Roberts Tobacco Co. v. Mich. Dep't of Revenue

• Decision Date: 04 October 1948
• Docket Number: No. 13.,13.
• Citation: 34 N.W.2d 54,322 Mich. 519
• Parties: ROBERTS TOBACCO CO. v. MICHIGAN DEPARTMENT OF REVENUE.
• Court: Michigan Supreme Court

322 Mich. 519

34 N.W.2d 54

ROBERTS TOBACCO CO.

v.MICHIGAN DEPARTMENT OF REVENUE.

No. 13.

Supreme Court of Michigan.

Oct. 4, 1948.

Appeal from Circuit Court, Ingham County, in Chancery; Charles H. Hayden, Circuit Judge.

Bill for injunction by the Roberts Tobacco Company, a Michigan corporation, against the Michigan Department of Revenue, Louis M. Nims, Commissioner. From an adverse decree, plaintiff appeals.

Affirmed.

Before the Entire Bench.

Monaghan, Clark, Crawmer & Hart, of Detroit (L. Edwin Wenger, of Detroit, of counsel), for plaintiff and appellant.

Edmund E. Shepherd, Sol. Gen., of Lansing, and Daniel J. O'Hara and T. Carl Holbrook, Asst. Attys. Gen., for appellee.

CARR, Justice.

Defendant in this case is charged with the administration of Act No. 265, Pub.Acts 1947, Stat.Ann. § 7.411(1) et seq., which measure imposes a specific tax on the sale and distribution of cigarettes in this state. All persons engaging in the business of manufacturing, transporting or selling cigarettes are required to obtain licenses appropriate to the nature of the business transacted. Records are required to be kept and monthly returns to the department of revenue made on forms prescribed thereby. It is specifically provided that each return so made shall state ‘the number of cigarettes purchased or sold by such licensee in the state during the preceding calendar month and such return shall contain or be accompanied such further information as the department shall require.’

The bill of complaint in the instant case alleges that plaintiff is licensed under the act in question as a ‘secondary wholesaler.’ The act defines the term as meaning ‘any person who does not purchase at least 75 per cent of his cigarettes from the manufacturers and who sells at least 75 per cent of the cigarettes purchased by him.’ Plaintiff avers that its business is wholly interstate. The bill further avers that in accordance with the provisions of the statute the defendant requires that each monthly return filed by a licensee shall have attached thereto schedules setting forth specific information, including a list of the names and addresses of persons to whom cigarettes have been sold during the period covered by the return. Plaintiff alleges that it is informed that degendant intends to furnish such information to officials in other states under reciprocal agreements therewith, that such proposed action is not authorized by the provisions of the statute, that it will impose a burden on interstate commerce, and that it will constitute a violation of property rights of the plaintiff guaranteed by both state and federal constitutions. For the reasons indicated, the bill of complaint asks that defendant be ‘permanently restrained and enjoined from furnishing a list of plaintiff's customers to any officer, board or commission of any other state of the United States or to anyone not in the employ of the Michigan department of revenue and be required to keep such list of customers confidential.’

On the filing of the bill of complaint an order was issued by the circuit court requiring defendant to show cause why a temporary injunction should not issue. Said order further contained a restraining provision in accordance with the prayer of the bill of complaint. Defendant moved to dismiss, claiming that the bill of complaint did not set forth facts entitling plaintiff to the relief sought, that the proper administration of act 265 of the Public Acts of 1947 requires checking and verification of reports filed by licensees, and that the department of revenue is proceeding properly in obtaining requisite information through mutual assistance agreements with tax collection authorities in other states having cigarette tax laws. The order to show cause and the motion to dismiss were heard together by the trial court. The motion was granted, and plaintiff has appealed.

Plaintiff claims that its lists of customers are in the nature of trade secrets, that they constitute a part of the good will of its business, and that their secrecy is a valuable property right of which plaintiff may not be deprived under constitutional guaranties of both state and federal constitutions. Reliance is apparently placed on article 2, section 16, of the state constitution and the 14th amendment of the federal constitution. However, the bill of complaint does not allege that the carrying out of the reciprocal arrangements in question will result in any information contained in the customers' lists being divulged to competitors of the plaintiff or to others who may use it in any manner to the detriment of the plaintiff in the conduct of its business. It is not made to appear that any such use is threatened. Under proper circumstances, equity will grant injunctive relief to protect property rights, in the nature of trade secrets, against unauthorized interference. Grand Union Tea Co. v. Dodds, 164 Mich. 50, 128 N.W. 1090, 31 L.R.A.,N.S., 260, cited by plaintiff, furnishes a typical illustration. There defendant, who had been a driver in plaintiff's employ, was enjoined from using lists of customers to aid the business of one of plaintiff's competitors. However, the principle recognized and applied in said case and in other decisions of like import, is not applicable to the situation presented in the case at bar. Well pleaded averments of fact in the bill of complaint must be accepted as true, but, as indicated, we find no showing therein that plaintiff had been, or will be, actually injured in the exercise of its property rights if the relief sought is not granted.

In Van Husan v. Heames, 96 Mich. 504, 56 N.W. 22, 24, this court sustained, against constitutional objections, a statutory provision forbidding the recording of an instrument of conveyance of real estate without the presentation of a certificate showing the payment of all taxes due on the property for the preceding five year period. It was said, in part:

‘We do not think that the provision of the section constitutes an unwarrantable infringement of property rights. Mere inconvenience, however great, is not sufficient to defeat a law. That is a consideration for the legislature, and not for the court. The state may enact stringent measures to enforce the collection of the public revenue.’

On the record before us it cannot be said that the carrying out of the reciprocal arrangements in question will deprive plaintiff of any property rights protected by either the state or the federal constitution. The injunctive relief sought may not be granted on the basis of mere speculation or conjecture that any such result will follow.

The further claim that the action that plaintiff seeks to prevent constitutes an interference with interstate commerce is without merit. No showing is made that the action of the state department of revenue, in procuring, in the manner in question, information on which to check the monthly returns made by plaintiff in accordance with the statute, will result in placing any burden whatsoever on the operation of plaintiff's business or will constitute in any way an interference therewith. In Dixie Wholesale Grocery, Inc., v. Martin, Commissioner of Revenue, 278 Ky. 705, 129 S.W.2d 181, 183, the court had under consideration an agreement between the revenue department of Kentucky and the taxing authorities of Ohio, relative to the exchange of information bearing on the enforcement of their respective tax laws, which agreement was expressly authorized by a Kentucky statute. In rejecting the claim that such interchange of information resulted in imposing a burden on interstate commerce, it was said:

‘We cannot see that the sending of these reports to Ohio imposes any burden upon, or is a direct interference with, interstate commerce. A case very much in point with the one we have before us is Arkansas Louisiana Gas Company v. Department of Public Utilities, 304 U.S. 61, 58 S.Ct. 770, 771, 82 L.Ed, 1149. There the Gas Company was selling gas in interstate commerce and the Department of Public Utilities of Arkansas, under one of its regulations, sought to require the Gas Company to file with the Department reports showing charges, rates, etc. The Gas Company refused and contended such regulation interfered with interstate commerce. The United States Supreme Court held the regulation placed no material burden or undue interference upon commerce between the two states, and that it was reasonable for the State of Arkansas to obtain the highly important information which the reports of the Gas Company disclosed concerning its operations. * * *

‘The reciprocal agreement between Ohio and Kentucky for the exchange of data contained in the sales tax reports required of certain businesses conducted within their respective borders does not conflict with Article 1, Section 10, of the Federal Constitution, U.S.C.A., prohibiting one state from entering into a compact with another. This section has reference to political compacts, alliances and treaties. In support of its contention that this reciprocal agreement between Ohio and Kentucky violates Article 1, Section 10, of the Federal Constitution, appellant cites State of Virginia v. Tennessee, 148 U.S. 503, 13 S.Ct. 728, 734, 37 L.Ed. 537. But this case upheld a compact made in 1803 between Virginia and Tennessee fixing the boundary between the two states, and it said the inhibition in this section only applies to political alliances which may encroach upon the supremacy of the United States. That opinion recites: ‘There are many matters upon which different states nay agree that can in no respect concern the United States.’ A mere reading of this section shows conclusively it has no application to such reciprocal agreement as has been entered into between Kentuckyand Ohio in an effort to keep...