Midwestern Petroleum Corp. v. State Board of Tax Commissioners

• Decision Date: 15 December 1933
• Docket Number: 26,280
• Citation: 187 N.E. 882,206 Ind. 688
• Parties: Midwestern Petroleum Corporation v. State Board of Tax Commissioners et al
• Court: Indiana Supreme Court

187 N.E. 882

206 Ind. 688

Midwestern Petroleum Corporation v. State Board of Tax Commissioners et al

No. 26,280

Supreme Court of Indiana

December 15, 1933

Rehearing Denied June 26, 1934.

From Marion Circuit Court; Harry O. Chamberlin, Judge.

Action by the Midwestern Petroleum Corporation against the State Board of Tax Commissioners and others to enjoin enforcement of the Chain Store Tax Law (Acts 1929, ch. 207). From a judgment for defendants, plaintiff appealed.

Affirmed.

William Henry Harrison, James W. Noel, Hubert Hickam, Alan W Boyd, and Robert D. Armstrong, for appellant.

Philip Lutz, Jr., Attorney-General, and Edward Barce and Joseph W. Hutchinson, Assistant Attorneys-General, for appellees.

OPINION

Fansler, J.

The appellant, describing itself as a multiple owner of filling stations, engaged in the business of using, selling, and distributing gasoline and other petroleum products (exclusive of other merchandise), filed its complaint below on behalf of itself and others in like situation, seeking an injunction preventing the enforcement of Chapter 207 of the Acts of 1929, known as the Chain Store Tax Law.

The complaint asserts that such filling stations are not "stores" within the meaning of the word as used in the title of the act, or within the definition of the term as stated in the act, and that the act is not applicable to its business. That if the law is by its terms applicable, it is unconstitutional and void, offending against Section 23 of Article 1, Section 1 of Article X, Section 23 of Article IV, and Section 19 of Article IV of the State Constitution. Facts are alleged at great length, upon which appellant seeks to sustain its position.

A demurrer to the complaint was sustained, the appellant refused to plead further, and this appeal is from the judgment thereupon entered.

The only questions presented by the briefs are upon appellant's contention that the statute does not apply to filling stations, bulk stations, or leased stations, and that if it does apply the act is in violation of Section 23 of Article 1 of the Constitution of Indiana. All other questions must be deemed waived.

The constitutionality of the statute in question was considered by the Supreme Court of the United States in a case arising in the United States District Court for the Southern District of Indiana, and the statute was held not to offend against the 14th Amendment of the Federal Constitution, or Section 23 of Article 1, or Section 1 of Article X of the Constitution of Indiana. State Board of Tax Commissioners of Indiana v. Jackson (1931), 283 U.S. 527, 75 L.Ed. 1248, 51 S.Ct. 540.

As to those who come within the statute, the decision of the Supreme Court of the United States as to its offending against the Federal Constitution is conclusive.

The 14th Amendment prevents the curtailment of the rights of citizens, and Section 23 of Article 1 of the State Constitution prohibits the enlargement of the rights of some and discrimination against others. So long as all are treated alike, under like circumstances, neither of these provisions is violated. Hammer v. State (1909), 173 Ind. 199, 89 N.E. 850.

It is the province and duty of this court to interpret and apply the provisions of the Constitution of this State. Where a provision of our Constitution is similar in meaning and application to a provision of the Federal Constitution, it is desirable that there should be no conflict between the decisions of this court and the Supreme Court of the United States upon the subject. A decision of the latter court sustaining the validity of a statute of this state as not offending against the 14th Amendment of the Federal Constitution, is not binding on this court when the statute is attacked as offending against the provisions of the State Constitution having the same effect. But such a decision of that high and respected tribunal is strongly persuasive authority. Sperry & Hutchinson Co. v. State (1919), 188 Ind. 173, 122 N.E. 584.

The statute provides for an annual license fee of three dollars for a single store; and for two or more stores under single ownership, a fee of ten dollars for each not exceeding five; fifteen dollars for each in excess of five and not exceeding ten; twenty dollars for each in excess of ten and not exceeding twenty; and twenty-five dollars for each store in excess of twenty. It is the graduation of fees, discriminating as it does in favor of single stores and smaller groups and against the larger groups, that appellant attacks as unconstitutional.

The United States Supreme Court decided the Jackson Case upon the theory that the act involved is a revenue measure, and it is said in the opinion that the theory that the legislation would be justified under the police power was not pressed either in the briefs or at the bar.

The majority of the court were of the opinion that there is a substantial and significant difference between the business and operation of single stores and multiple owned stores, consisting not merely of multiple ownership, but in organization and the type of business transacted, and that these differences are sufficient to sustain the legislative classification for revenue purposes. The minority, and the district court, apparently, were of the opinion that the differences were not "germane to the object and sufficiently substantial to save the classification in each case from being condemned as purely arbitrary or capricious."

The Jackson Case involved a chain of grocery stores. The appellant contends that the difference in method of operation between single and multiple owned grocery stores does not exist in the case of filling stations engaged exclusively in the sale of petroleum products, and that operators of single or multiple stations are in substantially the same situation as to cost of merchandise and cash discounts; that the multiple owner has no advantage in buying skill; that there is no depreciation; that both enjoy prompt turnover; that there is no warehousing advantage with the multiple owner; that competition in selling prices does not exist; that products are advertised by the producer, and single operators receive the same proportionate advantage as multiple operators; that all operators commonly have abundant capital; and that multiple owners have no advantage in management. The allegations of the complaint covering these questions are long, detailed and specific, and have the obvious purpose of negativing the difference between single and multiple store operation described in the majority opinion in the Jackson Case.

The same effort was made in the case of Louis K. Liggett Co. et al. v. Lee, Comptroller, etc. (1933), 288 U.S. 517, 53 S.Ct. 481, 484, which involved the constitutionality of a Florida statute. In the majority opinion in the latter case it is said:

"In their endeavor thus to distinguish the earlier case, the appellants stress mere details, but ignore the underlying reason for sustaining the classification there attacked. The decision in the Jackson Case was based, not upon any single feature of chain store management, but upon the ultimate fact of common knowledge, illustrated and emphasized by the evidence, that the conduct of a chain of stores constitutes a form and method of merchandising quite apart from that adapted to the practice of the ordinary individually operated small store or department store; and that the difference between an integrated and a voluntary chain is fundamental. While incidents of the operation of the one may be quite similar to those found in the other, there is a clear distinction between one owner operating many stores and many owners each operating his own store with a greater or less measure of cooperation voluntarily undertaken. The Legislature may make the distinction the occasion of classification for purposes of taxation. Neither similarity of opportunities and advantages in some aspects, nor the fact that the one kind of store competes with the other, is enough to condemn the discrimination in the taxes imposed."

It cannot be doubted that the differences in practices and advantages between the operation of a single and a chain of stores may vary with the lines of merchandise handled. That the question of the constitutionality of the act as a revenue measure presents many difficulties is evidenced by the division of opinion among the learned Justices in the Jackson Case.

But here it is urged that the legislation can be justified under what Judge Cooley calls "the police or equivalent power." Commentators generally regard this type of legislation as designed and intended to discourage chain stores and encourage and protect local industry. We agree with this view as to the purpose of the Indiana statute, and will consider the question of its constitutionality upon that basis.

It was said by Chief Justice Fuller, in the case of United States v. E. C. Knight Company (1895), 156 U.S. 1, 39 L.Ed. 325, 15 S.Ct. 249:

"'It cannot be denied that the power of a State to protect the lives, health, and property of its citizens, and to preserve good order and the public morals, 'the power to govern men and things within the limits of its dominion,' is a power originally and always belonging to the States, not surrendered by them to the general government, nor directly restrained by the Constitution of the United States, and essentially exclusive. The relief of the citizens of each State from the burden of monopoly and the evils resulting from the restraint of trade among such citizens was left with the States to deal with, and this court has recognized their possession of that power even to the extent of holding that an employment or business carried on by private individuals, when it becomes a

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