Standard Oil Company v. City of Lincoln

• Decision Date: 23 January 1926
• Docket Number: 25045
• Parties: STANDARD OIL COMPANY, APPELLANT, v. CITY OF LINCOLN, ET AL., APPELLEES
• Court: Nebraska Supreme Court

207 N.W. 172

114 Neb. 243

STANDARD OIL COMPANY, APPELLANT, v. CITY OF LINCOLN, ET AL., APPELLEES

No. 25045

Supreme Court of Nebraska

January 23, 1926

APPEAL from the district court for Lancaster county: WILLARD E STEWART, JUDGE. Affirmed.

AFFIRMED.

Leonard A. Flansburg, E. J. Hainer, and William H. Herdman, for appellant.

C Petrus Peterson, Charles R. Wilke and R. A. Boehmer, contra.

O. S Spillman, Attorney General, and T. J. McGuire, amici curiae.

Heard before MORRISSEY, C. J., DEAN, DAY, GOOD, THOMPSON and EBERLY, JJ. ROSE, J., GOOD, J., dissenting.

OPINION

DEAN, J.

This suit was brought by plaintiff in the district court for Lancaster county to enjoin the city of Lincoln, and its municipal officers, as such, "from engaging in the business of selling gasoline and lubricating oil to the inhabitants of said defendant city."

Defendant demurred generally to plaintiff's petition. The district court sustained the demurrer and plaintiff electing to plead no further, the suit was dismissed and plaintiff has appealed.

Standard Oil Company is a Nebraska corporation and is engaged, as alleged, "in the business of marketing petroleum products, including 'gasoline and oil', in all the cities and towns in the state of Nebraska, and, more particularly, in the defendant city of Lincoln. "

Plaintiff alleges generally that Lincoln has more than 5,000 inhabitants and is governed by and is operating under what is known as a "Home Rule Charter" pursuant to section 2, article XI of the Constitution of Nebraska, which provides:

"Any city having a population of more than five thousand (5,000) inhabitants may frame a charter for its own government, consistent with and subject to the Constitution and laws of this state, * * * and if a majority of such (the) qualified voters (of such city), voting thereon, shall ratify the same, it shall at the end of sixty days thereafter become the charter of said city, and supersede any existing charter and all amendments thereof."

Plaintiff alleges that, under the above constitutional provision, the city framed a city charter which was ratified and adopted by the qualified voters as the charter of the defendant city at an election held November 14, 1917. It is also pointed out that the city council, by appropriate proceedings, subsequently submitted to the people of Lincoln a proposed amendment to the city charter which was duly ratified and lawfully adopted November 4, 1924. The amendment follows:

"Section 13b. The city council shall have power to engage in the business of selling gasoline and oil to the inhabitants of the city, both at retail and wholesale, and for that purpose shall have power to acquire and own such real and personal property as may be necessary and incident thereto. The city shall not charge for gasoline and oil, sold by it, more than the cost thereof to the city, plus the cost of handling the same, including contingencies."

Thereupon the Lincoln city council adopted the following ordinance:

"An ordinance creating and establishing a municipal gasoline department for the sale of gasoline and oil, and prescribing rules for the government and operation thereof."

Sections 1 and 2 of the ordinance follow:

"Section 1. That there be and hereby is created and established a municipal gasoline department for the purpose of selling gasoline and oil to the inhabitants of the city, both at retail and wholesale, and until otherwise assigned by the city council, the municipal gasoline department is hereby assigned to the department of streets and public improvements. The municipal gasoline department shall be operated pursuant to the rules hereinafter set forth and as the same may be amended, modified or extended.

"Section 2. That the following rules be and they are hereby adopted governing the operation of said municipal gasoline department, to wit:"

Here follow rules from one to eight inclusive, which for the most part have to do with expenditures, the handling of the funds, and the division of the duties under the purely administrative features of the gasoline ordinance among the different departmental members of the city council and which are to be performed by them in their several official capacities. Except as to rules 7 and 8, which follow, the rules, above referred to, need not be reproduced here:

"Rule 7. Gasoline and oil shall be purchased as directly from the original source of supply as possible, and shall be sold to the inhabitants of the city of Lincoln at the cost thereof to the city, plus the cost of handling the same, including contingencies.

"Rule 8. All gasoline and oil shall be sold for cash."

Plaintiff alleges that the charter did not empower the city to sell gasoline and oil, but that it is selling it at cost price, plus the cost of handling, including contingencies, and is using money therefore which is raised by taxation of all property in the city, including plaintiff's; that the business is carried on by city officers and employees in city-owned buildings and with city-owned facilities, and that plaintiff is thereby excluded from engaging in such business, and that such business "is not of, and does not pertain to, the government of said defendant city," and that thereby the due process of law clause of the Fourteenth Amendment of the federal Constitution is contravened; that there is no threatened shortage of gasoline and oils in the city; that "there is no agreement, trust or combination" among dealers in Lincoln, or elsewhere, in the gasoline and oil business, and that competition therein is active; that the prices charged by all dealers are not exorbitant and only return a reasonable profit; that neither gasoline nor lubricating oils are necessaries of life; that no emergency requires the city to engage in such business, but it is so engaged solely for the benefit of the buyers; that plaintiff has never been engaged nor financially interested in the production or refining of crude petroleum or other products therefrom; that plaintiff's business is worth more than $ 25,000, and its property and equipment used therein is worth about $ 210,000; and that, by reason of the city's engaging in the business complained of, plaintiff's business has "decreased in (gasoline) volume upwards of 30 per centum, without any decrease" in overhead costs. It is further pleaded that, by reason of the imposition of valid taxes of every sort on its property, and overhead expenses, plaintiff cannot compete with the city at its prevailing prices, and that, unless the injunction is granted as prayed, plaintiff will be deprived of its property and business without due process of law.

Plaintiff further pleads that the money so used by the city is not for a public purpose but is solely for the benefit of the purchasers of gasoline and oil; that all city taxes, including plaintiff's will be thereby increased; that the defendant city is conducting only a three-pump gasoline service station, which is wholly inadequate to supply the necessary and normal demands of the city's inhabitants, and that it does not intend to provide any more facilities or equipment to furnish gasoline and oils to Lincoln's inhabitants, its only object being to "furnish a supply sufficient in volume to fix and control the price at which gasoline is and may be sold" by plaintiff and other gasoline dealers in Lincoln; that the city's engagement in such business is an "unlawful, unreasonable, capricious, discriminatory, and abusive exercise" of the city's power to regulate the business in question, and is in violation of the Fourteenth Amendment of the federal Constitution, and also of the Nebraska Constitution, in that the business complained of is not a business affected with a public interest; that the city's operation in the business is confiscatory of plaintiff's property and business and "does not apply equally to all other businesses in said city handling and selling to inhabitants thereof products of like general use and consumption;" that the engaging in such sales is in contravention of and does not comply with section 9, art. XV, of the state Constitution, which provides:

"Laws may be enacted providing for the investigation, submission and determination of controversies between employers and employees in any business or vocation affected with a public interest, and for the prevention of unfair business practices and unconscionable gains in any business or vocation affecting the public welfare. An industrial commission may be created for the purpose of administering such laws, and appeals shall lie to the supreme court from the final orders and judgments of such commission."

Plaintiff further contends that to engage in the business complained of by the defendant city is illegal, and that the charter amendment and the powers which purport to be granted thereby, only authorize it to engage in the business of selling gasoline and oil of like kind and class and nature and having properties and uses similar to gasoline; and that lubricating oils for motor vehicles is in kind, class and nature wholly dissimilar to gasoline. Here follow the usual allegations that plaintiff is without an adequate remedy at law, and a plea that the charter amendment shall be judged illegal, unconstitutional and void, and the city officials named herein and their successors in office, and the agents, employees, and servants of the defendant city shall all be enjoined from engaging in the business complained of.

In Schroeder v. Zehrung, 108 Neb. 573, 188 N.W. 237, we said: "While a home rule charter of a city, adopted pursuant to the constitutional provisions, may not contravene any provision of the Constitution or of any general statute enacted by the legislature, it is, in all other respects,...