State v. Fidelity & Deposit Co. of Maryland

• Citation: 194 Wash. 591,78 P.2d 1090
• Decision Date: 03 May 1938
• Docket Number: 26847.
• Court: United States State Supreme Court of Washington
• Parties: STATE v. FIDELITY & DEPOSIT CO. OF MARYLAND et al.

78 P.2d 1090

194 Wash. 591

STATE v. FIDELITY & DEPOSIT CO. OF MARYLAND et al.

No. 26847.

Supreme Court of Washington

May 3, 1938

Department 2.

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

Action by the State of Washington against the Fidelity & Deposit Company of Maryland, the Northern Pacific Railway Company and others. From a judgment for plaintiff against defendant railway company, the latter appeals.

Reversed with direction.

L. B da Ponte, of St. Paul, Minn., and Robert S. Macfarlane, Dean H. Eastman, and Meier & Meagher, all of Seattle, for appellant.

G. W Hamilton, Atty. Gen., and R. G. Sharpe, Asst. Atty. Gen., for the State.

ROBINSON Justice.

This action was begun in January, 1936, against the Fidelity & Deposit Company of Maryland, by filing a complaint alleging, in substance, that the Sunset Pacific Oil Company, on June 4, 1935, procured a fuel and Diesel oil distributor's license under the provisions of title 11, chapter 180, p. 749 et seq., Laws of 1935, and filed a bond with the defendant as surety, conditioned, as required by the act, to pay plaintiff any taxes which might become due from it as such distributor, and that the oil company, on September 9th, 'imported into the state of Washington 29,712.6 barrels of fuel oil,' which it sold and delivered to the Northern Pacific Railway Company at Tacoma, but failed to pay the tax imposed by title 11 of chapter 180 amounting to the sum of $3,119.82, for which amount plaintiff prayed judgment against the defendant surety.

In December, 1936, the plaintiff filed an amended complaint making the Sunset Pacific Oil Company, the Sunset Oil Company, and the Northern Pacific Railway Company additional defendants. In this complaint, which is the complaint upon which the case was tried, it was alleged that the Sunset Oil Company owned all the stock of the Sunset Pacific Oil Company, and that both had qualified as distributors, with the defendant Fidelity & Deposit Company of Maryland as surety upon the qualifying bonds in each instance; that the railway company, having large tanks at Tacoma and 'desiring to avoid the payment of fuel oil tax to the plaintiff,' on August 2, 1935, entered into a written agreement with the Sunset Pacific Oil Company in which the railway company contracted to buy, and the oil company contracted to sell, large quantities of fuel oil; that, pursuant to such contract, on or about September 7, 1935, the Sunset Pacific Oil Company sold to the railway company 29,712.6 barrels of fuel oil which was shipped from San Pedro, Cal., via S. S. Topila, and delivered into the tanks of the railway company at Tacoma; and 'that said oil was at all times prior to the actual delivery to the Northern Pacific Railway Company, at the risk of the Sunset Pacific Oil Company, and payment therefor was not made until after delivery.'

Plaintiff further alleged that both the oil company and the railway company refused to pay the distributor's tax imposed by section 78, chapter 180, p. 749, Laws of 1935; that, if the oil company was, in fact, taxable, it was subject to penalties provided in that act for failure to make proper reports and payment, and, if the railway company was taxable, it was subject to certain penalties for failure to qualify as a distributor and make reports and payment. Judgment was asked for $3,119.82 and the appropriate penalties against such defendants as the court might adjudge legally liable for the tax.

The defendants, answering jointly and severally, denied that the contract to sell and the sale were made to avoid the tax, and that a tax was due from any of them. They further denied that the oil company was a distributor as to the shipment in question within the meaning of the taxing statute and asserted that it brought the oil into the State in pursuance of its right to freely engage in interstate commerce. They also denied that the railway company was a distributor within the meaning of the statute, setting up that it did not import the oil, but purchased it after it had been imported. They further alleged that the railway company used the oil solely in its interstate commerce operations and was not taxable in any manner with respect to the said shipment. The defendants invoked, as against the asserted tax liability, the protection of clause 3, section 8, and clause 2, section 10, of article 1 of the Constitution of the United States, the equal taxation provisions of the Fourteenth Amendment to the Constitution of the State of Washington, and the due process and equal protection clauses of the Fourteenth Amendment to the Constitution of the United States, and, as against the claimed penalties, the Fourteenth Amendment to the Federal Constitution, and section 3 of article 1 of the State Constitution.

The court found the facts substantially as alleged in the complaint, concluded that the railway company imported the oil into the State and stored the same, and withdrew it from time to time for use in connection with its business, and that it was, therefore, liable for the tax, but should not be subjected to penalties. It accordingly entered judgment against the railway company for $3,119.82 and costs, and dismissed the action as against the other defendants, with prejudice.

The railway company brings this appeal from the judgment against it, and the first question presented is whether or not it was, in fact, a distributor within the meaning of the statute.

Although title 11, which includes sections 78 to 81, inclusive, of chapter 180, pp. 749-751, of the 1935 Laws of Washington, is captioned 'Fuel Oil Tax,' it is clear from the terms of section 78 that the tax therein provided for is not a tax on fuel oil, but an excise tax imposed upon persons with respect to the privilege of distributing fuel oil, such tax being measured by the amount of the fuel oil distributed. The State, therefore, had the burden of proving that the railway company was, in fact, a distributor as to the fuel oil in question.

It appears, upon analysis of section 79 of the...