Great Northern Ry. Co. v. Cohn

• Decision Date: 26 April 1940
• Docket Number: 27854.
• Citation: 101 P.2d 985,3 Wn.2d 672
• Parties: GREAT NORTHERN RY. CO. v. COHN, Acting Director of Licenses, et al.
• Court: Washington Supreme Court

101 P.2d 985

3 Wn.2d 672

GREAT NORTHERN RY. CO. v. COHN, Acting Director of Licenses, et al.

No. 27854.

Supreme Court of Washington, En Banc.

April 26, 1940

Action under Rem.Rev.Stat. § 784-1 et seq., by the Great Northern Railway Company against Dave S. Cohn, Acting Director of Licenses of the State of Washington, and another, to obtain a declaration of plaintiff's rights with respect to the payment of fuel oil taxes and for injunctive relief. From an adverse decree, Dave S. Cohn, Acting Director of Licenses of the State of Washington, appeals.

Affirmed.

BLAKE C.J., dissenting.

A statute will be given a prospective interpretation unless by its terms it is expressly declared to be retroactive.

Appeal from Superior Court, Thurston County; D. F Wright, judge.

G. W. Hamilton, Atty. Gen., and John E. Belcher and L. C. Brodbeck, both of Olympia, for appellant.

E. W. Anderson, Wallace G. Mills, and Harold P. Troy, all of Olympia, and Poe, Falknor, Emory & Howe, of Seattle, amici curiae.

Thomas Balmer, Edwin C. Matthias, and Anthony Kane, all of Seattle, for respondent.

MILLARD Justice.

Chapter 186, Laws of 1939, p. 581, which repealed chapter 180, Laws of 1935, p. 706, as amended by chapter 116, Laws of 1937, p. 459, imposes upon each person engaged in the oil distribution business, in addition to any other tax provided by law, an excise tax upon each distributor of one-fourth of one cent for each gallon of fuel oil 'withdrawn, sold, distributed or in any manner used by such distributor' within this state, except as expressly exempted by section 15, chapter 186, Laws of 1939.

Section 15, chapter 186, Laws of 1939, provides that petroleum products withdrawn, sold or distributed to any vessel engaged in foreign commerce, petroleum products withdrawn, sold or distributed that are derived from crude oil refined within this state, petroleum products withdrawn, sold or distributed to those who pay a public utility tax and who use the same to produce manufactured gas, shall be exempt from the tax.

On the theory that the section exempting those who withdraw, sell or distribute petroleum products derived from the refining within this state to crude petroleum or crude oil was unconstitutional, and if given effect rendered the entire statute unconstitutional, the attorney general of this state instituted an original proceeding in mandamus in this court March 22, 1939, to require the acting director of licenses to collect the tax imposed by chapter 186, supra, from distributors of petroleum products derived from crude oil refined within this state. The application for the writ was denied without written opinion. Subsequently, an action was brought by the attorney general in the superior court for Thurston county to require the acting director of licenses to collect the tax from the exempted distributors just described. Motion to quash was granted on the ground that the original proceeding in this court was res adjudicata. On appeal of the attorney general from the judgment of dismissal, we held that the original mandamus proceeding in this court was dismissed solely on the ground of prematurity and that we did not pass upon the question of constitutionality of the exemption provisions of the statute. State ex rel. Hamilton v. Cohn, Wash. 95 P.2d 38. The cause was remanded to the trial court with direction to overrule the motion to quash.

On the ground that it is not a distributor as that term is defined in chapter 186, Laws of 1939, with respect to any of the fuel oil used by it, as hereinafter described, and on the further ground that if it is held to be a distributor within the purview of chapter 186, supra, the statute is unconstitutional, the Great Northern Railway Company brought this action against the acting director of licenses of this state, joining the Tidewater Associated Oil Company as a party defendant, to obtain a declaration of its rights under the uniform declaratory judgment act (L.1935, ch. 113, p. 305, L.1937, ch. 14, p. 39, Rem.Rev.Stat. Sec. 784-1 et seq.) and for injunctive relief.

Trial of the cause to the court resulted in findings and judgment to the effect that chapter 186, Laws of 1939, is unconstitutional in its entirety and that the statute has no application to the distribution, withdrawal or use of fuel oil by anyone who is not engaged as his principal pursuit in the business of distributing, selling, withdrawing or in any manner using petroleum products. The appeal is prosecuted from that decree by the acting director of licenses of this state.

It is the position of appellant that while the state is inhibited by the federal constitution from taxing imports or the business of importing, respondent may be required, under subsection (a), section 2, chapter 186, Laws of 1939, reading as follows, to pay the excise tax on the fuel oil shipped from California in tank steamers as that oil was acquired by respondent from the importer who did not pay the tax: '(a) 'Distributor' shall mean and include * * * any person, firm, association or corporation who acquires the same within the state from any person refining it within or importing it into the state on which the tax of one-quarter (1/4) cent per gallon has not been paid; * * *.'

That is, the respondent may be required to pay the excise tax for the privilege of having acquired the fuel oil from the importer within the state and thereafter withdrawing the fuel oil from storage and using that oil within this state. Appellant concedes that under our holding in Great Northern Railway Company v. State, 200 Wash. 392, 93 P.2d 694, and State v. Fidelity & Deposit Company of Maryland, 194 Wash. 591, 78 P.2d 1090, on shipments by tank steamships from California and delivered to the railroad company in this state, the oil company and not the railroad company was the importer.

It is insisted by appellant that as to the oil imported by respondent from Montana and Oregon in railroad tank cars and unloaded therefrom into respondent's storage tanks in the State of Washington and thereafter withdrawn and used by respondent within this state, respondent is a distributor under that part of subsection (a), section 2, chapter 186, supra, which defines the third class of distributors as follows: '(a) 'Distributor' shall mean and include * * * any person, firm, association or corporation who imports the same into this state and withdraws, sells, distributes or in any manner uses the same in this state.'

It is urged that the question of interference with interstate commerce is answered in both instances by the statutory imposition of the excise tax not on the importation but for the privilege of withdrawing the oil from storage after the interstate transportation has ended and the oil has ceased to be an import.

Another contention of appellant is that if the exemption features of chapter 186, supra, contravene the state and federal constitutions the discriminatory exemptions may be stricken from the statute and the remainder of the act will be a complete and workable revenue measure which is valid, in view of the legislative declaration in section 21 of the statute that if any section etc., of the act is held to be unconstitutional such decision shall not affect the validity of the remaining portions of the statute.

Counsel for respondent insist that it is not engaged in business as a distributor of fuel oil, therefore respondent is not subject to the tax in question. A second ground urged by respondent is that chapter 186, Laws of 1939, is unconstitutional in that it violates certain provisions of the federal and state constitutions.

Respondent railway company is engaged solely in the business of railroading. Its use of fuel oil is incidental to its railroad business. It buys fuel oil from local refiners and from refiners and oil companies located in Oregon and Montana. Respondent brings the fuel oil purchased by it in Oregon and Montana into this state as company material and property of the railway company. It buys fuel oil refined in California from the Tidewater Associated Oil Company and takes delivery of that oil at tidewater in this state. All of this fuel oil is placed by respondent in its stationary storage facilities and respondent withdraws and uses that oil to produce the power by which its trains are operated. That is, respondent is engaged in the business of railroading and is not engaged in the business of selling, withdrawing or distributing fuel oil. None of the fuel oil received by respondent is sold or distributed by respondent to other parties. We cannot stress too strongly the fact that the railroad company is not engaged in the business of using fuel oil but is engaged solely in the railroad business and uses or consumes fuel oil just as it uses or consumes other supplies in conducting the business of railroading.

The fuel oil used by respondent in the operation of its trains between May 1, 1939, the effective date of chapter 186, Laws of 1939, and the trial of this cause was acquired from four sources: Approximately seven million gallons were on hand and in storage when the act became effective; sixty thousand eight hundred and fifty-nine gallons, which were acquired after May 1, 1939 from the Inland Empire Refineries Inc. which distributor is exempted by subsection (e) of section 15, chapter 186, Laws of 1939, from the excise tax (which exemption appellant concedes is discriminative and violates the equal protection clause of the Fourteenth Amendment to the Federal Constitution and section 12 of Article I of the state constitution); five million two hundred forty thousand and seventy six gallons which were acquired from the Tidewater Associated Oil Company and transported and delivered to respondent at tidewater in this...