State v. Standard Oil Co. of Louisiana, 34386

CourtSupreme Court of Louisiana
Writing for the CourtFOURNET, Justice.
Citation188 La. 978,178 So. 601
Decision Date02 November 1937
Docket Number34386

178 So. 601

188 La. 978


No. 34386

Supreme Court of Louisiana

November 2, 1937

Rehearing Denied January 10, 1938 [178 So. 602] [Copyrighted Material Omitted] [178 So. 603]

Appeal from Nineteenth Judicial District Court, Parish of East Baton Rouge; James D. Womack, Judge.

Summary proceeding by the State of Louisiana against the Standard Oil Company of Louisiana to recover severance taxes on oil. From a judgment for plaintiff, defendant appeals.


T. M. Milling, A.M. Curtis, R. B. Jennings, and R. C. Milling, all of New Orleans, for appellant.

Gaston L. Porterie, Atty. Gen., and Justin C. Daspit, F. A. Blanche, and E. L. Richardson, Sp. Assts. to Atty. Gen., for the State.

FOURNET, Justice. ODOM, J., and O'NIELL, C. J., dissents.

OPINION [178 So. 604]

[188 La. 987] FOURNET, Justice.

This is a summary proceeding instituted by the State of Louisiana, under the provisions of Act No. 14 of the Second Extra Session of the State of Louisiana for the year 1935, to recover from the Standard Oil Company of Louisiana the sumof $ 142,915.02 for additional severance taxes on oil, which the State claims is due for alleged arbitrary deductions made by the defendant in its payment of severance taxes on oil produced and purchased by it in the State of Louisiana from August 1, 1928, to and including December 31, 1936, and for interest, penalties, and attorney's fees.

The defendant, in response to the rule nisi, and in conformity to the provisions of the act under which the State instituted this suit, filed all its pleadings at the same time, before the hour fixed for the return date, consisting of three motions to dismiss the suit, a plea of estoppel, a plea of prescription, [188 La. 988] a motion for a continuance, and an answer.

Briefly stated, the pleadings set up: (1) That Act No. 14 of the Second Extra Session of 1935 does not apply to the collection of severance taxes, but, if it does, it is unconstitutional for the reason that the act deprives the defendant of its property without due process of law and is in violation of the equal protection clauses of the Constitutions of the State of Louisiana and of the United States, Const.La.1921, art. 1, § 6, Const. U.S.Amend. 14, § 1, and moreover, the procedure under the act is an encroachment by the Legislative Department upon the Judicial Department of this State in violation of sections 1, 2, and 10 of article 7 of the Constitution of Louisiana of 1921, and the court is, therefore, without jurisdiction to proceed thereunder; (2) that, if Act No. 14 is constitutional, the State cannot proceed under the act but, as the object is to collect severance taxes, it must proceed under the severance tax acts, which provide an exclusive method of collection; (3) that there is no law of the State of Louisiana levying a severance tax on the purchaser of oil and that such a law would be unconstitutional and in violation of section 21 of article 10 and section 15 of article 4 of the Constitution of the State of Louisiana, and also in violation of the due process and equal protection clauses of the Constitutions of the State of Louisiana and of the United States, Const.La. 1921, art. 1, §§ 2, 6; Const. U.S.Amend. 14, § 1; (4) that the State, having acquiesced over a long period of time in the method employed by the defendant in determining the [188 La. 989] amount of oil purchased, and having accepted payments therefor without questioning the amounts received, is now estopped from claiming any further taxes, interest, penalties, etc., on oil purchased by it as agent of the State; (5) that plaintiff's claim for any amount, accruing prior to February 17, 1934, is barred by the prescription of 3 years under section 19 of article 19 of the Constitution of 1921, Act No. 148 of 1906, and Act No. 198 of 1914; and (6) in answer to the merits, the defendant reiterated the defenses raised in the several motions and pleas, and invoked the provisions of articles 14 and 15 of the Revised Civil Code and the doctrine of contemporaneous construction.

The trial judge granted the motion for a continuance to allow the defendant an opportunity to take the testimony of nonresident witnesses, and, after hearing, for written reasons, referred to the merits the pleas of nonliability and of estoppel (motions Nos. 3 and 4), and overruled the other motions to dismiss and the plea of prescription. On the merits, the trial judge rendered judgment as prayed for. The defendant has appealed suspensively.

The defendant, appellant here, seems to stress more seriously its defense on the merits, and argued that phase of the case in its brief first. We shall, therefore, follow the order in which the defendant has presented the case.

The suit is for unpaid severance taxes on oil produced and purchased by the defendant from August 1, 1928, to and including December 31, 1936. There is no dispute as [188 La. 990] to the quantity of oil involved in this suit. The controversy arises over the question of the measurement of the oil, that is, what is a "barrel of oil of forty-two gallons" under the laws of Louisiana.

The record shows that the defendant, in computing the severance tax due by it on all oil it produced and purchased in the State of Louisiana, adopted what it claims to be the method of measuring oil for the purpose of buying and selling oil as it prevailed [178 So. 605] in the oil industry. By that method the gross quantity was first ascertained. From that gross quantity it deducted the percentage of basic sediment, dirt, water, and other impurities contained in the oil. Corrections were then made for temperature so as to uniformly base the volume at 60 degrees Fahrenheit. After making the deductions for impurities and correcting for temperature, it made an additional deduction of 2 per cent. for which the defendant claims it incurred in handling the oil from the place of severance to the point of destination at its refinery, except on the oil produced and purchased in the parishes of Jefferson Davis and Acadia, in which case a deduction of 1 per cent. was made.

The State contends that, for the purpose of computing the amount of the severance tax, the oil should be measured at the place of severance, that is, as it passes out of the well into what are known as gauge tanks. The State admits that there is no severance tax due on anything except the oil, and therefore, it is proper to make deductions from the gross amount of the oil the percentage of basic sediment, dirt, water, and other impurities contained in the oil, and [188 La. 991] that it is proper to make corrections for temperature, but that the deductions made by the defendant for loss in handling between the place of severance and the point of destination of the oil is an arbitrary deduction, not authorized by law in computing the severance taxes. This deduction forms the basis of this suit.

On the other hand, it is the contention of the defendant that, as the State of Louisiana, in the first severance tax act in 1912, Act No. 209 of 1912, did not define a barrel of oil and did not provide a method for determining what is a barrel of oil, the Legislature in enacting all of the severance tax laws of Louisiana used the term "barrel of oil" as understood and adopted in the oil industry for the purchasing and selling of oil, and the long-continued acceptance and acquiescence by the State of the oil industry's method of determining what is a "barrel of oil" amounted to a construction of law, estopping the State from now giving a new meaning to the term "barrel of oil."

In order to establish this custom, the defendant produced a number of witnesses to testify in support of its contention, which was objected to by the State on the ground that there is no ambiguity in the severance tax laws of this State with reference to the measuring of oil; that "a barrel of oil of 42 gallons" is fixed, definite and certain, and that evidence is not admissible to establish usage and custom in contravention of positive law on the same subject matter. The judge allowed the evidence to be introduced and referred it to the effect. As a consequence of the ruling of the court a great mass of testimony was taken and a [188 La. 992] great number of documents were introduced comprising several hundred pages of evidence.

It is the well-established and universal rule of law in the interpretation of statutes levying taxes that they are to be interpreted liberally in favor of the taxpayer and all doubts and ambiguities are to be construed against the State and in favor of the taxpayer. Moreover, if the act be susceptible of more than one reasonable interpretation, the one less onerous to the taxpayer must be adopted. Barber Asphalt Paving Company v. Watt, 51 La.Ann. 1345, 26 So. 70; Town of Minden v. Glass, 132 La. 927, 61 So. 874; State v. State Agricultural Credit Corporation, 176 La. 590, 146 So. 159; United States v. Merriam, 263 U.S. 179, 44 S.Ct. 69, 68 L.Ed. 240, 29 A.L.R. 1547; Gould v. Gould, 245 U.S. 151, 38 S.Ct. 53, 62 L.Ed. 211; Crooks v. Harrelson, 282 U.S. 55, 51 S.Ct. 49, 75 L.Ed. 156; Miller v. Standard Nut Margarine Company, 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422. But "if a statute has given a definite meaning to any particular word no evidence of custom will be admitted to attach any other meaning to it." (Italics ours.) 17 C. J. 476, § 36. See, also, Harrod v. Lafarge, 12 Mart 21; Glasgow v. Stevenson, 6 Mart. (n.s.) 567; Cranwell v. The Fanny Fosdick, 15 La.Ann. 436, 77 Am. Dec. 190; Meyer v. Vicksburg, S. & P. R. Co., 35 La.Ann. 897; Clement v. South Atlantic S.S. Line, 128 La. 399, 54 So. 920; Walker v. Western Transport Co., 70 U.S. 150, 3 Wall. 150, 18 L.Ed. 172; Quinette v. Bisso, 5 Cir., 136 F. 825, 69 C.C.A. 503, 5 L.R.A.,N.S., 303. And the rule that "a definitely settled administrative [188 La. 993] construction of a statute is entitled to the highest...

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