Fox v. Standard Oil Co. of N.J., 294 U.S. 87 (1935)

St ate Board of Tax Commissioners v. Jackson, 283 U. S. 527, decided that chain store operators and independent store merchants may be classified separately for purposes of taxation, because of special factual advantages in chain store operation. It was held that these advantages justified a progressively graduated tax upon the group of chain store operators, based upon the number of store units and rising to a maximum of $25 per unit. This Court pointed out that the statute treated “upon a similar basis all owners of chain stores similarly situated.” This was said apparently because the same unit measurement for the tax was applied to the entire group of chain store operators, and because, when compared to the situation of the independently operated p. 8987 Argument for Appellee.

Appellee, complainant in the court below, is a Delaware corporation, engaged in the business of refining, transporting and distributing petroleum products. It owns or controls in West Virginia 949 service or filling p. 92stations, and 54 bulk plants, a total of 1003. Of the 949 stations, there are 101 which are described as “ company owned ”; these are both owned and operated by the complainant itself. 11 Leased outlets,” 388 in number, and “vending privilege outlets,” 460 in number, are leased by the complainant and operated by agents under commission contracts. By concession its control over these outlets is so complete as to amount to operation within the meaning of the statute. Finally there are 54 “ bulk or distributing plants,” maintained chiefly for the storage of petroleum products to be distributed to the stations, but in part as a source of supply from which deliveries are made to buyers.

Chains for the sale of gasoline have units many times more numerous than chains for other purposes. The longest “ general commodity ” chain is that of the Great Atlantic & Pacific Tea Company with 198 stores within the boundaries of West Virginia. Not only are the gasoline units more numerous, but the sales from any one unit are, comparatively speaking, small, as must always be the case when subdivision is so minute. The result is to cast upon the complainant and upon competing chains in the same business a burden much heavier, both absolutely and relatively to earnings, than any that is borne by others. This is brought out clearly through statistical tables in the record. The store license fees from all sources during the year 1933 amounted to $569,693. Of this total, stores other than gasoline stations contributed $83,525 (single stores $21,723, and multiple stores $61,- 802). Single gasoline stations, maintained by independent dealers, 2,000 in number, contributed $5,000, and chain gasoline stations $481,168, or 84.46% of the whole. Five oil companies including the complainant paid $476,171 or 83.5%, and the complainant alone paid $240,173 or 42.16%. Other tables supply the data for a comparison between the business done by the gasoline chains and that p. 9387 Opinion of the Court.

of chains for other purposes. If we look to the year 1932, the latest year for which complete figures are forthcoming, 2,453 gasoline chain stations did an aggregate business of $15,198,638, or 4.6% of the total chain business of the state, yet they would have paid 84.46% of the tax if the law had been in force during that year; 1,889 general retail stores in chain organizations did a total business of $75,454,257, or 22.9% of the whole, and would have paid 10.7% of the tax, this because the number of the units was relatively small. In 1932 the average gross revenue of the complainant’s gasoline stations was $26,822 for each of the company-owned stations, and $3,892 for each of the agency stations, the company-owned stations making by far the better showing. During the same year the average net income for company stations was $1,782.78 (it had been more than double in 1931), and for agency stations only $89.75. Upon that basis a tax of $250 would have left a profit for the one group, but a loss for the other. In the computation of this loss, a word may be of use as to the bookkeeping methods in vogue in the complainant’s business. The complainant’s practice has been to bill the gasoline to its stations at the current market prices, as if there were a sale to strangers. Such a mode of segregation, unless corrected by other data, will give at times a partial picture of the economic situation. If the price at which the oil is billed includes a reasonable profit for refining and transporting, the business may show a gain when viewed in all its parts, though the later work of marketing is carried on at cost or less. Stations scattered far and wide address a mass appeal to customers, and thus stimulate them to buy at the sign that has made itself familiar. True, the complainant lost money in the process of refining from 1930 to 1933, but for anything that is shown, the loss had its origin in the general economic depression prevailing in those years. Even so, there can be no denial that service filling stations, when p. 94organized in chains, bear a heavier and harsher burden than chains whose units are fewer and yet individually larger.

There is no doubt that goods, wares and merchandise of a kind, i. e., gasoline and other petroleum products, and even tires and other automobile accessories, are sold by the complainant and its agencies at its plants and service stations. This satisfies the test of the statute, and subjects the seller to the tax. We are told that the average man if requested to point out to a stranger the store nearest by or even the nearest mercantile establishment would not be likely to think of a filling station as within the range of the inquiry.* Wadhams OU Co. n . State, 210 Wis. 448; 245 N. W. 646, 649; also 246 N. W. 687. There might be force in this suggestion if the statute had left the meaning of its terms to the test of popular understanding. Instead, it has attempted to secure precision and certainty by rejecting a test so fluid and indeterminate and supplying its own glossary. The goods offered for sale are to be understood as having reference to goods “ of any kind,” and the place at which the sale is made shall include not only places that in the common speech of men would be designated as stores, but, broadly speaking, any mercantile establishment, p. 96whether a store or something else. In such circumstances definition by the average man or even by the ordinary dictionary with its studied enumeration of subtle shades of meaning is not a substitute for the definition set before us by the lawmakers with instructions to apply it to the exclusion of all others. Cf. Midwestern Petroleum Corp. v. State Board of Tax Commissioners, 206 Ind. 688; 187 N. E. 882. There would be little use in such a glossary if we were free in despite of it to choose a meaning for ourselves.

Extrinsic tokens of intention, however, are not lacking altogether, and though their force may not be great, they point us the same way. In the passage of the bill through the Senate, an amendment was proposed whereby the definition of a store in § 8 was to be supplemented by the following proviso: “ Provided, however, that the term ‘ store ’ shall not include filling stations engaged exclusively in the sale of gasoline and other petroleum products.” The amendment was put to a vote and rejected. What was done in that connection is doubtless not conclusive as to the meaning of the bill in the unamended form. Murdock v. Memphis, 20 Wall. 590, 618. It is, however, a circumstance to be weighed along with others when choice is nicely balanced. Finlayson v. Shinnston, 113 W. Va. 434, 437; 168 S. E. 479; cf. United States v. United Shoe Machinery Co., 264 Fed. 138, 174; Lapina v. Williams, 232 U. S. 78, 89. Reinforcing this token is the contemporaneous interpretation of the statute by the Tax Commissioner of the State, the administrative agent charged with its enforcement. Fawcus Machine Co. v. United States, 282 U. S. 375, 378. We give to such construction “respectful consideration,” though we have power to disregard it. United States v. Moore, 95 U. S. 760, 763; Fawcus Machine Co. n . United States, supra. The complainant was at liberty to maintain a suit in the state courts, where the meaning of the statute could have p. 9787 Opinion of the Court.

We have here abundant capital; standardization in equipment and display ; superior management ; more rapid turnover; uniformity in store management; special accounting methods; and a unified sales policy coordinating the diverse units. The complainant receives the crude oil from a subsidiary company, which produces one-third of what it sells and buys two-thirds from others, these others, for all that appears, being affiliated corporations. The oil when delivered is refined by the complainant, and then billed to itself, that is to its stations and agencies, at current market rates. Through all these far flung instruments it distributes its own products and spreads through every hamlet its repute as a distributor. Ownership or control of a host of well-appointed depots, uniform in design and color, has put the chains in a position to bring home to the consuming public the knowledge of their wares and of the quality of their service in a way far beyond the capacity of the independent dealer with one station or a few. The mere statement of the number of depots maintained by the complainant—1,000 separate centres of attraction and distribution—must bear persuasive witness to the tremendous potencies of advertisement, of reiterated suggestion, inherent in a business conducted on such a scale. The results confirm the prophecy. There are 4,453 filling stations in West Virginia. Of these only 55% are members of a chain, yet this 55% p. 9987 Opinion of the Court.

When the power to tax exists, the extent of the burden is a matter for the discretion of the lawmakers. The subject was fully considered in Magnano Co. v. Hamilton, 292 U. S. 40, decided at the last term. “ Even if the tax should destroy a business, it would not be made invalid or require compensation upon that ground alone. Those who enter upon a business take that risk.” Alaska Fish p. 100Co. v. Smith, 255 U. S. 44, 48, quoted in Magnano Co. v. Hamilton, supra, p. 46. True the reservation was made (292 V. S. at p. 44) that an act might be so arbitrary as not to be an exercise of the taxing power at all, the form of a tax being a cloak'for something else. Cf. Child Labor Tax Case, 259 U. S. 20. In respect of the challenged act, there is neither evidence nor even claim of any such abuse. On the contrary, the complainant has stated in its bill that the “ act is, in effect, a tax measure,” its validity or invalidity to be adjudged upon that basis. A chain, as we have seen, is a distinctive business species, with its own capacities and functions. Broadly speaking its opportunities and powers become greater with the number of the component links; and the greater they become, the more far-reaching are the consequences, both social and economic. For that reason the state may tax the large chains more heavily than the small ones, and upon a graduated basis, as indeed we have already held, State Board of Tax Commissioners v. Jackson, supra; Liggett Co. v. Lee, supra. Not only may it do this, but it may make the tax so heavy as to discourage multiplication of the units to an extent believed to be inordinate, and by the incidence of the burden develop other forms of industry. Quong Wing v. Kirkendall, 223 U. S. 59; American Sugar Refining Co. v. Louisiana, 179 U. S. 89, 95; Southwestern Oil Co. v. Texas, 217 U. S. 114, 126; Sproles v. Binford, 286 U. S. 374, 394; Stephenson v. Binford, 287 U. S. 251. In principle there is no distinction between such an exercise of power and the statute upheld in Magnano Co. v. Hamilton, supra, whereby sales of butter were fostered and sales of oleomargarine repressed. A motive to build up through legislation the quality of men may be as creditable in the thought of some as a motive to magnify the quantity of trade. Courts do not choose between such values in adjudging legislative powers. They put the choice aside as beyond their lawful competence. “Collateral p. 10187 Opinion of the Court.

The argument against the statute rings the changes upon a comparison between the position of the gasoline chains and that of chains for other products. The gasoline chains,* as already noted in this opinion, have units more numerous by far than those that deal in other things, and because of their size must pay a large percentage of the tax, though it is not to be forgotten that there are general commodity chains also within the upper brackets. The outcome is no evidence of an arbitrary discrimination, defiant of the restraints of law. All members of a class within the same graduated levels are treated impartially and subjected to an equal rule. Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283, 293, 296. If only one form of chain chooses so to multiply its units, after arriving at the topmost levels, as to make the burden heavy, it owes its position on the scale and the aggravation of the tax to the exigencies of business and not to those of law. The classification is not arbitrary, but in its normal operation has a rational relation to the subject matter to be taxed, the capacity to pay, and the justice of the payment. Cf. Magoun v. Illinois Trust & Savings Bank, supra; Knowlton v. Moore, 178 U. S. 41, 54; Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61; Lake Shore & Michigan p. 102Southern Ry. Co. v. Clough, 242 U. S. 375, 385; Maxwell v. Bugbee, 250 U. S. 525, 540, 541; Watson v. State Comptroller, 254 U. S. 122, 124; State Board of Tax Commissioners v. Jackson, supra, at p. 537. We have never yet held that government in levying a graduated tax upon all the members of a class must satisfy itself by inquiry that every group within the class will be able to pay the tax without the sacrifice of profits. The operation of a general rule will seldom be the same for every one. If the accidents of trade lead to inequality or hardship, the consequences must be accepted as inherent in government by law instead of government by edict.

4. Semble that in the courts of California the writ of habeas corpus is available for one who is deprived of his liberty without due p. 104process of law in violation of the Constitution of the United States. P. 113. 5. Before this Court is asked to issue a writ of habeas corpus in the case of a person held under a state commitment, recourse should be had to whatever judicial remedy afforded by the State may still remain open. P. 115. Leave to file denied.

We concede that if the acts or omissions of a prosecuting attorney have the effect of withholding from a defendant the notice which must be accorded him under the due process clause, or if they have the effect of p. 107preventing a defendant from presenting such evidence as he possesses in defense of the accusation against him, then such acts or omissions of the attorney may be regarded as resulting in a denial of due process of law. Such is the effect of this Court’s decision in Powell v. Alabama, 278 U. S. 45, although, in that case, it was an omission on the part of the trial judge which was held to have had such a result.

Petitioner contends that the trial court, instead of being a party to the alleged fraud, was a victim of it. By mak- p. 109103 Opinion of the Court.

Thomas J. Mooney asks leave to file petition for an original writ of habeas corpus. He states that he is unlawfully restrained of his liberty by the State of California under a commitment pursuant to a conviction, in February, 1917, of murder in the first degree and sentence of death subsequently commuted to life imprisonment. He submits the record of proceedings set forth in his petition for a writ of habeas corpus presented to the District p. 110Court of the United States for the Northern District of California and dismissed upon the ground that the petitioner had not exhausted his legal remedies in the state court. Applications to the Judges of the Circuit Court of Appeals for the Ninth Circuit for allowance of an appeal to that Court from the judgment of dismissal have severally been denied.

The return does not put in issue any of the facts alleged in the petition. The return is in the nature of a demurrer. It submits that the petitioner “ has failed to raise a Federal question and that, consequently, leave to file the petition should be denied.” Reviewing decisions relating to due process, the Attorney General insists that the petitioner’s argument is vitiated by the fallacy “ that the acts or omissions of a prosecuting attorney can ever, p. 112in and by themselves, amount either to due process of law or to a denial of due process of law.” The Attorney General states that if the acts or omissions of a prosecuting attorney “have the effect of withholding from a defendant the notice which must be accorded him under the due process clause, or if they have the effect of preventing a defendant from presenting such evidence as he possesses in defense of the accusation against him, then such acts or omissions of the prosecuting attorney may be regarded as resulting in a denial of due process of law.” And, “ conversely,” the Attorney General contends that “ it is only where an act or omission operates so as to deprive a defendant of notice or so as to deprive him of an opportunity to present such evidence as he has, that it can be said that due process of law has been denied.”

tions presented to that Court within the limitations of particular appellate procedure. When there was submitted to that Court the consent of the Attorney General to the reversal of the judgment against petitioner and to the granting of a new trial, the Court pointed out that no motion had been made by the defendant and that his appeal was awaiting hearing. People v. Mooney, 175 Cal. 666; 166 Pac. 999. When, again in advance of the hearing of his appeal, the defendant made his motion solely upon the ground of the Attorney General’s consent, the Court held that its jurisdiction on appeal was limited to a determination whether there had been any error of law in the proceedings of the trial court and that the Court was confined to the record sent to it by the court below. People v. Mooney, 176 Cal. 105; 167 Pac. 696. On the appeal, the Court thus dealing with the record before it, found that the verdict was supported by the testimony presented and that no ground appeared for reversal. People v. Mooney, 177 Cal. 642; 171 Pac. 690. When, later, the defendant moved to set aside the judgment, and sought a certificate of probable cause on his appeal from an order denying his motion, the Court held that the general averments against the fairness of the trial were insufficient, but the Court did not place its denial of the application entirely upon that ground. The Court concluded that the proceeding by way of motion to set aside the judgment after it had become final and a motion for a new trial had been denied, and the time therefor had expired, was “ in the nature of an application for a writ of coram nobis, at common law.” The Court thought that such a writ did not lie to correct any error in the judgment of the Court nor to contradict or put in issue any fact directly passed upon and affirmed by the judgment itself. The Court, adopting the opinion of the court below, concluded that the judgment could not be set aside because it was predicated upon p. 115103 Opinion of the Court.