Standard Oil Co. v. Graves

• Decision Date: 13 January 1917
• Docket Number: 13657.
• Citation: 94 Wash. 291,162 P. 558
• Parties: STANDARD OIL CO. v. GRAVES, Commissioner of Agriculture.
• Court: Washington Supreme Court

162 P. 558

94 Wash. 291

STANDARD OIL CO. v. GRAVES, Commissioner of Agriculture.

No. 13657.

Supreme Court of Washington, En Banc.

January 13, 1917

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

Action by the Standard Oil Company, a corporation, against H. T Graves, individually and as Commissioner of Agriculture of the State of Washington. From a judgment for plaintiff defendant appeals. Judgment reversed, and cause remanded with direction to dismiss the action.

W. V. Tanner and Lindsay L. Thompson, both of Olympia, for appellant.

Ballinger Battle, Hulbert & Shorts, of Seattle, and Pillsbury, Madison & Sutro, of San Francisco, Cal., for respondent.

MAIN J.

The purpose of this action was to enjoin the enforcement of the oil inspection act passed by the Legislature of this state. To the amended complaint a demurrer was interposed and overruled by the trial court. The defendant refused to plead further, and elected to stand upon his demurrer. Thereupon a judgment was entered granting a permanent injunction restraining the defendant from enforcing the law. From this judgment the defendant appeals. The facts stated in the amended complaint sufficient to an understanding of the questions here presented may be summarized as follows:

The respondent is a corporation organized and existing under the laws of the state of California. The appellant is the commissioner of agriculture of the state of Washington, and, under chapter 60, Laws 1913, it is made his duty to enforce the state oil inspection law. The respondent is engaged in the state of California in the business of producing and buying crude petroleum oil, and of manufacturing and refining the same, and of shipping products of such manufacture from its refineries in the state of California into the state of Washington, where the same 'are sold by this plaintiff in large quantities for use and consumption in the state of Washington for illuminating, manufacturing, domestic, and power purposes.' The respondent maintains in the state of Washington wharves, docks, tanks, warehouses, and other equipment necessary for the selling and distributing of oils, which are shipped into this state for use and consumption. Under the provisions of chapter 192 of the Laws of 1907, the respondent has for a number of years paid the inspection fees provided for in that act, and the amount so paid is largely in excess of the reasonably necessary cost of inspecting and labeling the oils and administering the law. From June 30, 1905, to December 31, 1914, the amount of the fees collected, which were in excess of the cost of inspecting and labeling the oil, and the administering of the law, was $255,672.93. Since the act of 1907 was passed the excess fees over what was reasonably necessary for the inspection, labeling, and administering the law has gradually increased. During the year 1914, the gross receipts from the enforcement of this law were $79,339.66. The disbursements under the law were $8,553.75, leaving a net revenue for that year of $70,785.91, which was paid into the treasury as required by the statute. It is alleged that the appellant, unless restrained, will continue to enforce the provisions of the law, and will refuse to inspect the illuminating oil, gasoline, distillate, and other volatile products of petroleum manufactured by the respondent in the state of California, and shipped by it from that state into the state of Washington, for sale, for use, and consumption therein, unless the respondent pays the fees required by the act. It is claimed that the law offends against certain provisions of the Constitution of the United States, as well as the Constitution of this state. These constitutional provisions will be hereinafter referred to and considered. The inspection law referred to in the complaint was first passed during the legislative session for the year 1905. Laws 1905, p. 310. That act was amended in 1907, and will be found in chapter 192 of the Laws of 1907. Section 3 of this act provides that all gasoline, benzine, distillate, or other volatile products of petroleum intended for use or consumption in this state for illuminating, manufacturing, domestic or power purposes, 'before being sold or offered for sale,' shall be inspected by the state oil inspector or his deputies. When the inspection is made, a certificate is to be issued, and the barrel or receptacle which contains the oil must be labeled or branded. Section 4 of the act contains a schedule of the fees which shall be paid for the inspection. Section 6 provides that, if any person or persons, whether manufacturer, vendor or dealer, or as agent or representative of any manufacturer, vendor or dealer, 'shall sell or attempt to sell' to any person, firm, or corporation in this state any illuminating oil, gasoline, benzine, distillate, or other volatile products of petroleum, intended for use or consumption within this state, that has not been inspected and branded, according to the provisions of the act, 'shall be guilty of a gross misdemeanor.' By Laws 1913, c. 60, it was made the duty of the commissioner of agriculture to exercise all the powers and perform all the duties which by the law of 1907 were vested in and required to be performed by the state oil inspector.

The first question is whether the oil inspection law offends against article 1, § 10, cl. 2, of the federal Constitution, which provides that 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. * * *' This constitutional provision, as construed by the federal Supreme Court, does not refer to articles carried from one state into another, but only to articles imported from foreign countries into the United States. Woodruff v. Parham, 8 Wall. 123, 19 L.Ed. 382; Brown v. Houston, 114 U.S. 622, 5 S.Ct. 1091, 29 L.Ed. 257; Patapsco Guano Co. v. North Carolina Board of Agriculture, 171 U.S. 345, 18 S.Ct. 862, 43 L.Ed. 191.

Under the facts stated in the amended complaint, the oil was not imported from a foreign country into the United States, but was carried from one state into another, and the constitutional provision referred to has no application.

The second question is whether article 1, § 9, cl. 5, of the federal Constitution, which provides that 'no tax or duty shall be laid on articles exported from any state' can be invoked by the respondent. This mandate relates only to exportations to foreign countries, and is designed to give immunity from taxation to property that is in the actual course of such exportation. Dooley v. United States, 183 U.S. 151, 22 S.Ct. 62, 43 L.Ed. 128 United States v. Hvoslef,

237 U.S. 1, 35 S.Ct. 459, 59 L.Ed. 813, Ann. Cas. 1916A, 286.

The third question is whether the statute required the inspection to be made during the time that the oil was an article in interstate commerce. Article 1, § 8, cl. 3, of the federal Constitution provides that the Congress of the United States shall have power 'to regulate commerce with foreign nations and among the several states, and with the Indian tribes.' The determination of this question involves a consideration of the question whether the oil owned by the respondent in this state, when it was sought to be subjected to the inspection tax, was then an article in interstate commerce.

In the solution of this question the decisions of the United States Supreme Court are controlling. In Bacon v. Illinois, 227 U.S. 504, 33 S.Ct. 299, 57 L.Ed. 615, grain had been shipped by the original owners, who were residents of the Southern and Western states, under contracts for its transportation to New York, Philadelphia, and other Eastern cities. These contracts reserved to the owners the right to remove the grain from the cars at Chicago 'for the mere temporary purposes of inspecting, weighing, cleaning, clipping, drying, sacking, grading, or mixing, or changing the ownership, consignee, or destination' thereof. While the grain was in transit it was purchased by Bacon, the plaintiff in error, who succeeded to the rights of the vendors under the contracts of shipment. At the points of destination Bacon was represented by agents through whom he disposed of the grain and other commodities on the Eastern markets. The grain there in question was purchased by him solely for the purpose of being sold in this way, and with the intention to forward it according to the shipping contracts. It was not his intention to dispose of it in Illinois. Upon the arrival of the grain in Chicago Bacon availed himself of the privilege reserved, and removed it from the cars to his private elevator. This removal was for the sole purpose of inspecting, weighing, grading, mixing, etc., and not for the purpose of changing its ownership, consignee, or destination. All grain remained in the elevator only for such time as was reasonably necessary for the purposes mentioned, and immediately after these purposes had been accomplished it was turned over to the railroad companies, and forwarded by them to the Eastern cities, in accordance with the original contract. No part of the grain was sold or consumed in Illinois. While it was in Bacon's elevator in Chicago, it was by the board of assessors of Cook county, Ill., assessed and a tax levied thereon. Upon these facts it was held that the grain, when the tax was assessed, was not the subject of interstate commerce, because the property was in the state of Illinois for purposes deemed by the owner to be beneficial himself, and was not in actual transportation. It was there said:

'But neither the fact that the grain had come from outside the state nor the intention of the owner to send it to another state and there to dispose of it can

...