# Appellants Brief — Hart Refineries v. Harmon

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appellants Brief
- **Published:** January 1, 1929
- **Citation:** 278 U.S. 499

## Text

INDEX
Subject Matter: Page

Official report of opinion delivered below 2
Statement of grounds upon which jurisdic-

tion to review invoked 2
Statutory provision believed to sustain the
jurisdiction 2-3

Date of judgment sought to be reviewed 3
Date on which application for appeal was

presented 3
Nature of case to bring case within jurisdic-
tional provision 3-5

Assignments of error 5-6
Rulings below to bring the case with jurisdic-

tional provision 6-7
Citation of cases believed to sustain the jur-
isdiction 7-9

Concise statement of case containing mate-
rial questions presented 9-19
Specification of assigned errors intended to

be urged 19
Summary preceding argument 20-22

4 Argument 22-39
Authorities Page
hghou man v. Continental Oil Co., 256 U. S. 648,

649 28. 8
Columbia Water Power Co. v. Columbia Elec.
St. Ry. Co. 172, U. S. 475, 488-9 7
Detroit City Ry. Co. ». Guthard 114 U. S. 133,
134 N
Hart Refineries v. Harmon, 81, Mont. 423,
427 34, 6
Levy v». San Francisco Sup. Ct. 167 U. S. 175,
177 oa
Miedric} v. Lauenstein 232 U. S. 236, 243 8

RPT RAE NH DERN ARPT INT ES Sr Pe RAY leet eh arena

INDEX (Continued)

Subject Matter: Page
Miller vs. Cornwall R. Co. 168 U. S. 131, 134 7
Murdock vs. Memphis (20 Wall) 87 U. S. 590.

639, 640

Seudder v. New York 175 U. S. 32, 36 7
Sonneborn Bros. » Keeling, 262 U. S. 506, 508,

509 31, 9, 8
State v. Sunburst Refining Co. 73 Mont. 68,

82, 80 38, 36, 33, 9
State v. Silver Bow Refining Co., 78 Mont. I,

19 37, 9
Texas Company v. Brown, 258 U.S. 475, 476,

480 30, 31, 8

Statutes:

Montana Gasoline Licence Tax Law of 1925,

Sec. 2382, 2383 26
Sec. 2381, Rev. Codes, 1921 26, 27

Montana Gasoline License Tax Law of 1927 23, 24
28 U.S.C. A. See. 344, Judicial Code Sec. 237 2
Text Books:
Foster-Creighton Co. » Graham, 47, A. I. R.,
971, 258 S. W 971, 975, 977 32, 33

IN THE

SUPREME COURT

OF THE

UNITED STATES

October Term, 1928
No. 210

HART REFINERIES, a Corporation,
Appellant,

W. E. HARMON, as
TREASURER OF THE STATE OF MONTANA,
Appellee.

Appellant’s Brief

JOHN E. PATTERSON,
Missoula, Montana,
Attorney for Appellant
L. A. FOOT,
Attorney General
A. H. ANGSTMAN,
Assistant Attorney General
Attorneys for Appellee

8

BRIEF OF APPELLANT.

1. The above entitled case was decided in the
Supreme Court of Montana on the 31st day of Jan-
uary, 1928, and is reported under the title Hart
Refineries, Appellant, v. Harmon, Appellee, 81 Mon-
tana, 423.

STATEMENT DISCLOSING JURISDICTION
TO REVIEW.
2. It is contended that the Court has jurisdiction
to review on appeal the judgment of the Supreme
Court of Montana, upon the following grounds:

It is an appeal from the Highest State Court of
Montana, wherein there has been drawn in question
the validity of a statute of Montana, on the ground
of its being repugnant to the provisions of Section
One of the l4th Amendment to the Constitution of
the United States, providing that no state shall make
or enforce any law which shall deny to any person
within its jurisdiction the equal protection of the
laws, and the decision of the Supreme Court of Mon-
tana was in favor of its validity.

(a) .
The statutory provision believed to sustain the juris-
diction of this Court is as follows:

28 U.S.C. A. See. 344, Judicial Code Sec. 237, pro-
vides as follows:

“A final judgment or decree in any suit in
the highest court of a State in which a decision
in the suit could be had, where is drawn in
question the validity of a treaty or statute of,
or an authority exercised under the United
States, and the decision is against their valid-
ity, or where it is drawn in question the valid-
ity of a statute of, or an authority exercised

—3—

under any State, on the ground of their being
repugnant to the Constitution, treaties or laws
of the United States, and the decision is in
favor of their validity, may be re-examined and
reversed or affirmed in the Supreme Court
upon writ of error.”

(b)
A. The date of judgment sought to be veviewed
was January 31st, 1928 (R. 26).

B. The petition for appeal to the Supreme Court
of the United States was presented to the Chief Jus-
tice of the Supreme Court of Montana, and allowed
by him on the 27th day of April, 1928.

(e

Appellant's contention is that the Montana Gaso-
line License Tax Law of the year 1925 taxed the
Montana refiner two cents a gallon on all gasoline
and distillate he manufactured and sold. It permitted
gasoline manufactured in sister states to be shipped
into Montana, but required no tax on any such gaso-
line which was not sold after it had reached a state
of rest in Montana. This permitted all gasoline and
distillate transported from sister states, which was
not resold, after reaching Montana, but which was
used or consumed in the state, to avoid the tax. Con-
sumers and dealers were not required to pay a tax on
such as they used or consumed, but did not sell. That
such discrimination could have been avoided by ex-
tending the law to include all gasoline and distillate
used in Montana after its interstate character had
ceased, and it had come to rest. Such law would have
been valid and not in conflict with the Interstate
Commerce Clause of the Constitution; but the Mon-
tana Court nevertheless held that to tax the use of

CCC TAME IIS LAT DTI PRIA ISA BOOED EO Fe ede

—

gasoline transported from a sister state, after it had
reached a state of rest and its interstate commerce
status ended, would still interfere with interstate
commerce, and bePalid.

This was an action brought by Hart Refineries to
recover the sum of $6,071.84 (K. 1-14) required of
appellant under the Gasoline License Tax Law of the
State of Montana for the vear 1925 (Mont. 1925, 359.
360). The tax was paid under written protest that
the same was unlawful and so received by the State
Treasurer. (R. 2, 3. Pars. V. VI). The ground of
protest that said tax was unlawful, was that the
provisions thereof permitted persons and corpora-
tions (R. 5, 6, 7. Pars. XII. XI) refining gasoline
in sister states, and making sales inside and outside
the state, before gasoline products were resold, after
being brought to rest in Montana, did not require the
payment of the gasoline tax of (wo cents per gallon:
that (R. 6, 7 Par. XViii> piainutr, who is a Mon-
tana Refiner, designated as a manufacturing dis-
tributor, Was required to pay the tax of two cents per
galion on all gasoline products he manufactured and
sold, but refiners from sister states who were com-
petitors of plaintiff were permitted to ship to non-
manufacturing distributors, dealers and consumers
in Montana, said tax being avoided on all that was
not resold after being brought to rest in Montana
That by reason of this discrimination, plaintiff could
not compete with his competitors in securing the
business of non-manufacturing distributors, dealers
and consumers in Montana in plaintiff's territory
That (R. 7,8 Par. XIX), the competitors from other
states sell their products both before and after they
arrive in Montana, but no tax being required on euch
as is not sold after it has reached a state of rest in

**

Montana, permits all that is transported into the
state, and used or consumed, to avoid the tax. Deal-
ers are not required to pay a tax on what they use,
and use gasoline for their own delivery trucks, tank
wagons, and automobiles for the distribution of their
gasoline to their stations over several counties, and
such as they use in other lines of mercantile business
owned by them, tax free. If such dealers buy of
plaintiff or the Montana refiner he has to pay the
tax, 8o Will not patronize the Montana refiner. That
by reason of the discriminations the manufacture and
sale of gasoline in the state by Montana refiners is
unjustly and arbitrarily discriminated against.

(R. 11. Par. XXIV). That by reason of the prem-
ises plaintiff is denied the equal protection of the
laws, and is unable to compete under said law permit-
ting such unreasonable and unlawful discrimination.

(R. 12. Par. XXV). Not only the Montana refiner,
but also such dealers, persons and distributors as
purchase said gasoline and distillate from Montana
manufacturing distributors, (refiners), are denied
the equal protection of the law.

That by reason of the premises (R. 13), the said
provisions of the said Montana law, are in violation
and contravention of the following Constitutional pro-
visions, to-wit:

Section One (1), Article XIV of Amendments to
the Constitution of the United States.

The appellant assigned errors of the Supreme Court
of Montana, as follows: (R. 32, 33)

“ASSIGNMENTS OF ERROR

And the said Hart Refineries, appellant, as-
signs the following errors in the record and

3

proceedings of the said case.

The Supreme Court of the State of Montana
erred in rendering judgment in favor of ap-
pellee, and against appellant as follows:

First. The Supreme Court of the State of
Montana erred in overruling plaintiff's de-
murrer to the defendant’s answer for the rea-
son that the provisions of the Montana Gasoline
Tax Law, upon which said tax was based, were
unconstitutional and void, by reason of which
appellant was injured in its business in the re-
spect hereinafter set forth.

Second. The Supreme Court of the State of
Montana should have held Sections 2382 and
2383 of Chapter 186 of the laws of 1925 of
Montana void as being in violation and contra-
vention of the provisions of Section 1, Article
14 of Amendments to the Constitution of the
United States, which provides: “No state shall
make or enforce any law which shall deny to
any person within its jurisdiction the equal
protection of the laws.”

Third. The Supreme Court of the State of
Montana should have held said tax denied ap-
pellant the equal protection of the laws.”

The same assignments were made on appeal from
the District Court (R. 26, 27).

In the opinion of the Supreme Court of Montana in
deciding this case, it said: (R. 27, 28), as follows:

“It is the plaintiffs contention that the
statute upon the authority of which the tax was
collected is unconstitutional. It is urged that
it discriminates between Montana products and
those im into the state; that it is in vio-
lation of Section 1 of the Fourteenth Amend-
ment to the Constitution of the United States;
and also, Section II of Article XII. and Section
II of Article XV and Section 26 of Article V
of the state Constitution. Section I of the

=

Fourteenth Amendment, so far as applicable,
provides that ‘no state shall make or enforce
any law which shall abridge the privileges or
immunities of citizens of the United States?
nor, (shall any state) deny to any person with-
in its jurisdiction the equal protection of the
laws. The principal contention is (R. 29) that
the law is discriminatory. Upon similar on-
slaught this Act has been by this Court held
to be unconstitutional, (State v Silver Bow
Refining Co., 78 Mont. I), and not withstand-
ing the elaborate brief and argument of counsel
for the appellant, we see no good reason to
change our minds in this regard.”

1. The Statute does not violate the Four-
teenth Amendment to the Constitution of the
United States.”

Counsel quotes thus far to show the raising
of the Constitutional question and the passing
thereon. The decision and its further holding
will be referred to in the subsequent argument.

(d)

The following cases are believed to sustain the jur-
isdiction of the Supreme Court of the United States
in this action, to-wit:

As to the application of the provisions of 28

U. S. C. A. Sec. 344. Section 237 Judicial Code here-
tofore quoted:

Columbia Water Power Co., vs. Columbia
Electric St. R. etc., 172 U. S. 475, 488. 489.

Levy vs. San Francisco Sup. Ct. 167 U. S.
175, 177.

Miller vs. Cornwall R. Co., 168 U. S. 131,
134.

Murdock vs. Memphis (20 Wall) 87 U. 8.
590, 639, 640.

Scudder vs. New York, 175 U. S. 32, 36.

— 8

In Miedriej v. Lauenstein, 232 U. S. 236, 243, this
Court said:

“Where a state Court holds that a federal
question is made before it, according to its
practice and proceeds to determine it, this
Court will regard the question as duly made.”
(Citations).

In Detroit City Ry. Co. v. Guthard, 114 U. S. 133,
134, the Court said:

“In Choteau v. Gibson, 111 U. S. 200, it was
said: ‘From the beginning it has been held,
that to give us jurisdiction in this class of
cases, it must appear affirmatively on the face
of the record, not only that a federal question
was raised and presented to the highest court
of the state for decision, but that it was decided,
or that its decision was necessary to the judg-
ment or decree entered in the ease.

2nd. The taxation of the use or consumption of
gasoline products shipped from sister states, after
they have come to rest in the State of Montana, and
the interstate commerce status has terminated, is
lawful, and does not violate the interstate commerce
clause of the Federal Constitution. The 1925 Act
could have included the same, and avoided the dis-
crimination complained of:

Bowman v. Continental Oil Co., 256 U. 8.

648, 649.

Texas Company v. Brown, 258 U. 8. 475,
176, 480.

Sonneborn Bros. v. Keeling, 262 U. S. 506,
508, 509.

3rd. Failure to remove discrimination against
citizens of State, which it was within the province of
the Legislature to remove, in favor of products of
other states, is in contravention of the provisions of

_

Section I of the 14th Amendment, and void:

State vs. Silver Bow Refining Co., 78 Mont. 1, 18,
18, saying at page 19:

“In the first case of State vs. Sunburst Re-
fining Co., above, the Act of 1923 was held
unconstitutional because of an unjust discrim-
ination which could have been eliminated,” etc.

State vs. Sunburst Refining Co., 73 Mont.,

68, 82, 80.
Hart Refineries vs. Harmon (case at bar),
81 Mont., 423, 427, 428.
Sonneborn Bros. v. Keeling, 262, U. S., 506,
520.
The foregoing authorities are considered more
fully in the argument contained later in this brief,
and relevant parts thereof quoted.

We believe the foregoing shows the jurisdiction of
this Honorable Court to review this appeal.

(d)

STATEMENT OF THE CASE

This is an appeal from a judgment on the pleadings
rendered on the 10th day of February, 1927 by the
District Court of Lewis and Clark County in favor
of respondent, and against appellant, Hart Refineries,
whereby it was ordered, adjudged and decreed that
the plaintiff Hart Refineries take nothing by its ac-
tion, and it was further ordered adjudged and decreed
that the plaintiff has no further right, title or interest
in or to the sum of $6,071.84 involved in said action,
and which was paid by the plaintiff under protest,
and it was ordered that the said sum be by the de-
fendant State Treasurer taken from the “Protest
License Fund” and deposited to the credit of the
funds to which it belongs, as provided in Chapter 186,

=

Laws of 1925 (R. 21).

The complaint is based upon the unconstitutionality
of the Gasoline License Tax Law, as set forth in the
R. C. of 1921, as amended by the provisions of
Chapter 186 of the Laws of the Nineteenth Legisla-
tive session for the vear 1925, pages 359, 360, which
laws provide for the payment of a Gasoline License
Tax of two cents per gallon by every distributor for
carrying on business in the state, on every gallon of
gasoline and every gallon of distillate refined, manu-
factured, produced or compounded by a distributor
and sold by him within this state; that the plaintiff
alleges that it paid under protest the sum of $6,071.84
for the manufacture and sale of 303,592 gallons of
gasoline and distillate, refined and sold during the
quarter ending on the 30th day of September, 1925,
by the Hart Refineries, a corporation organized un-
der the laws of Montana, having a refining plant at
Missoula, Montana. Plaintiff's complaint alleges sub-
stantially as follows: (R. 1-13)

(1). That at all times since April, 1924, plaintiff
was and is a Montana corporation, with its principal
place of business at Missoula. Montana, and engaged
in manufacturing, refining, producing and compound-
ing gasoline and distillates and selling the same in
Montana; that the defendant is the State Treasurer
of Montana; that under the provisions of Sections 1,
2. 3 and 5, being Sections 2382, 2353, 2884 and 2392
of Chapter 186 of the laws of the Nineteenth Legis
lative Assembly for the year 1925, plaintiff was re-
quired to pay to said State Treasurer a license tax of
two cents for each gallon of gasoline and distillate
refined, manufactured, produced and compounded and
sold by plaintiff in the State of Montana; that for the

elite

quarter ending September 30, 1925, plaintiff refined
and sold in Montana 303,592 gallons, by reason of
which plaintiff became liable for the payment of two
cents per gallon, amounting to $6,071.84. That plain-
tiff did not ship nor transport any gasoline or dis-
tillate into the State of Montana; that within thirty
days after the 30th day of September, 1925, the end
of the said quarter period the plaintiff paid to the
defendant the sum of said $6,071.84, as State Treas-
urer of the State of Montana, to be held by him pend-
ing the outcome of this action to recover the same as
paid under protest that the tax was unlawful, which
said sum was so received and accepted by him; that
the plaintiff deemed said license tax to be unlawful,
and at the time said license was paid, and before the
tax became delinquent the plaintiff paid said tax
te the defendant as State Treasurer of Montana, un-
der written protest that the same was unlawful, and
the defendant received and accepted the same as so
paid. (R. 1-3, par. 1-6 of Compl.)

(2). That the complaint further alleges (R. 3, 4,
Par. VII, VIII, IX) that during all the time appellant
was engaged in the refining, manufacture and selling
of gasoline and distillate a large number of corpora-
tions organized under the laws of the states of the
Union, other than Montana, were engaged in the
manufacture, refining, and compounding of gasoline
and distillate in such states, and were authorized to
do business in Montana under the laws applicable to
foreign corporations; that on and at all times after
April 1, 1925, said corporations were engaged in the
manufacture, refining, compounding and production
of gasoline and distillate at places within the United
States outside of Montana and during said time they
were engaged in the shipment and transporting into

=

Montana of great quantities of gasoline and distillate
which were sold by them outside of the State of Mon-
tana, and also great quantities of which were sold
within the State of Montana before it was brought to
rest in Montana, to corporations, persons and con-
cerns within the State; that said corporations at all
times from April Ist to Sept. 30th, 1925, maintained
places of business without the State of Montana and
also within the State of Montana during which time
said respective corporations made sales both without
the State of Montana and in the State of Montana,
before it arrived and was brought to rest in Montana
to persons, corporations, dealers, consumers and users
in Missoula County and the territory occupied by
plaintiff, in quantities by said various corporations
respectively of 400,000 gallons per vear and amount-
ing in the agyregate to several million vallons, and
during all the period herein mentioned said corpora-
tions have been competitors of plaintiff:

(3). That none of said persons, corporations or
concerns engaged in refining gasoline and transport-
ing and shipping the same into Montana, and in the
sale thereof inside and outside of the State of Mon-
tana to their respective customers in the State of
Montana „tore the same has arrived and heen
brought to rest in Montana and then resold, was re-
quired to pay tio cents per ga'lon as license tar or
any other tax upon the sale of said gasoline and dis-
tillate. (R. 5. Par. XII).

(4). That in addition to said foreign corporations
other Montana corporations and individuals were
during said time engaged in the selling and distribu-
tion of gasoline and distillate to persons residing in
Montana. (R. 5. Par. XIII).

8. EERIE e * ee rere eee, ae νπντντπ D er ge

— 1 —

(5). That under said law the plaintiff is required
to pay two cents per gallon license tax on each gallon
sold for the privilege of conducting its business, but
said competiting foreign corporations, being com-
petitors of plaintiff, solicit and ship orders to dealers
and non-manufacturing distributors and consumers
in plaintiff's territory, and sell said products before
they arrive and are brought to rest in the State of
Montana, at a price of two cents per gallon less than
the market price, by deducting two cents per gallon
which plaintiff is required to pay under said law,
but which neither said competitors, dealers, non-
manufacturing distributors nor consumers are re-
quired to pay on such as is transported from without
the state and is not resold after being brought to rest
in Montana. (R. 6. 7. Par. XVIII). That by reason
of this discrimination of two cents per gallon the
plaintiff is unable to compete in its territory with
said corporations from other states in securing the
business of non-manufacturing distributors, dealers,
users and consumers.

(6). (R. 7, 8. 9. Par. XIX). That plaintiff's
competitors solicit orders and ship to dealers and con-
sumers in Montana, large quantities of gasoline sold
in Montana before it has been brought to rest in Mon-
tana, and also large quantities sold in neighboring
states before it has been brought to rest in Montana;
that many of said dealers in gasoline in Montana
are engaged in other lines of business requiring the
use of many delivery trucks and automobiles deliver-
ing gasoline to customers, their own service stations
located over several counties, running delivery trucks
for mercantile businesses, owned by them, besides
running touring cars and trucks for their own use

Pte CCC ATI AED ARNO aR ete Tie epee nog ueber

=

and enjoyment; that if said dealers purchase from
plaintiff or a Montana refiner the license tax of two
cents per gallon is payable on all of such sales which
are required to be reported by plaintiff, when, how-
ever, such dealers and consumers purchase their gas-
oline from said competitors of plaintiff who sell and
ship the same from neighboring states, or sell the
same before it is brought to rest in Montana, the
dealer receives the same delivered to him, in Montana,
tax free. That the dealer being absolved from al!
tax until required to be reported by him within 30
days after the end of the quarter, and then, for such
quantity only as has been resold by such dealer, as
provided by Sections 2383 and 2384, Chapter 186,
Laws 1925, such dealers are entitled to have all that
they procure for their own consumption and use tax
free.

(7). That neither such dealers, foreign corpora-
tions, non-manufacturing distributors or consumers
of gasoline are required to pay a tax on such gasoline
as is purchased by them before it is hraught to rest
in Montana, and are not required to pay a tar on
such imported casoline they sell before the me has
arrived in and te browaht to reat in Montane; that by
reason thereof not only said foreign corporations and
non-manufacturing corporations but the dealers who
are also competitors of plaintiff solicit orders and
sell auch gasoline tax free, as has been purchased by
such dealers and resold by them before it comes to
reat in Montana, and thereafter delivered from a for-
eign state direct in original packages to the consumer,
or, upon such re-sales as the dealer may make before
it comes to rest in Montana, and thereafter delivered
either in broken or unbroken packages, tax free (R.

a oe

9). The Montana dealer may purchase gasoline be-
fore it comes to rest in Montana, resell it before it
comes to rest in Montana, and then after it has come
to rest in Montana, deliver it either in broken or un-
broken packages, tax free.

(8). That by reason of the premises such dealers
and consumers ceased and refused to purchase from
Montana manufacturers and from plaintiff, but pur-
chase from plaintiff's competitors, and plaintiff is
unable to compete with said competitors, and by rea-
son of the said two cents per gallon which plaintiff
has to pay and which his competitors do not have to
pay the plaintiff's customers have been lost to him,
and plaintiff and Montana manufacturers have been
and are unjustly and arbitrarily discriminated
against by reason of being a manufacturer and tax-
payer in the State of Montana.

(9). That by reason of the premises the plaintiff
lost for the quarter ending September 30th, 1925, a
profit of $4,000.00 it would otherwise have realized,
and will continue to lose $1,500.00 per month, by
reason of the discrimination in favor of said foreign
corporations. (R. 9, 10).

(10). That by reason of the premises and said
discrimination in favor of non-manufacturing dis-
tributors and dealers, the plaintiff lost for the quar-
ter ending September 30th, 1925, a profit of $4,000.00
which it otherwise would have realized, and will con-
tinue to lose $1,500.00 per month. (R. 10. Par. XXI).

(11). That the imposition of said two-cent license
tax on plaintiff is the sole cause of the inability of
plaintiff to sell gasoline and distillate to persons
within Montana, at the prices which have been paid
by such persons to the corporations and individuals

aan $ Gu

hereinbefore mentioned, and but for said tax plaintiff
would be able to meet such prices and to sell substan-
tially all of the gasoline which it manufactured, to
persons within the State of Montana. (R. 10. Par.
XXII).

(12). That no part of said license tax prescribed
was for police regulation or supervision of oil refin-
eries but said license tax, when paid, is used for rev-
enue purposes only. (R. 11. Par. XXIII).

(13). That by reason of the premises the plain-
tiff is denied the equal protection of the laws as
against its competitors established in other states, in
the State of Montana, and in plaintiff's territory in
Missoula, and Western Montana, and is unable to
compete under said law permitting such unreasonable,
unlawful and arbitrary discrimination, and said gas-
oline license tax law is in violation and contravention
of Section 1 of Article XIV of Amendments to the
Constitution of the United States, and is void. (KR.
11. Par. XXIV).

(14). That by reason of the premises said gas-
oline license tax law permitted foreign corporations
to exercise and enjoy within the State of Montana,
greater rights, privileges and immunities, under the
laws of the State of Montana, than those enjoved by
plaintiff, a domestic corporation, and other manufac-
turing distributor corporations of similar character
organized under the laws of the State of Montana,
which is in violation and contravention of Section
Eleven (11) of Article Fifteen (XV) of the Constitu-
tion af the State of Montana. (R. 11. Par. XXV.

(15). That the imposition of said license tax con-
stitutes an unjust discrimination against appellant,
a domestic corporation, and in favor of foreign and

—

other domestic corporations and individuals; that
such tax is not uniform in its operation upon the
same class of subjects, to-wit: upon gasoline and dis-
tillate sold by domestic corporations, being manufac-
turing distributors, within the territorial authority of
the State of Montana, which levies the tax, and such
as is sold in other states to non-manufacturing dis-
tributors, dealers and consumers within Montana,
before it has arrived and been brought to rest in Mon-
tana, and such as is sold in Montana, before it has ar-
rived and been brought to rest in Montana, by for-
eign corporations, non-manufacturing distributors,
domestic corporations, dealers and individuals doing
business in the State of Montana; that by reason
thereof the provisions of Sections 2382, and 2383 of
Chapter 186 of Laws of 1925 are in violation and
contravention of the provisions of Section Eleven of
Article XII, of the Constitution of the State of Mon-
tana. (R. 11-13. Par. XXV).

(16). That by reason of the premises said law is
in violation and contravention of Sections One (1)
and Seven (7) of Article Twelve (12) of the Consti-
tution of the State of Montana.

(17). That by reason of the premises there is due
and owing plaintiff the sum of $6,071.84 for which
plaintiff demands judgment. (Tr. p. 18).

(18). The answer of the defendant admits the al-
legations of paragraphs I to XI inclusive of plaintiff's
second amended complaint, except the defendant al-
ledges insufficient knowledge as to whether the cor-
porations mentioned in Paragraph VII or any other
corporation or individuals with places of business out
of the state transported into the state gasoline. or
made sales within their respective states outside of

3

Montana or within Montana, before it arrived in and
was brought to rest within Montana for delivery to
persons, corporations, dealers and consumers in Mon-
tana in quantities alleged in paragraph IX, or in any
amount, and as to whether said parties were com-
petitors of plaintiff, and defendant denies that some
of said corporations enumerated in Par. VII. were
authorized to do business in Montana. (R. 14, 18).

(19). The answer admits the allegations of para-
graphs XIII. XIV, XVI and XVII. and alleges insuf-
ficient knowledge as to Par. XV. Admits that the
State of Montana does not regulate the manufactur-
ing, refining or compounding of gasoline or distillate,
or the sale or distribution thereof within the State of
Montana.

(20). The answer denies the other allegations of
plaintiff's complaint.

(21). The plaintiff demurred to the defendant's
answer on the ground that it did not state facts suffi-
cient to constitute a defense to plaintiff's second
amended complaint, which demurrer was overruled.
(R. 19).

(22). The plaintiff replied denying all affirma-
tive matter set forth in defendant's answer as amend-
ed. (R. 19).

(23). The defendant moved for judgment on the
pleadings. (R.20). This admitted the truth of mat-
ters of fact pleaded.

(24). The motion for judgment on the pleadings
waa sustained and judgment entered for the defend-
ant and against the plaintiff. (R. 20).

(25). The plaintiff filed its notice of appeal from
the judgment. (R. 25).

— a

(26). Petition for Appeal, Assignments of Error,

and Prayer for Reversal, presented and filed April
27, 1928. (R. 32, 33).

(27). Order allowing Appeal filed April 27, 1928,
by the Chief Justice of the Supreme Court of Mon-
tana, fixing bond in sum of $1,000,00, and directing
the record be sent to the Supreme Court of the United
States, within sixty days.

(28). Citation, issued in usual form, showing
service on L. A. Foot and others. (R. 34).

(29). Bond on Appeal for $1,000.00 approved
and filed, May 2, 1928. (34).

(30). Praecipe for Record and service thereof
filed May 16, 1928. (R. 35, 36).

(31). Clerk's Certificate of Transcript. (R. 36).

(32). Statement of Points to be Relied Upon Des-
ignation of the parts of the Record to be printed, and
service of same, filed June 19, 1928.

(33). Endorse on cover: File No. 33,519, No.
210. Filed June 16, 1928.

(e)

All of the assigned errors are hereby specified as
intended to be urged by counsel for appellant, to-wit:

As set forth (R. 32, 33), and hereinbefore set forth
at page — hereof. Said Assignments of Error raise
the sole question of appellant's claim that the law in-
volved is in violation of Section I, of the 14th Amend-
ment to the Constitution of the United States, pro-
viding that no state shall deny to any person within
its jurisdiction the equa! protection of the laws.

~
SUMMARY PRECEDING ARGUMENT

It is appellant’s contention that the Montana Li-
cense Tax Law of 1925 discriminates against the
Montana refiners. This discrimination could have
been prevented, by having included in said law, tax-
ation of gasoline shipped from sister states, after its
interstate commerce status was terminated and it
was at rest in Montana, by applying to such as was
used or consumed. Said law limited the gasoline tax
on such as was shipped from sister states, to such as
was sold after it had been brought to rest in Montana.
It eliminated all shipped for consumption or use, or
consumed or used after it had reached a place of rest
in Montana and its interstate commerce status term-
inated. That the Legislature of Montana had au—
thority to have lawfully included in said law, the
taxation of such gasoline as was shipped from sister
states and used or consumed, which would have avoid-
ed such discrimination. That such a law would not be
any burden upon, or regulation of interstate com-
merce. That the Supreme Court of Montana erred
in holding that such law avoiding said discrimination
would be a burden on interstate commerce.

That the holding of said law as invalid would entail
little loas to Montana, as only a few thousand dollars,
perhaps less than fifty thousand dollars, remains un-
paid under said law of 1925. In 1927 the Legislature
of Montana passed a gasoline license tax law, remov
ing said discrimination, just as suggested above, by
extending said tax to the consumption and use. It
stands independent of the 1925 Act, and over two mil-
lion dollars have been paid under it. No objection has
been raised to it as Montana manufactured products
are not discriminated against in favor of products of

— von

sister states. The declaring of the 1925 Act invalid
would not affect the collection of gasoline license taxes
as they have all been paid under the 1927 Act, since
January first, 1927.

The appellant, as a Montana refiner, under the
1925 gasoline license tax law, was required to pay
two cents a gallon on all gasoline manufactured and
sold, but said law did not require any tax on gasoline
shipped from other states to pay said tax, nor any
tax on gasoline which was not sold after it was
brought to rest in Montana. The law did not require
said tax, nor any tax, on such gasoline as was shipped
into the state for consumption or use, or which was
used and not resold. After gasoline shipped from
sister states had completed its interstate commerce
status, and had come to rest in Montana, it could
have lawfully been included in such license tax.
To do so would not be any interference with, or bur-
den upon interstate commerce. The Supreme Court
of Montana held in this case (81 Mont. 426), as fol-
lows:

“As to the contention that products may be
imported into the state for consumption with-
out the payment of a tax, and thus users are
induced to deal with outside concerns when
their needs are sufficiently great to warrant
buying in bulk and thus withdraw their patron-
age from dealers within the state, the situation
is one which cannot be remedied by state legis-
lation. By Sections 9 and 16, Article I, of the
Constitution of the United States, the regula-
tion of interstate commerce is granted exclu-
sively to Congress; Congress has long since
acted on the subject, and ‘the states have no
power by taxation or otherwise to retard, im-
pede, burden, or in any manner control, the

—22—

2 — of the — itutional * enacted
n to carry into execution the powers
— Tn the 4 government.“ hi

Again, it was held by the Supreme Court of Mon-
tana,

W Silver Bow Refining Co., 78 Mont.

In the first case of State vs. Sunburst,
above, (73 Mont. 68), the Act of 1923 was held
unconstitutional because of an unjust discrim-
ination which could have been eliminated under
the decision in Sonneborn Bros. v. Cureton, 262
U. S. 506, 67 I. Ed. 1095, holding that ‘a tax
on the sale of oil imported after it had come to
rest in the state would be neither a regulation
nor a burden of the interstate commerce of
which the oil had been the subject.“

That said law could have been extended to include
such gasoline as was shipped into the state for con-
sumption or use, or was consumed or used, was de-
cided by this Court in the cases of Bowman v. Con-
tinental Oil Co., 256 U. S. 648, 649. Texas Company
v. Brown 258 U. S. 475, 476, 480, 481, 482. Sonne-
born Bros. v. Keeling, 262 U. S. 506, 508, 509, which
cases are hereinafter cited in the argument.

The allegations of appellant's complaint raise these
issues.

ARGUMENT

The effect of a decision of this Court validating the
principle involved in this controversy would, under
such law, entirely destroy the refining industry of the
State of Montana, and have a most far-reaching ef-
fect on the oil industry of the State requiring freight
rates shipping the oil from the State for refining,
raising the price and in the end defeating the very
object of the law, which is to raise revenue.

*

It may be noted here that to hold said law invalid
would entail no appreciable loss to the State of Mon-
tana, as only a few thousand dollars above what is
involved in this action remains unpaid. The heavy
penalty feature of the law, of ten per cent and one
per cent per month, (Mont. 1925, Sec. 2384), for non-
payment leaving few who had the courage to refuse
payment. Then the taking effect of the law of Jan.
1, 1927, (Mont. Laws 1927 P. 30), removed the dis-
crimination, in a companion measure, running along
with this law, which did just what appellant claims
should have been done by the law in controversy, ex-
tended it to require the tax to be paid on all gasoline
used in Montana, after it had reached a state of rest
in Montana, and its interstate status terminated.
Over two million dollars have been collected under
this 1927 Act. The Act involved being declared in-
valid, would not effect the law of 1927, under which
all taxes have been paid since Jan. 1, 1927, which
reaches all imported and consumed or used.

The effect of a decision of this Court foreclosing
any attack upon the 1925 Act, might bring about a
repeal of the 1927 Act, and leave the discrimination,
which was cured by the 1927 Act, still stand, with all
its iniquities.

Said Act of 1927, (Mont. 1927, Chapter 19, at Page
30), eliminating said discrimination is, in part, as
follows:

(6). The word ‘handle’ means to produce,
refine, manufacture, compound, or import gas-
oline, or to purchase gasoline for one’s own
use, upon which the license tax herein imposed
has not been paid.“

“(7). The word ‘Dealer’ means and in-
cludes any person who engages in the business

*

in the State of Montana of producing, refining,
manufacturing or compounding or of purchas-
ing in this State, or of importing into this
State, gasoline for sale or use in this State.
Such gasoline, for the pu of this Act shal!
be deemed to be ‘handled’ by the dealer.”

“Section 2. Every dealer shall pay to the
State Treasurer A LICENSE TAX for engag-
ing in and carrying on such business in this
State in an amount equal to three cents for
each gallon of gasoline handled by him in this
State while engaging in such business as here-
tofore defined.”

That such a law as the 1927 Law could be lawfully
passed by the Legislature, was alleged in appellant's
answer, in the following language, which was ad-
mitted by the motion for judgment on the pleadings,
to-wit: (R. 17).

“That in the of said gasoline license
tax law upon which plaintiff relies for recovery
in this action, it was within the province of the

islative Assembly of the State of Montana,
which passed said law, to have so framed said
law that every advantage accruing under said
law, would have remained under said law as a
gasoline license tax law, whereby said law
would have been more general in its applica-
tion, and extended to cover the inequalities in
this answer mentioned, causing said tax to
apply to the parties herein mentioned in whose
favor said law discriminated, making said law
and said discriminations unnecessary and ar-
bitrary, as against the defendant and Montan
manufacturing distributors, and said Legis-
lative Assembly could have lawfully passed a
commodity tax or a user's or consumer's tax, to
appiy after shinments to and into the State
of Montana, were within the jurisdiction of the
State of Montana, for purposes of taxation, and

*

thereby have created a more general tax which
would have met all of the benefits of the 1925
Act, and have extended its application to have
avoided the unnecessary, arbitrary and unjust
discriminations herein mentioned.”

The 1927 Act increased the tax to three cents a
gallon, and in increase above that is probable in the
future. The higher the tax naturally the greater the
discrimination.

When gasoline is shipped into Montana for use, or
which is used in Montana, there comes a time between
the shipment and use, when it has terminated its in-
terstate commerce status. At this point, it is within
state jurisdiction and authority to tax. To do so is
no interference with interstate commerce. Upon this
theory the gasoline tax law of 1927, was based and
very properly so.

Appellant’s contention has been, not that the law
was invalid because it did not tax such gasoline as
was in interstate commerce but, on the contrary, that
the law should have avoided discrimination against
the Montana refiner, by extending the tax to such
gasoline as was consumed or used after it had come
to rest in Montana and its status in interstate com-
merce ended.

Under said Act the gasoline license tax law, did not
extend to any gasoline or distillate not sold after its
arrival in the state, thereby permitting all gasoline
shipped from sister states to consumers to be A.
tax free, while if such consumer hourht as “ wu
product, he would have to pay the ta ..

The provisions of the Mon 4 Gasoline License
Tax Law of 1925 necessary to show the points at issue
are quoted as follows:

=

“Section 2382. Every distributor shall pay
do the State Treasurer a license tax
for engaging in and carrying on such business
in this State, in an amount equal to two cents
for each gallon of line and two cents for
each gallon of distillate refined, manufactured,
produced, or compounded by such distributor
and sold by him in this state, or shipped, trans-
ported or imported by such distributor into,
and distributed and sold by him within this
state; after it had arrived in and was brought
to rest within this State, whether sold in orig-
inal packages or broken packages.“

“Section 2383. Every dealer shall!
when engaged in such! * business in
this state, pay the State Treasurer
a license tax for engaging in such business
in this State equal to two cents for each gallon
of gasoline and two cents for each gallon of
distillate sold or distributed by such dealer in
this State during such year, provided, however,
that no gasoline or distillate sold by said dealer,
which was purchased from a producer who had
paid the tax thereon, shall be included or con-
sidered in determining the amount of such li-
cense tax to be paid by such dealer, but onl
such gasoline and distillate as was shipped,
transported, or imported into this State and
purchased by such dealer before it had arrived
and was brought to rest within this State and
then resold by such dealer, whether in original
packages or in broken packages, shall be in-
cluded or considered for the purpose of com-
puting the amount of such license tax.”

Sec. 2381 of Rev. Codes of 1921, is as follows:

“Section 2381. ‘Person,’ ‘distributor’ and
‘dealer’ defined. As used in this act: The term
‘person’ means and includes every individual,

rm, association, joint-stock company, syndi-
cate, and corporation.

—

The term ‘distributor’ means and includes
every person who engages in the business in the
State of refining, manufacturing, producing, or
compounding gasoline or distillate, and selling
the same in this State; and also every person
who engages in the business in this State of
shipping, transporting or importing any gaso-
line or distillate into, and making original sales
of the same, in this State.

The term ‘dealer’ means and includes every
rson, other than a distributor, who engages
in the business in this State, of distributing or
selling gasoline or distillate within the State.“
This law requires the Montana refiner to pay two
cents per gallon on all gasoline and distillate he man-
ufactures and sells.

It does not require such tax on any gasoline as is
imported by refiners located in sister states, which
is not sold in Montana.

It does not require such tax upon such as is shipped
by distributors or dealers in Montana, from sister
states, until it is sold, after it is brought to rest in
Montana.

Gasoline imported to consumers, from sister states
could have been included in said tax, after it had
reached a state of rest in Montana, and completed its
interstate commerce status, but was not.

Gasoline imported to dealers, from sister states,
used for their own consumption, could have been in-
cluded in said tax, after it had reached a state of rest
in Montana, and its interstate status was terminated,
but it was not.

The tax permitted competitors of appellant to ship
gasoline from sister states and, after it had come t
rest in Montana, use it tax free, which could have

—

been lawfully brought within the tax, but was not.

Said law permitted dealers to purchase gasoline in
sister states, ship it to Montana, and after its status
in interstate commerce had ceased, and the gasoline
was in their own storage tanks, use such as they de-
sired for their own consumption, tax free.

The effect of such discrimination was such that the
Montana refiner who paid a tax of two cents per
gallon, could not compete against sales of gasoline
imported from a sister state which was not required
to pay two cents a gallon, nor any tax, if sold to con-
sumers, importing distributors and dealers in the
State of Montana.

The Montana refining and manufacturing industry
could not survive under said discrimination.
The allegations of appellant's answer brought it
within the decision of this Court in the late case of
Bowman ». Continental Oil Co., 256 U. S., 648, 649,
as follows:

“With the excise tax as imposed upon the
use of gasoline by plaintiff at its distributing
stations, in the operation of its automobile tank
wagons and otherwise, we have no difficulty.
Manifestly, gasoline thus used has passed be-
yond interstate commerce, and the tax can be
imposed upon its use, as well as upon the sale
of the same commodity in domestic trade, with-
out infringing plaintiff's commercial rights
under the Federal Constitution The
tax imposed by the act under consideration
upon the “sale or use of gasoline sold or used
in this state,” is not property taxation, but in
effect, as in name, an excise tax. We see no
reason to doubt the power of the state to select
this commodity, as distinguished from others,
in order to impose an excise tax upon its sale
and use: and since the tax operates impartially

—

upon all, and with territorial uniformity
throughout the state, we deem it “equal and
uniform upon subjects of taxation of the same
class, within the meaning of Section 1 of
Article 8.“

Appellant’s answer raised the same question, to-
wit: (R. 7, 8, Par. XIX.)

That the competitors of appellant:

“Solicit orders for and ship to dealers and
consumers in Montana, large quantities of gas-
oline and distillate sold in Montana before it
has arrived and is brought to rest in Montana,
and also large quantities of gasoline and dis-
tillate sold in said neighboring states before it
has been brought to rest in Montana; that be-
sides being such dealers in the sale and delivery
of said gasoline and distillate, many of the said
dealers operate other lines of business requir-
ing the use of many delivery trucks and auto-
mobiles in delivering gasoline to their cus-
tomers, their own service stations located over
several counties, running delivery trucks for
mercantile businesses owned by them, besides
using touring cars and trucks for their own
use and enjoyment,” etc.

The complaint also further alleges: (R. 7, Par.
XVIII.)

That by reason of this diserimination of two cents
per gallon, plaintiff is unable to compete with said
corporations from other states in the territory of
plaintiff in securing the business of non-manufactur-
ing distributors, dealers, users and consumers in
plaintiff's territory in Montana. That among the
important consumers for whose business plaintiff is
unable to compete in its territory by reason of their
exemption from said tax when they buy gasoline
which is shipped from out of the state, but purchased

ae eA

before it has been brought to rest in this State, are
the Chicago, Milwaukee and St. Paul Railway Com-
pany and the Northern Pacific Railway Company,
who, prior to the enactment of said law, were im-
portant and profitable customers of plaintiff, but
whose business by reason of the premises has been
lost to plaintiff.

Again, in the later case of

Texas Company v. Brown, 258 U. S. 475-
476,

the Court said:

“Plaintiff makes the broad contention that
inspection charges, amounting in effect to tax-
ation, cannot be imposed even upon that part
of its products which has come to rest within
the state, or is disposed of in domestic trade, in
view of the fact that all of it has come from
other states. But American Steel & Wire Co.
v. Speed, 192 U. S. 500, 520, 48 L. Ed. 538,
546, 24 Sup. Ct. Rep. 365, settles the principle
that goods brought into a state, not from a for-
eign country, but from another state, having
reached their destination, and being held in
storage awaiting sale and distribution, enjoy-
ing the protection which the laws of the state
afford, may, without violation of the commerce
clause, be subjected to non-discriminatory state
taxation, even though still contained in original
packages. This decision is in line with the
previous cases of Woodruff v. Parham, 8 Wall.
123, 140, 19 L. Ed. 382, 387, and Brown v.
Houston, 114 U. S. 622, 632, 634, 20 I. Ed.
257, 260, 261, 5 Sup. Ct. Rep. 1091, and it was
pointed out that their authority was not over-
ruled by Leisy v. Hardin, 135 U. S. 100, 34 L.
Ed. 128, 3 Inters. Com. Rep. 36, 10 Sup. Ct.
Rep. 681, or other cases of like character.“

In the same case, at page 180, the Court said:

=

“That the legislature intended the effect of
the tax to fall upon the ultimate consumer is
evident, not only irom the obviously inevitable
resuil OF requiring its payment, ordinarily, by
the first domestic seller, but from the specific
provisions oi the amendatory Act of 1913, that
tne 1912 Act “shail apply not only to gasolenes,
benzins, and napthas sold or offered for sale in
the State of Georgia, but likewise to all such
commodities that may be sold elsewhere and
brought into the State of Georgia, for consump-
tion or use. Where such commodities or any of
them may be purchased within the state, or
without the state, and brought into the state,
by any person, firm, or corporation, not for the
purpose of selling or offering the same for sale,
but for the purpose or use or consumption by
the purchaser in manufacturing or other law-
ful uses, either as a fuel or otherwise, the in-
spections herein prescribed shall be made, and
the fees above fixed shall be paid therefor.”

In the same case, at Pages 481 and 482, the Court
said:

“The peculiar qualities of illuminating oils
and 2asoline seem to us a sufficient warrant
for putting them in a class by themselves for
excise taxation upon their sale or use. So we
held in Bowman v. Continental Oil Co., 256
U. S. 642, 65 IL. Ed. 1139, with respect to an
excise tax upon the sale or use of gasoline, un-
der a provision of the Constitution of New
Mexico, not differing materially.”

In Sonneborn Bros. v. Keeling, 262 U. S.
506, 508, 509,

The Court said:

Our conclusion must depend on the answer
to the question: Is this a regulation of, or a
burden upon, interstate commerce? We think
it is neither. The oil had come to a state of

a

rest in the warehouse of the appellants, and
had become a part of their stock, with which
they proposed to do business as wholesale deal-
ers in the state. The interstate transportation
Was at an end, and whether in the original
packages or not, a state tax upon the oil as
property, or upon its sale in the state, if the
state levied the same tax on all oil or all sales
of it, without regard to origin, would be neither
a regulation nor a burden of the interstate
commerce of which this oil had been the sub-
ject.”
In Foster-Creighton Company v. Graham,
(285 5. W. 570) 47 A. L. R. 971
commenting upon the foregoing question and deci-
sions the Court said: (Page 975)
“We think the effect of the amendatory Act
of 1925 when properly interpreted, is to reach
line that is stored and thereafter with-
rawn and used without being sold by any per-
son, etc.”

“Under the act of 1923, a large consumer,
desiring to escape the tax levied by the Act,
could do so by buying his gasoline in quantities,
say in tank lots, storing it, thereafter with-
drawing it, and using it as needed. In such
case there would be no intrastate sale or dis-
tribution within the meaning of said act, and
such consumer would not, therefore, be subject
to the tax.

“It was manifestly the purpose of the legis-
lature in passing the amendatory act, to cut
off this avenue through which large consumer:
might evade the tax.”

“We think the act, when properly interpreted
not only applies to distributors and dealers in
gasoline, but applies to consumers who pur-
ager mame in interstate commerce and store
it, and thereafter distribute the same, or allow

—

the same to be withdrawn from storage, wheth-
er such withdrawal be for sale or other use. It
therefore follows that complainant and all other
persons, etc., in like situations, come within the
provisions of the act.”

Page 977:

“The validity of a tax on the use and con-
sumption of gasoline has been recognized and
sustained by the Supreme Court of the United
States in the two recent cases of Bowman v.
Continental Oil Co., 256 U. S. 642, 65 L. Ed.
1139, and Texas Co. v. Brown, 258 U. S. 466,
66 L. Ed. 721.

The decisions of the Supreme Court of Montana as
set forth in the case of State v. Sunburst Refining
Co., 73 Mont. 68, and State v. Sunburst Refining Co.,
76 Mont. 472, sustain appellant's contention in these
cases. In those cases the Court concedes, that if there
was a discrimination affecting the Montana refiner,
which could have been eliminated by said act, and
was not, it violates the provisions of the 14th Amend-

ment to the Constitution of the United States.
The Montana Court erred in holding that such dis-

crimination could not be removed.
The Court said in

State v. Sunburst, 73 Mont. 68, 82:

“It may be accepted, then, as settled beyond
all further controversy that gasoline or distil-
late, brought into this state from a sister state
and stored in original packages, afterward to
be sold in this state, is no longer an article in
interstate commerce, but is merely property in
thie state, and as such does not enjoy any
greater privilege or immunity than gasoline or
distillate manufactured in this state. In other
words, such gasoline or distillate, though
brought here from another state and held in

—-84—

the original packages for sale in this state, is
subject to a property tax, or may be made the
basis of an occupation tax, the same as gasoline
or distillates manufactured in this state.”

Again, the Court said in said decision at Page 80
as follows:

“What, then, is the basis of the classification
made by this statute ete. * ° ' The only
ground upon which the attorney general seeks
to justify the classification is that the statute
discriminates only between a business which is
a lawful subject of license tax, and one which
is not, and this contention has its foundation in
the — that a license tax imposed upon
any one who sells in the original packages gaso-
line or distillate shipped into this state from
another state, would constitute a burden upon
or regulation of interstate commerce. If this
assumption were 12 the argument in
support of it would be unanswerable, but since
the assumption is altogether unwarranted, the
argument falls of its own weight.”

It is the contention of appellant that the Court
erred in not holding the same decision in the case
at bar by holding that said gasoline license tax law
of 1925 could have been extended, to avoid such dis-
crimination against the Montana refiner, which was
in fact done by the legislature in the year 1927,
which was made to and did apply to all gasoline sold
or distributed from and after December 31, 1926.
That only by reason of said supplemental law was
the appellant and Montana refiner enabled to con-
tinue in business.

The Supreme Court of the State of Montana, in
passing on said 1925 act said, in
E * v. Harmon, 81 Mont. 423.
4 .

—35—

“The principal contention is that the law is
discriminatory. Upon similar onslaught this
Act has been by this Court held to be constitu-
tional (State v. Silver Bow Refining Co., 78
Mont. 1, 252 Pac. 301), and notwithstandin
the elaborate brief and argument of learn
counsel for the appellant, we see no good reason
to change our views in this regard.

1. The statute is not violative of the Four-
teenth Amendment to the Constitution of the
United States. (State v. Silver Bow Refining
Co., supra) That which would invalidate the
law because of unjust discrimination has been
thoroughly considered in the case last cited, and
in the two cases entitled State v. Sunburst Re-
fining Co., 73 Mont. 68, 235 Pac. 428; Id., 76
Mont. 472, 47 A. L. R. 969, 248 Pac. 186.

The law is now settled. As was well said by
Mr. Justice Matthews, speaking for this court
in the Silver Bow Refining Co. case: ‘As to
the contention that products may be imported
into the state for consumption without the pay-
ment of a tax, and thus users are induced to
deal with outside concerns when their needs
are sufficiently great to warrant buying in
bulk and thus withdraw their patronage Foam
dealers within the state, the situation is one
which cannot be remedied by state legislation.
By sections 9 and 10, Article I, of the Consti-
tution of the United States, the regulation of
interstate commerce is granted exclusively to
the Congress; Congress has long since acted on
the subject, and “the states have no power, by
taxation or otherwise, to retard, impede, bur-
den, or in any manner control, the operations
of the constitutional laws enacted by Congress
to carry into execution the powers vested in
the general government”.’

“Under the authority of the case of Sonne-

—36—

born Bros. v. Cureton, 262 U. S. 506, 67 L. Ed.
1095, 43 Sup. Ct. Rep. 643: ‘It may be ac-
cepted * as settled beyond all further
controversy that gasoline or distillate brought
into this state from a sister state and stored in
the original packages, afterward to be sold in
this state, is no longer an article in interstate
commerce, but is merely property in this state,
and as such does not enjoy any greater priv-
ilege or immunity than gasoline or distillate
manufactured in this state. In other words,
such gasoline or distillate, though brought here
from another state and held in the original
packages for sale in this state, is subject to a
property tax, or may be made the basis of an
occupation tax, the same as gasoline or distil-
late manufactured in this state. (State v.
ar Refining Co., 73 Mont. 68, 235 Pac.
428.

The foregoing holding is certainly contradictory,
holding that if the law had extended to tax the use of
gasoline, it would have been interstate commerce and
that it would not have been in interstate commerce.

All seem to agree that the tax could have been ex-
tended to gasoline used and eliminate the discrimina-
tion, and the 1927 Act actually did so, and yet the
decision of the case at ir holds that it could not be
done, and in the former cases that it could have been
done, and that if it could have been done, but was not,
that it violated Section One of the 14th Amendment.

In State v. Sunburst Refining (Co., 73 Mont. 68, 82,
the Court said:

“It may be accepted then, as settled beyond
all further controversy that gasoline or distil-
late brought into this state from a sister state
and stored in the original packages, afterward
to be sold in this state, is no longer an article
in interstate commerce, but is merely property

= =

in this state, and as such does not enjoy any
greater privilege or immunity than gasoline or
distillate manufactured in this state. In other
words, such gasoline or distillate, though
brought here from another state and held in the
original packages for sale in this state, is sub-
ject to a porperty tax, or may be made the basis
of an occupation tax, the same as gasoline or
distillate manufactured in this state.”
The Court said, in
oa Silver Bow Refining Co., 78 Mont.
l, ;

“In the first case of State v. Sunburst Re-
fining Co., above, the Act of 1923 was held un-
constitutional because of an unjust discrimina-
tion which could have been eliminated under
the decision in Sonneborn Bros. v. Cureton, 262
U. S. 506, 67 L. Ed. 1095, holding that a tax on
the sale of oi] imported after it had come to
rest in the state would be ‘neither a regulation
nor a burden of the interstate commerce of
which the oi] had been the subject.”

Under the 1925 law, transportation companies having
passenger stages and freight trucks, running in
numerous directions out of Missoula and other towns
of the state, could purchase the foreign product, store
it in their tanks after the transportation was entirely
over, and use the same, tax free. Thereby parties
whose sole business was the use of the highways were
not required to pay a tax, and the market is lost to
the Montana refiner, and the State of Montana loses
the benefit of a tax. Also parties can contract to do
trucking, making all deliveries for numerous mer-
cantile establishments, and can thus secure their gas-
oline without tax. Numerous instances occur of vari-
ous characters to the same effect.

The following further allegations of appellant's

— 2

complaint appear and are admitted by . otion for
judgment on the pleadings, viz: .

That said discriminations in favor of foreign cor-
porations and foreign refiners for the quarter for
which said tax was paid, ending September 30th,
1925, by reason of shipments from sister states,
caused appellant a loss of $4,000.00 and by said dis-
criminations in favor of non-manufacturing distribu-
tors and dealers during said period, caused appellant
a loss of $4,000.00. R. 10. Par. XXI).

That the imposition of said tax of two cents per
gallon was the sole cause of the inability of appellant
to sell said gasoline causing appellant's loss. (R. 10.
Par. XXII).

That the said gasoline tax was imposed by the
State of Montana, solely for revenue purposes, and
none was used for police regulation or supervision
of oil refineries or the sale and distribution of gaso-
line and distillate. R II. Par. XXIII).

That by reason of the premises appellant was de-
nied the equa! protection of the laws of Montana.) R.
II. Par. XXIV).

Illustrations have been set forth showing the actual
discrimination against the Montana refiner in the
working out of the law, and many others logically
occur. As said by the Supreme Court of Montana,
State vs. Sunburst Refining Co., 73 Mont. 83:

“The statute very clearly authorized such
successive taxes, the test is, not what has
been done under it, but what may be done un-
der it. (State ex rel. Holliday v. O'Leary, 43
Mont. 157).“

In conclusion it is most earnestly contended by ap-

pellant that the 1925 gasoline license tax law was dis-

inal

criminative against Montana industries in favor of
the products of refiners of gasoline in sister states,
transported to Montana; that the discrimination
could lawfully have been avoided, but was not; that
it was of such a character that the Montana refiner
was unable to compete and that the refining industry
of Montana could not survive under it. That it was

arbitrarily and unjustly discriminative and void.

Wherefore appellant respectfully submits that said
judgment should be reversed, and the judgment of
this Court, require that the sum of money involved in
this action, to-wit: $6,081.74, paid under protest by
appellant, be ordered restored to the “Protest License
Fund,” referred to in the judgment, (R. 21), and
that judgment be had and given in favor of appellant
for the said sum involved, and for costs.

Respectfully submitted,

JOHN E. PATTERSON,

Counsel for Appellant.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386007_0202%3A2. Public record. Not legal advice.