General Oil Company v. Crain

Plaintiff in error, which was also plaintiff in the courts below, invokes the protection of the commerce clause of the Constitution of the United States against the collection of a tax for the inspection of certain of its oils in Tennessee. The bill prayed an injunction against the defendant, based on the following facts, summarized from the bill:

The plaintiff is a Tennessee corporation with its principal place of business in Memphis, Tennessee. It is engaged in the manufacture and sale of coal oil and other illuminating oils in the various states of the Union. Its wells and refining and manufacturing plants are all located in the states of Pennsylvania and Ohio, from which it ships its product to the states in which they are sold and used. On account of the tendency of the oils to leak and evaporate, and, under change of temperature, to burst the vessel in which they are contained, it is necessary to ship the oils in tank cars, and it is also necessary to have distributing points for such oils in various places in the United States, at which it may receive the oils so shipped, and place it in barrels or other smaller vessels suitable in size for filling orders, which vary in amounts from one barrel upward. It would be impracticable to carry on business in, or to have apparatus and machinery for the reception and delivery of, oil at every point at which plaintiff ships oil. For some years plaintiff has been engaged in business at Memphis, and has made that city not only a place of business at which to sell oil to the citizens and residents of Tennessee, but also has made it one of its distributing points to which its oils are shipped from Pennsylvania and Ohio in tank cars, from which cars the oils are unloaded into various tanks, barrels, and other receptacles, for the purpose of being forwarded to its customers in Arkansas, Louisiana, and Mississippi, in which states it has many regular customers, from whom it always has on hand many unfilled orders for oil, to be delivered as soon as possible or convenient.

At Memphis plaintiff has numerous tanks or receptacles for oil of various kinds and sizes, among which are the following: (1) A tank or vessel in which is kept oil for which orders have been received from the states above mentioned before its shipment from the manufacturing plants, and which is especially shipped to fill such orders. This oil is unloaded at Memphis only for the purpose of distribution in smaller vessels to meet the requirements of such orders, and is kept separate from oils for sale in Tennessee, in a tank plainly and conspicuously marked 'Oil Already Sold in Arkansas, Louisiana, and Mississippi,' and remains in Tennessee only long enough (a few days) to be properly distributed according to the orders therefor. (2) Another tank or vessel for oil to be sold in those states, but for which [there were] no orders at the time of shipment from the manufacturing plants. This tank is marked 'Oil to be Sold in Arkansas, Louisiana, and Mississippi,' and is kept separate and apart from all other oil until required to supply orders from plaintiff's customers in those states, and is never sold except upon the receipt of such orders.

The defendant, as inspector of oils, from time to time inspects plaintiff's oils at Memphis, and charges and collects for such inspection a regular fee of 25 cents per barrel, as provided in § 8 of the act of 1899 of the legislature of Tennessee, and the plaintiff has fully paid such charges up to the present time on all of its oils shipped into Tennessee, whether intended for sale in that state or other states. Until recently plaintiff has unloaded the greater portion of its oil from its tank cars to its stationary tanks without attempting to separate the oil sold or intended to be sold in the states above mentioned from that to be sold in the state of Tennessee, and paid the inspection charges upon all. Plaintiff, however, is now separating its oil in the manner above described, because it has been advised that the oil intended to be sold outside of Tennessee is not subject to inspection in that state if kept separate from the oil sold or intended to be sold in that state.

Defendant claims the right to inspect such oils, although he knows and admits no sales thereof are made in Tennessee, and claims that he is not only entitled, but that it is his cuty, to inspect the same and collect the regular fees in such inspection.

Plaintiff is advised and shows that defendant has no right to inspect the oil or collect the fees, because the act of 1899 does not apply to them, for reasons which are elaborately set out; but it is alleged that, if the act should be construed to apply to them, the act is unconstitutional 'in so far as it provides for or requires an inspection of any of the oil in said tanks, because such inspection would be a regulation of and interference with commerce between the states of Pennsylvania and Ohio, from which said oil was shipped, and the states of Arkansas, Louisiana, and Mississippi, to which the same was shipped, in violation of the Constitution and laws of the United States, and especially of the 3d clause of § 8 of article 1 of the Constitution of the United States, which provides that Congress shall have power 'to regulate commerce with foreign nations, and among the several states, and with the Indian tribes."

Plaintiff alleges that the act of 1899 and the inspection thereunder is not a valid exercise of the police power of the state, and to that extent the act is unconstitutional and void, because (1) none of the oil is manufactured in Tennessee, and the inspection, therefore, is not necessary for the protection either of the residents and citizens of Tennessee or the reputation of her manufactured products. (2) The fees are unreasonable and exorbitant for the service performed, and very much greater than necessary to provide for inspection, and that, after payment of the salaries and other expenses incident to inspection, there is a surplus of many thousands of dollars put into the treasury annually. (3) The act is void under the Constitution of the state of Tennessee, because the inspection is not necessary or conducive to the benefit of the state of Tennessee or the citizens thereof, and the act is therefore unnecessary, unreasonable, and not a valid exercise of the police power of the state, but a mere tax or charge imposed under the guise of a police regulation, and as such is in conflict with article 2, § 28, of the Constitution of Tennessee, which requires all property to be taxed according to its value, and that taxes be equal and uniform throughout the state.

It is alleged that the act provides in § 2 a heavy penalty, consisting of a fine from $20 to $50 for each offense, against any dealer or manufacturer who shall obstruct the inspector in the discharge of his duties, or refuse to permit him upon his premises for the performance thereof; and provides in § 4 that it shall be a misdemeanor for any person to sell any oil before having it inspected as provided in the act, and, on conviction, shall be fined $300, and the oil, if found to be rejected, shall be forfeited and sold. Plaintiff, therefore, it is alleged, on account of the severe penalties, could not afford to take the risk of selling any oil without inspection, or take the risk of refusing permission to inspect. That it is doubtful if plaintiff, if it paid the fees under protest, could recover the same, and if they could be recovered it would be necessary for plaintiff to bring suit every thirty days for the charges paid for the preceding thirty days, so that an indefinite number of suits would be necessary. Irreparable injury will therefore result, it is alleged, if the inspection against plaintiff's oils under the act of 1899 be not enjoined.

Defendant filed a demurrer which attacked the bill for want of equity, and also the jurisdiction of the court to hear and determine the cause, for the reason that it was a 'suit against the state, or against an officer of the state, acting by authority of the state, with a view to reach the state, its treasury, funds, or property.' By this ground of demurrer defendant attempted to avail himself of an act of the state of Tennessee, passed in 1873, being § 4507 of Shannon's Code, which provides as follows: 'That no court in the state of Tennessee has, nor shall hereafter have, any power, jurisdiction, or authority to entertain any suit against the state, or any officer acting by the authority of the state, with a view to reach the state, its treasury, funds, or property, and all such suits now pending, or hereafter brought, should be dismissed as to the state, or such officer, on motion, plea, or demurrer of the law officer of the state, or counsel employed by the state.'

The demurrer was overruled 'as to that part of the bill in reference to the first tank mentioned in said bill.' It was sustained 'as to all that part of the bill in reference to the second tank mentioned in said bill.' The ground of demurrer which went to the jurisdiction of the court was overruled 'as to the oil in both tanks.'

A preliminary injunction which had been granted was continued in force. Inspection, however, it was adjudged might proceed, the fees to be paid into court pending appeal to the supreme court of the state.

An appeal was taken, and the supreme court decided that the suit was one against the state, and reversed the decree of the chancery court. 117 Tenn. 82, 95 S. W. 824.

Messrs. H. J. Livingston, Jr., and Thomas B. Turley for plaintiff in error.

[Argument of Counsel from pages 216-218 intentionally omitted]

Mr. Charles T. Cates, Jr., for defendant in error.

[Argument of Counsel from pages 219-220 intentionally omitted]

Mr. Justice McKenna, after stating the case as above, delivered the opinion of the court: