International Harvester Credit Corporation v. Goodrich/Dissent Frankfurter

Mr. Justice FRANKFURTER, with whom Mr. Justice DOUGLAS concurs, dissenting.

So far as the United States Constitution limits them, the States have the amplest scope in imposing highway taxes and devising relevant means for enforcing them. Within the vast range of its discretionary taxing power, a State may provide that a creditor who adds to the corpus of equipment used by his debtor on the State's highways cannot be heard to complain if his equity in such equipment is subordinated not only to tax liens on that specific equipment, but also, as is true of the New York State legislation, for tax liens incurred by all the debtor's vehicles for the entire period during which the creditor has enabled his debtor to have added vehicles on the road. As a practical matter, the carrier's creditor may well have adequate means of protecting himself regarding the incidence of highway taxes and their default during the whole of the period that such creditor helped to enhance the totality of vehicles used by the carrier.

We therefore agree with the Court that taxes incurred by all the vehicles in Eastern's service during the period that the three International Harvester tractors were on the road may be collected by way of enforcing tax liens for such total taxes against the three International tractors. It is immaterial that these three tractors were held under a credit arrangement whereby International Harvester reserved interest in them by way of security for payment of their purchase price.

A very different situation is presented for such part of the taxes as are sought to be collected by way of lien out of these International Harvester tractors for the period antedating their conditional sale to Eastern.

Property is included within the triad of interests protected by the Due Process Clause of the Fourteenth Amendment-'nor shall any State deprive any person of life, liberty, or property, without due process of law.' When one man's property is taken and given to another or, as in this case, is taken to satisfy the debts of another, a justifying public purpose must meet the requirements of the Due Process Clause. See Thompson v. Consolidated Gas Utilities Corp., 300 U.S. 55, 79-80, 57 S.Ct. 364, 375-376, 81 L.Ed. 510.

It is one thing for a creditor, who has enabled his debtor to hold himself out as having dominion over property which the creditor has placed within his debtor's control, to suffer for debts incurred by his debtor to third persons. It is quite another thing to saddle such creditor's property with satisfaction of prior obligation to a third person when the creditor had no means whatever of safeguarding himself against the enforcement of such third-party indebtedness. Nor does it matter that the third party is the State.

In the situation before us, International Harvester had no means of protecting itself against highway taxes incurred by Eastern prior to the time that it put its three tractors into Eastern's hands. It is admitted that under New York law in force at the time of the conditional sale of these tractors, International Harvester could not possibly have protected itself against the losses to which it is now subjected except by avoiding such sales. It could not possibly have ascertained the tax liabilities of its conditional vendee prior to the credit arrangement in the sale of these tractors. It could not have informed itself by examining the tax returns of its vendee. New York made it a misdemeanor for any state official to divulge such information. N.Y.Tax Law, Art. 21, § 514. Thus, there is no connection whatever between the undoubted property interest that International Harvester had in the three tractors and the extent of the lien that the State sought to foreclose in them. When one considers the important role played in our economy by credit sales, it will hardly do for the law to deem such transactions extrahazardous and subject such creditors to an insurer's risks.

We would therefore remand the case to the New York courts in order to restrict the enforcible lien in appellant's tractors to the highway taxes incurred by Eastern for the period that appellant's vehicles were in Eastern's service.