Cleveland Refining Co. of Cleveland, Ohio v. Phipps

• Decision Date: 21 December 1921
• Docket Number: 186.
• Citation: 277 F. 463
• Parties: CLEVELAND REFINING CO., OF CLEVELAND, OHIO, v. PHIPPS.
• Court: U.S. District Court — Southern District of Ohio

277 F. 463

CLEVELAND REFINING CO., OF CLEVELAND, OHIO, v. PHIPPS.

No. 186.

United States District Court, S.D. Ohio, Eastern Division.

December 21, 1921

Chamberlin & Fuller, of Cleveland, Ohio, and H. B. Myers, of Columbus Ohio, for plaintiff.

John G Price, Atty. Gen., of Ohio, and Ray Martin, Sp. Counsel, of Newark, Ohio, for defendant.

Before DONAHUE, Circuit Judge, and SATER and PECK, District Judges.

PER CURIAM.

The plaintiff, an Ohio corporation, assails on various grounds the constitutionality of the act passed by the General Assembly of Ohio May 19, 1915, entitled:

'An act to provide for the inspection of petroleum illuminating oils, gasoline and naphtha and to repeal sections 844 to 868, inclusive of the General Code,' Ohio Laws, vol. 105, p. 309.

The sections of the act are now known as sections 844-868, both inclusive, of such Code. Invoking proceedings under section 266 of the Judicial Code (Comp. St. Sec. 1243), the plaintiff seeks a temporary injunction against the defendant, as an individual and as director of the state department of commerce, to prevent him from enforcing such act; the defendant, as such director, having been vested by the act of April 26, 1921 (109 Ohio Laws, p. 105), with all the powers and duties conferred on the state inspector of oils by the act of 1915, and intending to enforce its provisions. For a considerable time past the plaintiff has been and is still engaged at East Cleveland, Ohio, in the sale and distribution of kerosene, petroleum, and petroleum products, and has invested its capital in storage tanks, buildings, side tracks, machinery, and other equipment necessary for and used in receiving, handling, and delivering such kerosene, oil, and petroleum products, of all which kinds of goods it has in storage large quantities. It buys in other states, ships into Ohio, and receives at its place of business, large quantities of such articles in storage tanks, barrels, cans, and packages, and has contracts for such articles which it is bound to consummate, and which it cannot perform without great loss, except through its established business. It also employs a large number of persons to sell and deliver its goods to the public.

By the terms of the statute, oil intended for sale for illuminating purposes within the state must be inspected in Ohio. When consigned to a distributing station in tank cars, it must be inspected at the refinery where manufactured, if located in the state, or at the distributing station to which it is consigned, at the discretion and direction of the state inspector. Section 860. All mineral or petroleum oil, and any fluid or substance, the product of petroleum, or into which petroleum or a product of petroleum enters or is a constituent element, whether manufactured within the state or not, and all gasoline, petroleum ether, or similar or like substances, under whatever name held, whether manufactured within the state or not, having a lower flash test than provided by the act for illuminating oils, shall be inspected before being offered for sale to a consumer for use in the state. Sections 854, 865. Provision is made for a state oil inspector and deputy inspectors (a number of whom are required), and for payment of their prescribed salaries and their necessary traveling and other expenses, and also for the payment of the salaries of stenographers and clerks, from the state treasury. Sections 848, 849.

The statute requires that each owner of the several kinds of goods required to be inspected shall pay to the state inspector or his deputy for such inspection, for a single barrel, package, or cask, 25 cents; when the quantity inspected does not exceed 10 barrels, of 50 gallons each, in the aggregate, for each barrel, 15 cents; when the quantity inspected does not exceed 50 barrels, of 50 gallons each, in the aggregate, for each barrel, 10 cents; when the quantity inspected exceeds 50 barrels, of 50 gallons each, in the aggregate, for each barrel, 3 cents. All fees are payable on demand of the state inspector and in case of default beyond the tenth day of the end of the month in which such inspection is made, the fees are made a lien on the article inspected. Section 850. The state inspector is required to keep a record of inspections, showing the date of inspection, number of barrels inspected, and the name of the person for whom inspection is made. A like record must also be made by each deputy inspector regarding his activities. All fees received are paid into the state treasury, to the credit of the oil inspection fund. Sections 851, 852, 853.

If any manufacturer, vendor, or dealer shall sell or offer for sale any oil, fluid, or substance marked 'Rejected for illuminating purposes,' or any gasoline, petroleum ether, or similar or like substance, which, after inspection, has been marked 'Dangerous,' he shall be fined not to exceed $1,000, or be imprisoned in the county jail not to exceed 20 days, or both. Sections 859, 865. Any person who transfers the contents of a tank car, which have been rejected as the result of an examination, to a storage or receiving tank from which illuminating oil is distributed to consumers or dealers within the state, shall be subject to the penalty above stated (section 861); and any driver of a wagon from which oil intended for consumption for illuminating purposes within the state is delivered to consumers or dealers, and which does not bear a certificate such as covers the contents of the last tank car emptied into the storage or receiving tank from which the wagon was filled, shall be fined $10 for each day of his violation of the law.

The inspection fees collected, beginning with July 1, 1915, and ending on June 30, 1920, were $639,057.47. The disbursements were $321,188.68. In addition to the fees thus actually received, there was a considerable sum of outstanding uncollected accounts at the close of the period named. Exclusive of such accounts, the fees collected in such five years exceeded the cost of inspection by $317,868.79. On account of the increased consumption of the articles inspected, the excess of receipts over the cost of inspection in each of the years within the above-named period exceeded that of the preceding year, the excess for the year ending June 30, 1916, being $34,219.23, and thereafter the excess annually increased, until for the year ending June 30, 1920, it was $104,690.23. On account of a reduction in the number of deputy oil inspectors and change in the mode of inspection, the inspection fees and the cost of inspection for the year ending June 30, 1921, cannot be stated; but, in view of the increased use of the articles subject to inspection, it is thought the inspection fees for the year then ending will not be less than those of the preceding year, while the cost of inspection will be less, on account of the reduction in the number of inspectors.

The plaintiff contends that the inspection fees charged are excessive, that they interfere with interstate commerce, and are an unlawful impost duty upon goods shipped into Ohio from other states, and that the statute is therefore violative of article 1, sections 8 and 10, of the federal Constitution.

The enactment of proper oil inspection laws is a valid exercise of the police power. Castle v. Mason, 91 Ohio St 296, 110 N.E. 463, Ann. Cas. 1917A, 164; Red C Oil Mfg. Co. v. Board of Agriculture, 222 U.S. 380, 392, 32 Sup.Ct. 152, 56 L.Ed. 240. The state was without power to regulate interstate commerce, but under the federal Constitution it could collect the necessary expense of its inspection laws, with the result that interstate commerce to that extent would be lawfully burdened. The power to fix fees to cover such expenses rested primarily with the General Assembly, which in its discretion was required to determine the amount to be charged, and, on account of the fluctuation in trade and the inability to determine the sum that would be realized in the way of fees under a given law, it was not required to determine with exact nicety the difference between cost and collection. A surplus collected in any given year above inspection expenses would not necessarily indicate an invalid law, for the reason that such excess might be...