reason among others, to determine how long they — they would be there until used?

Roger C. Minahan:

There was no testimony on that, Your Honor.

As to — for instance, selection of that stack which had been there the longest in order to take advantage of that.

There was no testimony on that point.

William J. Brennan, Jr.:

Well, may I ask, was there a finding below that the stack in the process (Inaudible) manufacturing process of the company, actually had begun when (Inaudible) or whatever it took (Inaudible)

Roger C. Minahan:

Well, that was a conclusion of law drawn by this trial court on the finding of fact that the dominant purpose was to take advantage of the air drying time.

William J. Brennan, Jr.:

Therefore, that the (Inaudible) of plywood making (Inaudible)

Audio Transcription for Oral Argument, Part 2: Youngstown Sheet & Tube Company v. Bowers – November 12, 1958 (9) in Youngstown Sheet & Tube Company v. Bowers
Audio Transcription for Oral Argument, Part 2: United States Plywood Corporation v. City of Algoma – November 13, 1958 (44) in Youngstown Sheet & Tube Company v. Bowers

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Roger C. Minahan:

Had begun.

That was their conclusion of law.

Tom C. Clark:

(Inaudible)

Roger C. Minahan:

Yes, Your Honor, they are.

They’re stacked in a crossed manner so that the air can get through to all the stacks.

Tom C. Clark:

As far as laying down the (Inaudible)

Roger C. Minahan:

No.

Not all on top of each other, all continous.

The veneers imported both from Canada and from Africa and Europe all were reshipped to the United States in packages.

Either in crates or bound together with metal strips.

They’re shipped via water those from the — from Europe and Africa to the East Coast of the United States.

And they’re loaded on to railcars and brought by rail to Algoma.

The Canadian veneers are shipped from Canada in railroad cars.

Potter Stewart:

Now, as to the veneers, there was no intention and certainly no finding that anything happened in — so far as the production process and that probably were (Voice Overlap) —

Roger C. Minahan:

That’s correct, Your Honor.

They — they were received in Algoma in railroad cars.

The import seal broken, customs — clearing customs in Algoma.

They were removed from the cars and stored in a warehouse which is a building adjacent to the petitioner’s factory in Algoma.

There was no finding, never any suggestion anywhere, that any change of any character had taken place in the veneers, so stored in the warehouse.

Tom C. Clark:

And then take it from the warehouse (Inaudible)

Roger C. Minahan:

It was trucked, Your Honor, from the warehouse to the manufacturing plant.

William J. Brennan, Jr.:

Well, now, do you again possible to identify (Inaudible)

Roger C. Minahan:

Yes.

The veneers were never commingled.

They were placed in stacks in the warehouse always identifiable as veneers from particular locations, Africa, Belgian — Belgian Congo, France and Canada.

William J. Brennan, Jr.:

Well, how about the (Inaudible)

Roger C. Minahan:

In that case, there was no identification.

There was no testimony as to that except that each package had a shipping mark, so that it was possible to go and identify as to when it arrived.

The stacking would be done in — in various piles of packages one on top of the other.

And you would add to this (Inaudible) of stacks or select another spot in the warehouse and they might be adjacent to that pile, a stack of domestic veneers as well.

Audio Transcription for Oral Argument, Part 2: Youngstown Sheet & Tube Company v. Bowers – November 12, 1958 (9) in Youngstown Sheet & Tube Company v. Bowers
Audio Transcription for Oral Argument, Part 2: United States Plywood Corporation v. City of Algoma – November 13, 1958 (44) in Youngstown Sheet & Tube Company v. Bowers

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Roger C. Minahan:

However, always separated into a different stack or a different pile so it did not mix the two.

The City of Algoma in May 1, 1955, levied a tax on the — both the lumber and veneer that were located in the storage yard and in the warehouse.

They, of course, also levied a tax upon that part of the imported goods both in and out of their packages which were in the factory itself.

Though those — that assessment as to the property that was in the factory whether in or out of the package is not involved here.

It was not contested.

We deal here only with the assessment on the lumber and veneers in the storage yard and in the warehouse.

The total value of the goods found on that date worth $288,593 and they were as such that $144,296.

The ratio of assessment to true value in the City of Algoma in 1955 was 100% and the reason they were assessed at 50% of their true market value, in this case, was on the ground that the assessor determined that one-half of the veneers on hand were currently operationally required by the petitioner in this case for its manufacturing process.

The petitioner objected at every stage of the proceedings until the assessment on these goods on the ground that it was in violation of Clause 2 of Section 10 of Article I of the Constitution.

The case ultimately, after a hearing before a Board of Review, reached the Circuit Court for Kewaunee County which is the court of original jurisdiction of Wisconsin.

And there, the position of the City was that the goods were currently operationally, necessary to the extent of half of what was on hand and hence, came within an exception indicated in Hooven & Allison versus Evatt, to the original package rule, or the rule of the Brown case.

Now, the assessor, in this instance, determined what was taxable according to the findings below by an observation of what the methods of the petitioner were with respect to the use of its imported goods.

The testimony was that he knew how much in value, the petitioner had on hand in its warehouse.

He observed the removal of goods from the warehouse to the factory.

The arrival of goods to the warehouse from the foreign shipment and that it was his opinion that one-half of the goods were required to be kept on hand, to meet the current operational needs of the petitioner.

The Circuit Court for Kewaunee County sustained that conclusion by the assessor, taking the position that the amount of such goods which could be included within the assessment were not unlimited to the immediate needs of the petitioner in the factory, in the manufacturing operation.

And concluding with the portion so included were — was taken out of the stream of commerce and had come to rest in the plant of the petitioner.

There, to a practical certainty, to be used in its manufacturing process and not reshipped in the original form or packaging.

And hence, because it was so highly improbable that it would again be sold and transported in commerce that it will become a part of the commoness of property in the State and could be taxed.

As to the lumber, the trial court found that the assessor would have been justified in taxing it all, going to taxed only half on the current operational needs fairly, because it had been subjected to manufacture by reason of it having been stacked in the storage yard to take advantage of air-drying which took place between the time it was stored there and ultimately taken into the factory for manufacture.

This was a suit for a refund, so it did not affect the determination at all, but it indicated that the Court would’ve gone private in the assumption in that respect.

The dissenting judge, split out their differentiation (Inaudible)

Roger C. Minahan:

In the Supreme Court of Wisconsin, the dissenting judges, I think, took the position that they would have been trying to go along with the majority on that issue and indicated that their only conclusion was asked to the packaged goods.

It’s correct.

Earl Warren:

You may get a distinction between the veneer and the lumber as to its taxability?

Roger C. Minahan:

I make none, Your Honor.

I think the position that — that the lumber and the veneer both were all, should have been not taxed.

Earl Warren:

When the — we should come to the conclusion that the — that the lumber was taxable that it — that it followed that we would have to hold that the veneer was taxable also?

Roger C. Minahan:

No, I think that’s —

Earl Warren:

Always omit the distinction from that?

Audio Transcription for Oral Argument, Part 2: Youngstown Sheet & Tube Company v. Bowers – November 12, 1958 (9) in Youngstown Sheet & Tube Company v. Bowers
Audio Transcription for Oral Argument, Part 2: United States Plywood Corporation v. City of Algoma – November 13, 1958 (44) in Youngstown Sheet & Tube Company v. Bowers

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Roger C. Minahan:

Well —

Earl Warren:

There is no distinction?

Roger C. Minahan:

Well, I think that for instance this Court could decide such as the Wisconsin court, both from a majority and minority indicated that by reason of its stacking for in the yard and the air drying which took place that it might have been — comes — it might have been subjected to manufacture or have entered the manufacturing process and therefore, the lumber might be subject to tax 100%.

On the other hand, the veneers, none of which had any chemical change or any other change at all taking place, could nevertheless be found by this Court to be completely free from tax.

Earl Warren:

Well, I — I misunderstood you.

You do make a distinction that we could — we could decide one way as for the lumber —

Roger C. Minahan:

Oh ,I’m sorry.

Yes, Your Honor.

Earl Warren:

And the other way as to the veneer.

Roger C. Minahan:

Yes, Your Honor, it could.

Earl Warren:

Yes.

Well, I —

Roger C. Minahan:

That’s right.

Now, the Supreme Court of Wisconsin in a divided opinion, held or — or cited with the approval, the trial court’s opinion as to the basis for holding the property, one-half of the property taxable under current operational needs theory, it went further and said that for two reasons, the lumber would be subject to tax.

First, because it was unpackaged and because it was unpackaged, it was — it didn’t come within any of the rules with respect to exclusion from tax for imported goods and secondly, because it had entered the manufacturing process as it was stacked for the purpose of taking advantage of the natural process of air-drying.

The veneers, they found some — considerable more difficulty with, but concluded that it was necessary that the importer and manufacturer in this case, have on hand, a reasonable supply of such goods and that therefore, it could be considered as having been put to use in effect or subjected to manufacture, that they do not use that term in the opinion, because it was assembled there and available for the purpose of putting it to use and the plant could not operate unless it was there.

Charles E. Whittaker:

The whole (Inaudible)

Roger C. Minahan:

No, Your Honor, only 50% of it was included.

Charles E. Whittaker:

On the veneer as well?

Roger C. Minahan:

On the veneer as well.

They took the position that to require breaking of a package was to artificially test and to mechanically test and that it was equally mechanical and disregardful of reality to say that some change had to take place in the article itself.

In this respect, it is the position of the petitioner that —

Perhaps — could I interrupt you —

Roger C. Minahan:

Yes.

May I?

(Inaudible)

What was the theory in taxing the 50% (Inaudible)

Roger C. Minahan:

That — that part was necessary in the current operational needs of the manufacturer.

Charles E. Whittaker:

If I may ask —

Roger C. Minahan:

Yes, sir.

Audio Transcription for Oral Argument, Part 2: Youngstown Sheet & Tube Company v. Bowers – November 12, 1958 (9) in Youngstown Sheet & Tube Company v. Bowers
Audio Transcription for Oral Argument, Part 2: United States Plywood Corporation v. City of Algoma – November 13, 1958 (44) in Youngstown Sheet & Tube Company v. Bowers

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Charles E. Whittaker:

— do you — Do you think the Court’s findings (Inaudible) saying that perhaps the whole of the lumber in the stack might have been the same things that — with respect to the veneers?

Roger C. Minahan:

No, they did not, Your Honor.

The basis for saying this as to the lumber, both by the trial court and the appellate court was that it had entered the manufacturing process because of the air drying which was taking place, the chemical change.

They talked about wood being a combination of wood and diffused water and some of the diffused water was evaporated off by reason of the storage in the yard.

As to the veneers, there was admittedly no change in — in form or character at all.

That was stored in a — they are — a veneer, Your Honors, is a thin slice of wood peeled from a log and has been kiln-dried before it’s been shipped.

So that it’s pretty well run free of water at that point.

And it was admitted, as I understand it, that there was no change taking place in the veneers while stored in the warehouse.

Now, it is the position of petitioner that this conclusion of the Wisconsin Supreme Court is clearly opposed to the fundamental and thouroghly agreed rules of law, which have been clearly enunciated by this Court.

Beginning with Brown versus Maryland, which we think together with Hooven & Allison versus Evatt, just disposed of this case.

In Brown versus Maryland, the Court said that a point of some practical determination must be made when an import ceases to have a — the character of an import and becomes something other than an import.

And in formulating a general rule, the Court pointed out that it was necessary that there’d be some affirmative action on the part of the importer which would cause the property to become mixed up with the massive property in this country.

Then the Court says, because there were original packages there involved, that at least we — that case had the clear kind of a situation that required no further inquiry, though there were going to be cases they anticipated that were.

Earl Warren:

We’ll recess now, Mr. Minahan.