Peterson Oil Co. v. Frary
| Decision Date | 24 February 1923 |
| Docket Number | 5202. |
| Parties | PETERSON OIL CO. v. FRARY, State Inspector of Petroleum Products. [*] |
| Court | South Dakota Supreme Court |
Original action for injunction by the Peterson Oil Company against Guy G. Frary, as State Inspector of Petroleum Products. Application for injunction denied.
Bates Johnson & Simons, of Sioux Falls, for plaintiff.
Byron S. Payne, of Pierre, and C. C. Caldwell, of Sioux Falls, for defendant.
This is an original action submitted on an agreed statement of facts. Plaintiff is a domestic corporation, engaged in selling and distributing petroleum product in large quantities at Dell Rapids. Defendant is the state food and drug commissioner who as such commissioner is inspector of petroleum products within the state.
Plaintiff contends that the law of this state relating to inspection of petroleum products is void, and that the state food and drug commissioner should be enjoined from enforcing the same, because in violation of certain provisions of the federal and state Constitutions, hereinafter noted. This law is found in section 7866 to 7883, inclusive, and in general provides for the inspection of all petroleum products before they are sold, offered for sale, or used for illuminating purposes in this state, and authorizes the inspector to have access to any warehouse, oil house, station, or other building where such products are kept for sale or use, and to cars, tanks, packages, etc., containing products subject to inspection. The inspector has the right to take samples sufficient for inspection, with authority to open any tank car in the state subject to inspection under the law, and to take therefrom a sample sufficient for inspection, after which he shall properly seal the car or tank. An inspection fee of 5 cents a barrel is provided for all petroleum products inspected, and this fee is made a lien on the products so examined, and a penalty is provided for selling, or offering for sale, such products before the inspection.
It will be observed that only petroleum products sold, offered for sale, or used in this state, and such products as are so kept for sale or use, are to be inspected, that if samples are taken from any tank car, subject to inspection, it is to be resealed, and that the penalty applies only for offering for sale such products before inspection.
The stipulated facts pertinent to this issue show: That plaintiff bought his petroleum products direct from the refineries in Oklahoma and Texas, or through brokers from states outside of South Dakota. That such products were shipped in carload lots from states outside of South Dakota to Dell Rapids. That plaintiff maintained at the city of Dell Rapids large stationary storage tanks, into which he received and kept for sale and distribution such products. That on arrival at Dell Rapids the tank cars in which the railway company sent the products were unloaded into plaintiff's stationary storage tanks. That all such products, so purchased by plaintiff, were kept by him to be sold to the public in the state of South Dakota. Plaintiff resold these petroleum products by taking them from his large storage tanks, in wagons or motor trucks, and selling them at retail to consumers, or at wholesale to other dealers in Dell Rapids. That in all cases, before plaintiff resold these products, they were unloaded by him, and mixed together in the stationary storage tanks above referred to.
That the plaintiff, on arrival of a shipment of petroleum products, saved from each tank car a small bottle of the product, as a sample, and defendant, through his deputies and inspectors, visited plaintiff's place of business at frequent intervals, and made his tests from the samples of petroleum products saved by plaintiff in the bottles, and furnished by him in such bottles to the inspector. That defendant also sometimes inspected plaintiff's products by taking samples out of plaintiff's storage tanks after they had been unloaded into these storage tanks from the tank cars.
That the inspection fees were charged and collected by the defendant direct from the plaintiff, through defendant's office at Vermillion, some time after the inspection was made. That approximately 58 per cent. of the total expenses of defendant in performing his official duties, in the years 1920, 1921, and 1922, have to do with and are occasioned by his inspection of petroleum products, and approximately 47 per cent. of the fee charged and received by defendant for inspection of petroleum products is used to pay the expenses of such inspection, and approximately 53 per cent. thereof remains in the general fund of the state, and is used by the state for general purposes.
The first law relating to the inspection of petroleum products was passed in 1897 (Laws 1897, c. 68), and has been several times amended; the rate being as high at times as 40 cents per barrel for inspecting small quantities, and as low as 10 cents per barrel. For several years up to 1917 the fee for inspecting oils in this state in quantities was 10 cents per barrel. That in 1917 the fee was reduced (Laws 1916-17, c. 243, § 5) by the Legislature to 5 cents per barrel, without regard to the number of barrels inspected, at which figure it has remained ever since.
That since 1913 the expenses of the inspection of petroleum products have not been kept separate from other expenses of the food and drug department. That the estimated profits received by the state from the inspection of petroleum products have been as high as 70 6/10 per cent. in 1917, and as low as 52 5/10 per cent. in 1922, and, in tabulating the expenses of inspection of petroleum products, no consideration has been given to the services and expenses of any department of government, except the expenses of the food and drug department in inspecting such products, and no charge has been made for office rent, fuel, lights, or janitor services, in connection with said department.
It is clear from this evidence that plaintiff's petroleum products had come to rest in his own storage tanks, from which he sold them at retail or wholesale, and in which he kept them for sale and use in this state before they were inspected or the inspection fee paid.
It is claimed by plaintiff that this law violates the following sections of the United States Constitution, namely:
Section 1 of the Fourteenth Amendment, which provides:
"Nor shall any state deprive any person of life, liberty or property, without due process of law."
Section 10 of article 1, which provides:
"No state shall, without the consent of Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws."
And section 8 of article 1, which provides:
"Congress shall have power *** to regulate commerce with foreign nations, and among the several states."
It is further claimed by plaintiff that this statute violates the following provisions of the state Constitution:
Section 17 of article 6, which provides:
"No tax or duty shall be imposed without the consent of the people or their representatives in the Legislature, and all taxes shall be equal and uniform."
Section 8 of Article 11, which provides:
"No tax shall be levied except in pursuance of a law, which shall distinctly state the object of the same, to which the tax only shall be applied."
Section 2 of article 6, which provides:
"No person shall be deprived of life, liberty or property without due process of law."
The particular point made by plaintiff is that the fees collected by the defendant for the inspection of oil are so largely in excess of the amount absolutely necessary to defray the expenses incident to inspection that they are, in effect, a revenue measure in disguise, and not a police measure, and that by reason of the amount collected being so much above the actual cost of inspection and being a revenue measure in disguise, it places a burden upon interstate commerce, which violates the provisions of the federal and state Constitutions, above set forth. It is further contended by plaintiff in his reply brief that sections 8 and 10 of article 1 of the Constitution of the United States should be considered together and construed together, and, when so considered and...
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