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decided: April 17, 1922.



Author: Pitney

[ 258 U.S. Page 470]

 MR. JUSTICE PITNEY delivered the opinion of the court.

This is a suit in equity by appellant, a corporation and citizen of Texas, against appellees, both individually and as officers of Georgia, to restrain enforcement of laws respecting fees for inspection of petroleum and petroleum products, especially kerosene oil and gasoline, so far as concerns products brought by plaintiff from other States into Georgia and there disposed of.

The laws in question, as they stood when suit was commenced (March, 1920), comprise provisions found in Georgia Civil Code, 1910, §§ 1800-1814, which originally referred only to illuminating oils; an amendatory Act of August 19, 1912 (Laws 1912, No. 570, p. 149), which extended the inspection system to gasoline; an amendatory Act of August 19, 1913 (Laws 1913, No. 258, p. 110); and certain sections of the Penal Code, 1910. They provide for official state inspection of petroleum and petroleum products; prescribe tests relating to their fitness for use -- a flash test for illuminating oils, a specific gravity test for gasoline -- and establish inspection fees dependent upon the quantity inspected but at a higher rate per gallon in small quantities than in large, the fees being fixed, however, upon a basis that has been found in practice to yield revenues substantially in excess of the cost of inspection. The officials in charge of enforcement of the system, here made defendants, are the commissioner of agriculture, a general inspector of oils, and numerous local inspectors, whose duties are set forth in the cited code sections and in the Act of 1912. Among other provisions for rendering the acts effective, § 639 of the Penal Code makes it a misdemeanor to sell or offer for sale illuminating fluids in violation of the pertinent provisions of the Civil Code, and § 642, to sell or keep for sale, or in storage, crude or refined petroleum, naphtha, kerosene, etc., without having the same inspected and approved by an authorized inspector.

[ 258 U.S. Page 471]

     The federal jurisdiction was invoked both because of diverse citizenship and because the suit arose under the Constitution of the United States. Upon the merits, questions of state law were and are raised, as they may be (Greene v. Louisville & Interurban, R.R. Co., 244 U.S. 499, 508), in addition to federal questions.

Enforcement of the inspection fees was and is resisted upon the ground that they constitute an arbitrary and unreasonable exaction, not sustainable as a fair exercise of the taxing power but invalid as violative of the guarantee of due process of law contained in the state constitution, as well as that in the Fourteenth Amendment.

A more specific objection is that the imposition of the fees is in conflict with Art. 7, § 2, par. 1, of the state constitution, which provides: "All taxation shall be uniform upon the same class of subjects, and ad valorem on all property subject to be taxed within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws."

But the contention most emphasized is rested upon the commerce clause of the Constitution of the United States, the insistence being that inspection fees exceeding the cost of inspection, as imposed upon plaintiff's products, constitute a burden upon interstate commerce. As to this, defendants denied that the laws in question by proper construction applied, or as enforced by the state officers were made to apply, to plaintiff's products while in interstate commerce; they averred that inspections were not required to be made, nor fees to be paid, until after the products had arrived at destination in the State and were held in storage by the consignee for the purposes of sale in the State.

Upon amended bill and answer, and affidavits pro and con, an application for interlocutory injunction was heard before three judges pursuant to § 266 Judicial Code as amended March 4, 1913, c. 160, 37 Stat. 1013, and resulted

[ 258 U.S. Page 472]

     in a decision June 28, 1920 (one judge dissenting), pursuant to which an injunction pendente lite was granted restraining the collection of inspection fees in respect to kerosene oil, gasoline or other petroleum products of plaintiff brought into the State of Georgia from other States and intended to be sold in the original packages, and so sold; but injunction was refused, and restraining orders theretofore granted were dissolved, as to products brought in for indefinite storage within the State, or for sale after breaking the original package, after completion of the interstate transportation. 266 Fed. 577. An appeal was taken by plaintiff direct to this court, as authorized by § 266 Judicial Code.

The controlling facts are not in dispute. Plaintiff carries on in Georgia an extensive business in the distribution and sale of illuminating oil and gasoline. Neither commodity is produced in Georgia, and all plaintiff's supplies for that State are brought from points in other States, principally by rail in tank-cars owned by plaintiff, having a capacity of approximately 8,000 gallons each. Plaintiff has thirty-four local agencies or distributing stations at different points in the State, at which are stationary storage tanks for oil and gasoline respectively, pumps and other apparatus for transferring the products from tank-car to storage tank, and either a railroad siding, or (in a few cases) a private track in proximity to the storage tanks. Plaintiff also maintains wagons for the delivery of oil and gasoline from the stationary tanks to its customers. The principal part of its products comes to the distributing stations consigned to plaintiff or its manager or agent. As a rule, and as a part of plaintiff's own system, as soon as one of the tank-cars is started from the point of origin outside the State a request for inspection together with a check for the inspection fees is forwarded by plaintiff to the local inspector nearest the point of destination, notifying him that the shipment is en route and requesting

[ 258 U.S. Page 473]

     him to give it immediate attention upon arrival. Upon its arrival the local agent notifies the inspector, who thereupon, in compliance with the previous request, inspects the oil or gasoline by taking a sample from the tank-car, after which its contents are conveyed to and into the storage tank, and then distributed and sold to patrons, either directly from the tank or by means of the delivery wagons. In some instances, involving substantial quantities but only a small proportion of the whole -- less than 5 per cent. -- ...

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