A. Magnano Co. v. Dunbar

• Decision Date: 17 January 1933
• Docket Number: No. 458.,458.
• Citation: 2 F. Supp. 417
• Parties: A. MAGNANO CO. v. DUNBAR, Atty. Gen. of Washington, et al.
• Court: U.S. District Court — Western District of Washington

2 F. Supp. 417

A. MAGNANO CO. v. DUNBAR, Atty. Gen. of Washington, et al.

No. 458.

District Court, W. D. Washington, S. D.

January 17, 1933.

COPYRIGHT MATERIAL OMITTED

McMicken, Ramsey, Rupp & Schweppe, of Seattle, Wash. (A. M. Davis, of New York City, and W. R. Brown, of Chicago, Ill., of counsel), for complainant.

John H. Dunbar, Atty. Gen., E. W. Anderson, Asst. Atty. Gen., John B. Fogarty, of Everett, Wash., and Philip D. Macbride, of Seattle, Wash., for defendants.

Before WILBUR, Circuit Judge, and CUSHMAN and NETERER, District Judges.

NETERER, District Judge (after stating the facts as above).

The state has full power to prescribe any system of taxation, judged in the light of its practical application to the affairs of men as usually conducted, not so arbitrary or extravagant as to constitute an abuse of power, which in the judgment of its legislators is necessary for its people. Southwestern Oil Co. v. Texas, 217 U. S. 114, 126, 30 S. Ct. 496, 54 L. Ed. 688; Mountain Timber Co. v. State of Washington, 243 U. S. 219, 237, 37 S. Ct. 260, 61 L. Ed. 685, Ann. Cas. 1917D, 642; North Laramie Land Co. v. Hoffman, 268 U. S. 276, 45 S. Ct. 491, 69 L. Ed. 953. And this court may not inquire into the motives of the Legislature in enacting the law. Hamilton v. Kentucky Distilleries Co., 251 U. S. 146, 161, 40 S. Ct. 106, 64 L. Ed. 194; Arizona v. California, 283 U. S. 423, 455, 51 S. Ct. 522, 75 L. Ed. 1154. The court must presume that the challenged act was enacted in good faith and be not by its necessary and natural operation destructive of rights secured by the Constitution. Minnesota v. Barber, 136 U. S. 313, 10 S. Ct. 862, 34 L. Ed. 455. And, considering such operation, the court is not limited to the mere phrase, but looks beyond the letter in such cases. Pleasant Tp. v. ?tna Life Ins. Co., 138 U. S. 67, 75, 11 S. Ct. 215, 34 L. Ed. 864; Lochner v. New York, 198 U. S. 45, 65, 25 S. Ct. 539, 49 L. Ed. 937, 3 Ann. Cas. 1133; Mountain Timber Co. v. Washington, supra.

The court may judicially notice facts and matters shown with facts established by the evidence. Weaver v. Palmer Bros. Co., 270 U. S. 402, 410, 46 S. Ct. 320, 70 L. Ed. 654. See, also, Quong Wing v. Kirkendall, 223 U. S. 59, 64, 32 S. Ct. 192, 56 L. Ed. 350. Sale in interstate commerce is not forbidden by the act; nor is the introduction of oleomargarine, which is not affected, regulated, Schollenberger v. Pennsylvania, 171 U. S. 1, 19, 18 S. Ct. 757, 43 L. Ed. 49; nor is its practical effect prohibitory, Collins v. New Hampshire, 171 U. S. 30, 33, 18 S. Ct. 768, 43 L. Ed. 60. There is no tax on sale of oleomargarine. It may be introduced and sold in the state without tax by moving in interstate commerce from without the state direct to the consumer within the state. The tax is assessed on the dealer, the amount of tax being measured by the quantity sold, and is operative only when the interstate commerce relation to the oleomargarine is ended. To carry on trade within the state an excise tax is affixed, and this may be done, if not "so extravagant or arbitrary as to constitute an abuse of power." Mountain Timber Co. v. Washington, supra, 243 U. S. at page 237, 37 S. Ct. 260, 265, 61 L. Ed. 685, Ann. Cas. 1917D, 642.

The act in issue is unlike any of the numerous cases cited. It has relation to public revenue and local welfare rather than regulatory of local business, as in Real Silk Hosiery Mills v. Bellingham (D. C.) 1 F.(2d) 934; and as in Ex parte Bock (Cal. App.) 13 P.(2d) 836, not yet reported in State reports. Nor does a municipal ordinance bear the same status as to judicial review as a state statute. Roach v. Ephren, 82 Fla. 523, 90 So. 609; State v. Wilson, 101 Kan. 789, 168 P. 679, L. R. A. 1918B, 374. Nor does the act prohibit business under penalty, as Adams v. Tanner, 244 U. S. 590, 37 S. Ct. 662, 61 L. Ed. 1336, L. R. A. 1917F, 1163, Ann. Cas. 1917D, 973. See, also, Weaver v. Palmer Bros. Co., 270 U. S. 402, 410, 46 S. Ct. 320, 70 L. Ed. 654.

The instant issue must rest upon conditions of local welfare in the light of the reasonableness and with relation to the profits on oleomargarine and butter, public revenue, and the status of the parties, and the common good; and be predicated on a reasonable basis on the existing status in the disparity of production cost and reasonable profit and value of oleomargarine and butter, and the reasonable necessity of the tax in equality of right for the common good.

"The general legislative purpose is plain, and the intention to prohibit this particular business cannot properly be imputed from the amount of the tax payable by those embarked in it, even if we were at liberty on this record to go into that subject." Williams v. Fears, 179 U. S. 270, 21 S. Ct. 128, 130, 45 L. Ed. 186.

"But there is still another difficulty in the way of holding this tax invalid. Has this court, or any court, the right to say that a tax may not be levied because in the judgment of the court the amount is so large that it could not reasonably have been intended to produce revenue?" Sperry & Hutchinson Co. v. Blue, 202 F. 82, 88 (C. C. A.).

Chief Justice Marshall, in McCulloch v. Maryland, 17 U. S. (4 Wheat.) 316, 428, 4 L. Ed. 579: "The power of taxing the people and their property is essential to the very existence of government, and may be legitimately exercised on the objects to which it is applicable, to the utmost extent to which the government may chuse to carry it. The only security against the abuse of this power, is found in the structure of the government itself. In imposing a tax, the legislature acts upon its constituents. This is in general a sufficient security against erroneous and oppressive taxation. The people of a State, therefore, give to their government a right of taxing themselves and their property, and as the exigencies of government cannot be limited, they prescribe no limits to the exercise of this right, resting confidently on the interest of the legislator, and on the influence of the constituents over their representative, to guard them against its abuse."

And the same jurist in Providence Bank v. Billings, 29 U. S. (4 Pet.) 514, 563, 9 Curt. 171, 7 L. Ed. 939, referring to the taxing power, says: "It resides in government as a part of itself, and need not be reserved when property of any description, or the right to use it in any manner, is granted to individuals or corporate bodies. * * * This vital power may be abused; but * * * the interest, wisdom, and justice of the representative body, and its relations with its constituents, furnish the only security, where there is no express contract against unjust and excessive taxation; as well as against unwise legislation generally."

In Austin v. Boston, 74 U. S. (7 Wall.) 694, 699, 19 L. Ed. 224: "The right of taxation, where it exists, is necessarily unlimited in its nature. It carries with it inherently the power to embarrass and destroy."

In Spencer v. Merchant, 125 U. S. 345, 8 S. Ct. 921, 926, 31 L. Ed. 763: "The power to tax belongs exclusively to the legislative branch of the government. * * * `The judicial department cannot prescribe to the legislative department limitations upon the exercise of its acknowledged powers. The power to tax may be exercised oppressively upon persons; but the responsibility of the legislature is not to the courts, but to the people, by whom its members are elected.'"

In McCray v. United States, 195 U. S. 27, 24 S. Ct. 769, 776, 49 L. Ed. 78, 1 Ann. Cas. 561, Chief Justice White said: "It is, however, argued, if a lawful power may be exerted for an unlawful purpose, and thus, by abusing the power, it may be made to accomplish a result not intended by the Constitution, all limitations of power must disappear, and the grave function lodged in the judiciary, to confine all the departments within the authority conferred by the Constitution, will be of no avail. This, when reduced to its last analysis, comes to this: that, because a particular department of the government may exert its lawful powers with the object or motive of reaching an end not justified, therefore it becomes the duty of the judiciary to restrain the exercise of a lawful power wherever it seems to the judicial mind that such lawful power has been abused. But this reduces itself to the contention that, under our constitutional system, the abuse by one department of the government of its lawful powers is to be corrected by the abuse of its powers by another department."

In Kehrer v. Stewart, 197 U. S. 60, 25 S. Ct. 403, 406, 49 L. Ed. 663, in discussing an occupation tax upon meat dealers, it is said: "What the necessity is for such tax, and upon what occupations it shall be imposed, as well as the amount of the imposition, are exclusively within the control of the state legislature. So long as there is no discrimination against citizens of other states, the amount and necessity of the tax are not open to criticism here."

And on a federal tobacco tax, in Patton v. Brady, Ex'x, 184 U. S. 608, 623, 22 S. Ct. 493, 498, 46 L. Ed. 713: "It is not the province of the judiciary to inquire whether the excise is reasonable in amount or in respect to the property to which it is applied. Those are matters in respect to which the legislative determination is final."

Mr. Justice Day, in Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 356, 55 L. Ed. 389, Ann. Cas. 1912B, 1312, said: "It is urged that this power can be so exercised by Congress as to practically destroy the right of the states to create corporations, and for that reason it ought not to be sustained, and reference is made to the declaration of Chief Justice Marshall in McCulloch v. Maryland, that the power to tax involves the power to destroy. This argument has not been infrequently addressed to this court with respect to the exercise of the powers of Congress," and held a corporation tax not void as lacking due process under the Fifth Amendment.

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