Red 'C' Oil Manufacturing Company v. Board of Agriculture of North Carolina

In the year 1909, North Carolina passed an act for the inspection, under the control of the board of agriculture, of all kerosene or other illuminating oils sold, or offered for sale, in the state. The object of such inspection was declared to be in order to determine the safety and value of such oils for illuminating purposes. A charge of 1/2 cent per gallon was fixed, which law declared should be paid to the commissioner of agriculture for the purpose of defraying expenses connected with the inspection, testing, and analyzing of oils in this state. It was provided that the act should go into effect on July 1, 1909. Two days after, viz., on July 3, 1909, this suit was commenced by the appellant, the Red 'C' Oil Manufacturing Company, a corporation of the state of Maryland. The defendants named were the board of agriculture of North Carolina and the members of the board, and the object of the bill was to restrain the enforcement of the act referred to because it was charged to be not a proper exertion of the police power of the state, and, besides, was asserted to be repugnant to the Constitution of the United States.

The bill averred that the complainant was a large shipper of illuminating oils from the state of Maryland into the state of North Carolina, and that it did an extensive business in North Carolina in dealing in such oil. The provisions of the assailed act were set out in extenso, as also the terms of an act of the general assembly approved on March 9, 1909, which forbade the collection of a tax upon dealers in oils, authorized by § 58 of the revenue act, passed at the same session, 'from any persons, dealers, or corporations paying the taxes imposed under the inspection law enacted at the present session of the general assembly, entitled, 'An Act to Provide for the Inspection of Illuminating Oils and Fluids;' Provided, however, if the said oil inspection act should be held invalid, § 58, revenue act, shall remain in full effect.' In the preamble of this latter act it was recited that the 'inspection tax' was much greater than the 'tax' imposed under § 58 of the revenue act, and that 'it is not the purpose of the general assembly that the said tax shall be cumulative.' In addition to averring the appointment of inspectors by the board of agriculture, and the purpose of the board to enforce the collection of the inspection taxes, there were set forth the regulations adopted by the board under the authority of the statute.

The particulars by which it was asserted the statutory charge was shown to be unlawful may be thus summarized: The charge or 'tax' was not for the purpose of defraying the cost of the inspection of oil, but was imposed for revenue upon the goods of complainant shipped into the state of North Carolina from the state of Maryland, and was hence in conflict with the commerce clause and the 14th Amendment. The law, it was charged, was not a police regulation, since an inspection of oil 'for value and luminosity' was not within the competency of legislative action, and the public safety was not concerned, since illuminating oils, as the result of modern methods of manufacture, were no longer explosive. The charge or tax, it was averred, was more than double the amount necessary for the inspection proposed, and would realize annually a surplus for the state treasury of more than $20,000. It was further charged that the act fixed no standard for the guidance of the board of agriculture, but in effect arbitrary powers were conferred upon the board, and, indeed, legislative authority had been delegated to it. The power thus conferred, it was also alleged, had been exerted in an arbitrary manner, and tests prescribed which were not necessary 'in order to procure the safety of oil, to protect the people from the sale of oils which are dangerous.' Certain of the regulations promulgated by the board were also assailed as being uncertain, unreasonable, illegal, and oppressive.

On the filing of the bill an order was entered temporarily restraining the defendants from enforcing, as against the complainant, the statute and the rules and regulations of the board thereunder. The restraining order was subsequently amended by requiring the complainant, 'pending the final determination of this cause,' to 'pay the 1/2 cent per gallon upon all illuminating oils sold by it in the state, as prescribed in said act.' The defendants jointly and severally answered the bill, and took issue upon all the matters alleged in the complaint. As regards the allegation that the inspection fee was unnecessarily high and would yield a large surplus over the expenses, the defendants said:

'Defendants say that they have made no estimate that any excess may be left after paying all the proper and necessary expenses of inspection, and these defendants say that they have no means of actually approximating the amount that the tax of 1/2 cent per gallon will yield, or the expenses of equipping and maintaining a competent inspection force and department. That the legislature thought that 1/2 cent a gallon would be necessary to pay the expenses of inspection, and these defendants are informed and believe, and therefore aver, that this is as low an inspection tax as there is to be found in any state having oil inspection laws, and lower than the taxes in a great many of the states. In some states there is a graduated scale of taxation of more than 1/2 cent for small quantities and less than 1/2 cent for large quantities. The said act expressly provides, in § 6, that the commission of agriculture shall include in his report to the general assembly an account of the expenses under this act. The said act also provides that all money paid for inspection taxes shall be kept by the state treasurer as a distinct fund, to be styled, 'The Oil Inspection Fund.' At the end of one year, it can be seen exactly what the inspection costs and how much is paid for it by dealers in oil, and until it shall appear that said tax is excessive, a charge to that effect, by complaint, is premature and ill-considered.'

Both parties filed affidavits in support of their respective claims. The matter was heard upon a motion for an injunction upon the bulk, answer, and affidavits just referred to. Elaborately examining all the contentions, the court (172 Fed. 695) concluded that the complainant was not entitled to relief by injunction, and that, as respects the other relief asked, the bill should be dismissed. A final decree was thereupon entered and this appeal was then taken.

Messrs. Robert W. Winston and Charles B. Aycock for appellant.

[Argument of Counsel from pages 385-388 intentionally omitted]

Messrs. T. W. Bickett and R. H. Battle for appellees.

Mr. Chief Justice White, after making the foregoing statement, delivered the opinion of the court: