Prologue — Esso Standard Oil Co. v. Evans

Supreme Court brief1953

Ask Donna

What actually matters in this document.

Text

LAIR RE ig ALT LALOR TREES ESM

‘

e TAO AOL OO Rt RONNIE a AED Ha

onan TT Ta. esha enna

** ys

~—— :

Y *

ca os

PREME COURT, U.S.

Ate Eee te a OS \ : ye

4° TRANSCRIPT OF RECORD:

ae Axles es

° co Reay >

Sage Court Za the United States. :

“OCTOBER TERM, 1952 ..

¥ ; - _—

° No. 330 a

_ ESSO st Soahty OIL, APPELLANT, ©

= vs. ¢ Oo <

| Shues. enn EVANS, COMMISSIONER OF

ros

PINANCY AND ‘TAXATION OF THE STATE OF .

-TENNES

an No. 378.

_ THE UNITED STATES OF AMERICA, APPELLANT.

R,ETAL | c

“>

ve. :

JAMES CLARENCE EVANS, - COMMISSIONER ‘OF

FINANCE AND TAXATION OF THE STATE OF -

ve TENNESSEE, ET AL.

\ ; . : —_ a

a APPEALS FROM THE SUPREME COURT OF THE STATE OF TENNESSEE

P t -

. .

<> = .

No, 330-FILED SEPTEMBER 11, 1952

No. 378—FILED OCTOBER 6, 1952

Prpbable J urisdiction Noted November 10, 1952 -

\ . 7.

| SUPREME COURT. OF THE UNITED STATES ere

OCTOBER TERM, 1951 bi ."

te No. 330 =

__ES80 STANQARD OIL, APPELLANT,

- r ees vs,

—

JAMES CLARENCE EVANS, COMMISSIONER OF -

FINANCE AND TAXATION OF THE STATE OF

TENNESSEE, ET AL.

No. 378.

us. ie

- JAMES CLARENC E EVANS, | COMMISSIONE R OF

FINANCE’ AND TAXATION OF THE STATE OF

TENNESSEE? ET Aly

. APPEALS FROM THE SUPREME COURT OF THE STATE OF TENNESSEB ©

Be oe - ©

SNe pee Bt, (1 Ua Rada

5 bye : .

INDEX a

Original Print

Prine in ‘Gane me Court of the State of MES beaces fh 1

Stipulation as to record 1 1

Order-direeting transmittal of original exhibits to Supreme

Court (omitted in printing) 3 oes

Petition of Esso Standard Oil C ompany for appeap 4 2

Order allowing appeal 6 3

Bond. "(omitted i in printing) 8

Citation _.. (omitted in: printing) Ade

Assignmént of errors and prayer for sit chee ead | eee

THE UNITED STATES, OF AMERICA, APPELLANT,

Jupp & DerweiLer (Inc.), Manrers, Wasninoton, D.C., Jas. 16, 1953.

< —-5917 : 6 “

’ ‘ & °

«52 = x =

‘il Ta Ro ee INDEX wy a

a ye : 2 eres _ Original -

Service of appeal papers undér Rule 12 (omitted 5 in print. apis

ing) sity valg lava wes be cere ek tener te eR Ue aa kina 14.

- Ppinion Ay ral 255

Deeree a. ¥ eI. BOT

' Petition for rehearing . Mee heat ap - ” 969

. Reply to the petition os 5... eels o> 281 oS

Opinion on petition a a, Siete

a Judgment denying petition. to volver. .- tiers t teatt - 290°.

? Transcript, of record from Qavidson ; ‘County Chaneery Copa

Eee eA T pend teehee See rth = he gen Sg 291

Cantina (omitted i in’ printing). 291

a Original bill | .- TPT enid eG we Eee 291

: Exhibit A-list showing amount of ee :

SCOTT; =: - shipped and received ... 00:00... “. $07a

Subpoena. to. answer and” sheriff's return ‘(omitted ix eerie

pep ick, EL Ped CEE Re EOE ee ae

Answer of dcfendant: James Cliceuns Evans _... ee Ie =

Order of April 11, 1950 granting the United. States . .

leave to intervene *. ike Soa RG Weenie eete es . 319

Petition of the United States for leave to intervene’ and .

intervening pétition’.............- EN eae eee ks 320:

Transcript of evidence.-......:.02.......0¢ 002205. 322 is

; Stipulation re Gopomtions eee Sua ae +. 322

aS ppearances Jp ae caged, 3S Fetes mates MORNE ees 323

Offers in evidence > -———-; 2 . $23

Deposition of -— he

‘Paul C. Stratton .. Re Neon a ty * 329

‘ -W.-Randolph Pietsch»... ..:..0..%...:..° . 362

us C. E. Bradley ......°.:..... eae seiede oe 395.

+ F. VY. Thompsiin . *. pease ts 418

A. W. Goldsehmid 0. Me 452

avn ey Me se eee ee cue 476

a. J. M. Myrick ..... Sure cian ote 500

‘Ober ie Oven or eS 518

Stipuldiion re depositions : ‘523 ©

Offer in evideiice . - 525 —

—, » » Deposition of— aS :

f Johan P, Knight ees eh ae

sade : Gieero -C, Sessions: .........:. pS: 545

hat R. L. Weakley Sweeer ices

Stipulation re deposition 598 .

“Deposition of — , , th

| _ R. L. Weakley 599

5 .H. E.: Desaix. e 617

Stipulation re deposition 624

Deposition-of James Clarence Evaris - 625

640

Stipulation re deposition

od .

ere | f. t

Bf a tN te ieee Pe ieee Coane ries

4 a Supra S ° Yi ers Sete: or AN Cie) sbi gn 4 8 er ~

3 i Transeript of reeprd from Davidson County, Chaneery a tend Pet a

+, Wourt—Continned “eee SRO Se in Revd weeg

4,” Transeript of evidenee-—Continued? coe _ Original = “Print

: ’ .. Deposition ef- = >, eae ; Rig tein

, eS George F; MeCanless”) 22... GR. 66

rics} Deposition’ of Cletis Greene 0.0. 0S 653: 274

Complainant Exhibits. No. 47 & No. 48—Let- __ s Sopp

terfrom J: C, Greene to Standard Oil Com: aa

pany dated’ December 29, ‘1943 and reply

. } of December 30, 1943... 05 0... Pee ae’ A 291

: '’- Deposition of George F. Me(Canless (Recalled) 692. 302

Stipulation, re depdsition . } ;

ce (omitted in printing). 723 ;

_ ‘Justice’s certificate re clerk... (omitted in printing) .- ce, Species

«, Petition of the United Stat s of America for appea].’.... . 728 ~~. 321° .

_. Order allowing appeal nb hee Poe ieee Cae os & TQ goo

—~ . Citation’ on ‘appeal. 77 | _. >> (omitted in printing). > cS é

Assignment of. errors and prayer for reversal’. 6,’ a S| 323

Service of appeal papers under Rule 12 {omitted in print- . 3

Se 1 ae We a Pea Nonna eas Un female Ty ge aia 734 : a

*Praecipe for record “| ~ \.... (omitted in printing) © 736 . oS

Clerk’s certifieate:.. 2.’ + (omitted in printing). . 737. ° a

Justice's certificate regclerk .____ (omitted in printing) °- “738 — .

Statement by Esso Standard Oil Company of points to be he nies

acc OE as LE RL enn ee et ae one eee Spare 8 tet Wee BOR

Statement by the United States of points to be relied upbn :

_and designatton of parts of dcord to be printed..:..... 742 °" gos

_ Stipulation as to the printing of the record. _ nee . 745 :32@ .

Griders noting probable jurisdiction. -« -__ Pera; eeNee de

| -VOL.H.. . < |

~ COMPLAINANT'S EXHIBITS’

No.. L--Fixed price: service contract W33-038 ac-1683 oe

and Supplemental. Agreement No. 1 #®Nween the

pe G@dvernment and Standard Oit Company of Louisi- we &

ana for the period January 1, 1944. thru June 30, .

1944 for storage in company’s tanks, handling, re-

eeiving, transporting and delivery of aircraft. engine re

; fuel . aes eyes Ponsa coe ne | 753 329

No, 2-—-Fixed price service contract W-33-038 ac-1863

between the Government and Standard Oi) Company

.of Louisiana covering storage in Lion Tanks for the :

ye Period January 1, 1944 thru June 30, 1944 ; 789 36g

: gis

* _ fu

te fis varjous stonike:)

‘and for. these: ery

| - oro

6 ee oats ide ‘ - ys

[fol 209 Je In; Surreme Courr or TENNESSEE j ee

; ; Davidson Equity ° ot | 3

eon Esso Stasipann On. cae Tons fee |

§ =k e

Oe vs AMES Crdnexor Eva ANS, Commr, sete ae,

Bn * ‘ < ¢ hs { 2

4 2 Seti Orixion—

“The bill in this: cause was filed’ to

taxes paid nnder\ \protést by the. Complainant. on der und

> Of the® Defendant, /- In the Chancery Court, because cert

overtimental | ‘immunity was asserted, the Chancellor per

“mitted the United States Government. to file an intervenify

petition. For brevity and to conform with the method

-adopted Bw. the parties, ‘we will refer, in this opinion, to the

» Complainants as* “Bh

s0;"’. to the Defendant yas “*State;”

“und te the. intervenor as the. “United States. oO

~. The contraversy rises out of services ‘perfornied by Esso

for. the United States under written .contraets which are

exhibited, These contracts between the United States an & ”.

fol. 256] Esso contained indemnifying clauses which’ pro-

‘vide for payment by the United States of any stata taxes

for Which Esso.may he made Hable on account of its activi-

ties under the contradts : |

: During the war years the U ited Sates was purchasing

at the. refineties, all 100-octane andAhigher octane gasoline

“used in aviation, From the refineries, the gas Was dnoved,.

usually*hy cominon, carrier, and prince ipally by river barge,

ints. The United States had no stor-°

age fiilities nor pedsonnel to store and handle‘the gasoline,

¢ontracted with private cor porations,

Esso’ owned cevtain storhge tanks at Memphis, and rented

others ‘from! tie fon Oil Company, and. then contracted

‘With vy nited States toAtore the 3 aviation gasoline helonging

to the United States, in these tanks, and. with Esso per-

sonnelto distributd the gas from these tanks on order= of

the United States, v—

“The gasoline ¢ame: np the Mississippi River by bate’

from Lowisiana, where it had been purchased by the United

States. When it arriv vd ait Memphis, and while it was stil]

on the barges, it was int vected by State officers, and there:

peas

ecover ce ai ae gi spline

2°

_ rendering services und its contra@s. The State, on the -—

‘Other hand, insists that the matter of liability was held in’

- . , Yo &, : . : ‘ . ie Pesos

: r a ' oy ~~ = .

', after pumped by Esgo from the baxges into its storage

tanks, or in gome cases, into tank trucks, and thereafter.

delivyred. to various Afmy ‘posts on order of the United.

Stat¢s. Somewtthege ‘my posts wefe ‘in Tennessee, and

othefs:were in-Arkatsas and Mississipi, oy

[ fol! 257] Activity under. the céntrattk here involved, com-

menced in 1943, and continued. throug the-years 1944, 1945

and 1946, . Since, the Statute of Limitatyons had run on any

| ‘taxes which acerned for the year 1943, tke presant suit was

filed to recover taxes in the amount os

295,810:10, which

had been paid under protest for the month

isa test case; and will determine liabiltty for tax

balance of the year P44, and for the years 1945 and 1946.

During the years when the contracts were in operation and

Esso was rendeting its serwces to. the United States; inspec-

¥ : : ® ; : 2 a P \

tion reports were rendered,the Department of Finance and

| Tagation, and ‘discussions weré had with the State regard-

ing tax liability. Ne formal decision of such liability ‘was |

. ems . Fi . ~ he “

ever made,-either by the then Commissioner, or by the At-

., torney General. Esso insists that‘it relied on the econtem-

porareous and continued administrative construction of

qthie then officers of the State, ‘and that they coneluded that

. Esso was not liable for any® gasoline taxes in connection -

with the gasoline of the United States uponswhich Esso was

_ abeyance and was uncertain, and that Esso was never for-

mally advised*by any. responsible authority, that it was not

liable for these taxes;

~* Under the contracts, Esed received as~compensation,

amounts ranging from 18/100" of accent to 6 3/10 eents a

' [fol. 258 j gallon. for yeceiving and storing in its agyn facili-

. ties and those leased from others, the -gasoline belonging: |

° tq the United States. Also it received varying amounts for

*. gasoline. slistributed by its own facilities, or, delivered to

carriers on order of the United States-.- he

- Froin thisgwe conclude that the questions: presented for

decision by this litigation are three, namely: Sue fe

(1) On the facts. stated, was Esso liable for inspee-

fion fees under Code sec, 6821?

ty 4 4 . ox ; ‘

° @

, ‘

January 1944,

after the State had prepared a distress warrayt and thré@at-

ened to have,it served. / It is agreed that fhe esent suit. -

es forthe”

8 . ‘ “1 ; 7 : }

¥ . : : y e ioe i

« (2) Was Esso liable for privilege tax for such opera-

‘tions under Code see, 1126.1, et seq. }

(3) Was Ess@ liable for interest and penalties? *& .

% The Chancellor‘held that Esso was not liable for (1) and

(3), but was liable for (2), and from those parts of the

-@ detree which we adverse, all parties have perfected

appeals. * es ees ah. rm

We consider first, the. question of liability of Esso under

Code see. 6821, forthe iaepestion/icen : That section pro-

* vides thatevery consignment of ‘volatile substances, as such

_ Substanees, are defined in previous sections of the Code,

shall-be inspected, and for such inspection, a charge shall

-[ fol, 209]* be made to’ ‘the consignor or’ consignee,’’ of

~ ~20 certs a barrel. Fifty gallons shall constitute a barrel,

“- cand the fall charge made for any fraction of such barrel,

That this inspection fee is not merely a service charge, .

but is a. revenue measure and an excise tax on the con

«. modity, has beer held.in a number of our reported cases, -

State, ex rel Fort vs. City of Jackson,.172@enn.,.119; Texas _

Co. vs, MeCaQless, 177 Tenn., 238, a. “.

From Judge Cogk’s discussion of ‘the nature of the tax

and its. purpose inWState.vs. Reed Oi Co., 176 Tepn., 10,

19-20, it is clear that the tax is laid upon the commedity

itself, as an excise.” In the present case, the gasoline, while

it was inthe barges on ‘the river, and also while it was in,

the storage tanks ‘on the bank, was admittedly the property

of the United States. The inspections were made hefore

the contract of Essé came. into play, and before Esso had

pumped the gasoline from the barge inte. its storagé tanks, .

; We, therefore, agree with the Chancellor, tat the State has

620 power ‘to levy a tax on ‘property of vite States

uuder these admitted og sh Oe CTE Roars eae

“We come next to the consideragion of the second question,

and Esso’s liability for the pri¥ileze tax under Codé sees,:

1126, et seq. This privilege tax has.also been defined by

» Teported decisions of this Court.. rade os

. aes

« [fol. 260]* “This case (Foster & Creighton Co. vs,

Graham, 154 Tenn; 412). , . settled the proposi-

~ tion that the tax , [> isa privilege tax on the en.

gaging iff théebusiness of storing gasoline based 6n the

WV ere | INDEX

a ie ; ey - 9

‘ we

iginal - Prigt

cd > -

f° 800 © 378 ©

‘815 ° 395

Sou PEER EES ROE REE a he PO ae

No. 31—Government bill of lading WT-343187, eover-

ing shipment of 91 octane gasoline from Memphis

‘BIB

terminal to Grena a;, Mississippi gated Janua 16,

1944 Saves al ae Se a aR comtry ee oe Bolt Se ou

No. 32—Government bill of lading WT-343690Acover- -

Memphis

terminal to Little Roek, Arkansas dated January 7,

ONO To eee Sel anis

Nos. 33 & 33A—Standard Oil Company_ef Louisiane

Abhipping notice dated January 25, 1944, covering |

91 octane gasolirie transferred from Meniphis- ter- ty

minal to United States Army 70th sub-depot, Mem-

phis, See, eS | SURES RS ea meh ee Pa eS

‘No, 34—Lease cominencing: January 12, J944 of three

.storage tanks from Lion Oil Refining: Company to

Standard Oil Company of Louisiana ____ ng} Ree ena

“No. 35—Fixed price service contract W535 ae-36457

and Supplemental Agreements Nos. 6 and 7 between

the Governinent and Standard Ou Company. of ..

: Louisiana for the period January 1, 1943 thru June

30, 1943 for storage, handling and delivery of air-

craft engine fuel and other miscgllaneous services,

” Nos. 36, 37, 38-—Standard Oil Company of [wuisiana

invpices to the Government for performance of sery-

lee contracts during the month of January 1944

(without the aécompanying’ sheets showing the de:

tails) .

No. 39—Yonthly Gasoline Tax and Inspection. Fee re- —

port to the State of. Tennessee, Departmest of

Finance ‘and Taxatio: for the month of January.

1944 by Standard Oil Company of Louisiana

No, 46——Memorandugfor the Jadge Advecate General

from Cicero U. Sesfions dated September 14, 1943 -

No. 49—Letter from Ry L. Weakley to Mr. Joe Hol-

+» brook dated Jannary 28, 1943 oy

818 308

- bes

819 309

$26 403

862° 44)

863 442

5 R76 455

S7S 456

“i

. "32. INDEX

> : *

2, omplainanit’ 8 E xhibits—Continued

' Weakley dated February 23, 1943.

No. 55—Letter from George ‘Ss. Hale, Je. to R: «Lis

Weakley dated July 19, 1943.

-. Company of Louisiana dated Octobef 29, 1943 .

No. 58—Letter ffom R. L. W eakley to Standard Oil

Company of Louisiana dated October 29, 1943 with

Se ae A.F aes

___—_No.:60 & 61—Eel ter om J. ¢. ‘Greene to rh 2048.

Oil” bce pel of Louisiana dated: March bet 1943

pat dated February 29, 1944 Se a <

“ ea ad :

cone a DEFENDAN@ S EXHIBITS

No. 1 Fixed price service cOntract No. Ww 33-058

__, 8¢°1689 and Change, Or er No. ¥: and Stipplemental

. @riginal | Prot

Ae! “No. 54—Letter from William Waller. to Mr. BR, L...

- a

870. .. 457

ee, : 881. . 488

‘ No. 57-—Letter from R. L, “Weakley to Standard OiP

SRL 460°.

891 469 .

— * "Agreement No. 2 betw ph the government and'River ~ Je *

.Petroleum for: the porit Nevnghe 4d, 1943. thru “itt

. June 30, 19 c “tramspiotat torage, handling | ‘ es se

and delivery of poverpapent-ownkd | aiteratt engine \ ie

fuel - BONG ws ta ds Ae Mee SOP S ote Pugh ee oe ; 595 472 H

vos. 2 & 3433 etter From J. 0. Taleiess to Mr. R. 1 : é é.

| Weakley dated March 2, 1943 and Teply of Mare Sipe thea ote:

Me gud eee eclmer SW Reet ea 915 | 495

; ge i Litter from R.. L. Weakley to Standard il Entire

pany. dated December* 16, 1943. 5: tA: 917 » + 496

‘No, Foy a Letter. from W. F. Barry to Commissioner

Evans dateg October 28, 1949-2 © 918 497 = 2. °

: No, 6—Letter ftom Commissionet Evans to Ww ro Sos

Barry dated October 26, 1949 920. “499 | &

~ _ + :

\ ‘

'& z Gig as

6 , ‘‘e : = (-: . ~~.

(te guee ee aie

‘IN| THE SUPREME COURT OF THE STATE oF

c-~ \ TENNESSEE 5 5

——— = o 4

iw a Davidson Equity - LES

\ Esso Sranparp

) Ow Company, Complainan Appellant

A ; i . . : + te. ‘ : . as ‘

% BION ‘ ‘ wy ; Vv. : %, be oo re J

JAMES CLARENCE Evans, Commissioner, Ete., Defendant- -

Appellee.

\ " * j eo. es Pee , *

SripeLation AS TO. Recorp--Filed™ August 8, 1952

art)

¥>.

The parties to,the nbove entitled cause stipulate as fol- —

lows with respect to the portions of the record to be omitted i

‘drom, the transeript transmitted to the, Supreme Court: * ~

- Complainant’s: Kixhibits 4-28 sifclusive, 40-45 inclusive, |

] Y “hg. : ' ae

| 47,48, 00-5-Finclusiye, 56 and 62-66 inclusive shall be omitted

‘forthe reason that some are already copied in the testi-

of the witnesses are substantially -correet, so that their

inclusion; verbatim, would be unnecessa ry to a proper pres-

sentation 6f the case-dn appeal. It-is stipulated that title

‘to the gasoline here involved became vested in-the United

States at the refneries and remained in the: United States.

at All times thereafter and that -such.gaseline, was trans-

‘ported on government bills of lading by common ‘carrier

barges to the bank on he: Mississippi. River at ‘Mémphis.

‘{fol. 2] For that. addi onal reason such of the foregoing °

-exliibits as were introduced taprove saidfucts are unneces.

sary to a proper presentation of the case'on appeal,

“There shall also be’ omitted\the depositions of Joe Hol.

brook, T. B. Bunn and. Willie: Waller (pp. 316-228) and .

the rebuttal deposition of R. Li: Weakley (pp, I-00),

same -being unnecessary to a proper presentation of thé.

case on appeal. The deposition of R. LL, Weakley (pp. 396:

B39)" and Pps 248-263 will fellow the deposition OF Clears

C. Cessions (pp. 206-215) and will he copied. iti thi order

in which the testimony wis taken father than the stderr jy

whieh “it. Was filed” :

ails tee AEE a, 2

:-: gan “aha” eee .

a ]. oreo), , a * ie,

mony and the desgriptiorfs of the others in the testimony “e

-_°o

There will ale ‘be omitted, the cost bond, subpoena te. —

answer; appeal bond, certificate of Clerk & Master and.

bill of costs. . -+« Ae ‘

“With the foregoing exceptions, the entire record shal]

be}ineluded i the anseript) inclaiding thjs stipulation,

his August 9, ee

Grae Ve William Waller, @ounse for Appellant: o/

mene Walker & Hooker, by K. Haflat Dodsou, Jv.

+ sel for Appellee. Rar ete as

oo.

ii 3] Order directing transmittal of original exhibits to

es Sapreme Coart tNemipted j in printing). AEs - :

eB A z es Z , ’ « OF

“ A s Reira yae ma

. @ a

; ol 4y° ee [File. endorsemedt omitted] | = : a.

o : =

, Iw Supreme Cou RT OF Tex wHSsER pie =

Reh nr é [Title omitted] ae, ; San

Perition § FOR Avprat—Filed August 8, 1952

To the Honorable A:’B, Neil, Chief Justice of the i ns

Court of the State of. Tennessee ;

(, ‘onsidlering itself’ aggrieved by the final 1 ded and jude-

‘ment of this Court entered June 7, 1952, @nd order denying

petition for rehearing: entered July 11, 1952, Esso Standard

Oil Company, complainan}.appellant, does hereby pray that.

an appeal be allowed’ td the Supreme. Court of the United

States from said final déeree : and judgment and order deny-

ing the petition for relrearing and from each and é¥ery

part thereof; that citation be issued-in aceordance with law. 4

that an, order” he ente red with respect*to the appeal bond

to be given by isaid complainant- -appellant; and: that the

material parts of the record, proceedings and papers wpon

Which said final .judgment and. ‘decree and order denying

pegition 9x rehearing were: based, duly anthenticatd, be

sent to the Supreme Court ofthe U nifed States in accord.

ifoi. 5] ance with the rules j PACH Cases mace inl prov “hded,

Respectfully submittag

Villiam W aller, 0 ‘OUnse | for

Eihy: Coniplainant-A ppéllant, Esso Standard il Vom.

sy) pany. Anieriean Tras t Bujlding,. Nastine 3,

ChveSssee, . :

T 10 . e a or “e

« Be

oT ° Lor . : °, a Pe has

‘ : 3

a ~~

~ Ss

* “

‘ 0 =g

> = : :&

~ ce a o ~) Xt

: ere

« 4 t ° ? -

4 ° fe ¥ \ 7)

“a ~ : = >

re : om

i “ oN

e ‘ \ i

. © >

* os : é x

. a. . : <. 5 . = ei ‘

“ips : Yaa 2% agree = ’ Py ; 2

2 - Pe : RE tote 3 Fanze=S : = ¥ \\

4 ki, rests a ae e ‘ Oo. * \

. : Pi wis .

gnrie . ° ° 2 2° \

‘e © ef % o : . : \

Ss > ‘s \

aes SEE Pree eps ewes INT a Pee eee eins -

a\ “fol. 6] * — {File endorsement omitted] es)

. «

== ot he oa. 6 1 : ° =a8 °

‘ ee : - Ly Supreive Covrr OF TENNESSEE | zt

. = Z c - [Title omitted ] Sara re ae eae

‘ es ae Se Ears Re ee ° oy - es

‘ -, < Orver ALLowine Appear—Filed. August 8, 1962 .. -#

2 * aay Sie po fret Chee Sage 8 -

-- s+ Bsso Standard Of1 Company, complainant-appeHant, hav-

cS { ~, Ing made and filed \ts petition. praying for’an appeal-to the

"", .. “* Supreme Court of the United. States from the final judg-

Abr iegste . ment and deéree of this. Court inthis cause. entered June

aca4

-¥ 1952, and order denying petition for*rehearing entgred -

July 117.1952,-and from each and every part thereof, and. -

fes on appeal, pursuant fo »

Le the statutes ané piles of the Supreme Court of the United _

' States in such casgs made and provided,” : :

' Now, therefore, it is hereby ordered that said appeal

6 be agd the same is hereby allowed. as prayed for. Say

“ . ° [fol. 7] It is.furthe? ordered that the amount of the appeal

. bond be and the same is hereby fixed in the sum of $1,000.06

‘ "> with good and sufficient surety, and shall be conditioned.

as may be required by laws ~ Pes ak ogee eee at

It'is fu rther ordered thag citation shall issue in accordance

with law. fe 2 RGF gin oe «

; ea, ete ~ -* ALB. Neil,-Chief Justice.

Adgust 8, 1963." "> 88 3s 3 ES ae ae

@ . * .

° . a - . FP Nag a = 3 atic e-

° : e ee & ; - 2 S . .

; [fol. 8} Bond sn appeal) for $1y0610,00 approved an® fied

>, August 8, 1952, omitted iff printing. :

. ' [fols. 9-10]. Citation-in usyal fork showing service on Ky _

*, . Harlan. Dodson, Jr, omitted in printing. : is

e : mak . .

* s o bs

= ~ a

fetes’ ae _ [Bile etidorsement omitted] .

2 : ; ; & a °

} 9

= *¢ ;

0° e> © ‘~ 6 “s 2

« o o? ‘\

; gett :

e § % ". .

. ” >

. 2g ¥ : .% =

; ;: « te

t f° . : ¢., ee]

| - “3 — Te oC a * «

Eft > ie :

f : - ‘ rs

. = ¢ é

Ls Sveneate Corr OF Test ESSER

? = = {Title omitied) o ae Zs

“Assiow freer OF Eixnors AND ‘Peivan FOR Reyensat—Filed

Beg August'8, 1952

Esso. Standard Oil Company, complainant- -appellang in

the above cause, in connection with its appeal to the Su-

_\preme’ Court of the Unitet States, here thy filefthe following

. order denying. petition for rehearing eytered July 11, 1952.-

assignment of errors upon which it will rely-in its prosecu-

‘tion of said appeal-from the final sacar and decree of .

fhe Supreme Court of Tennessee enté¥ed June 7 7, 1952, and

- The Suprenie Court of Tennessee erred as follow Sie:

a Having construed the* Tennessee gasoline tax laws

(secs. 1126 et. seq. vf the Code of ‘Fenncssee (1932) as.

amended) as requiring the inelusion in the measure of Esso

Standard Oil Con) yany’s gasoline tax of gasoline belonging

, [ fol. 12] exclusively to the Unged States,.the Court erred

ast _in not holding that, as so construed-and applied, said Tennes-

“seé gasoline tax laws ‘ire repugnant to the Constitution of

“the United States and vo oe under the penne of roe

sipaudnelgatcne: immunity.

ie : The C ourt erred in. failing to hold that the assessment

to en Standard Oil Company, for the: purposes of said

Tennessee gasoline tax ‘s, of gasoline belonging exely-

sively to the United States, by ineluding the quantity of such

vasoline in the measure of the tax. assessed, is illegal’ al —

voul for the Season that such Assessment is apon or meas-

ured by the exchisive property of the United States, whieh”

is immune from taxation by the State of Tennesse © under

ate Constitution of the United States. © |,

~ Having construed said Te NHessee gasoline t tax laws as -

‘requiring the inclusién | in the measure of Esso Standard Oi).

‘Company's gasoline t tax of gisoline belonging e ‘xclusively to

the United States, whic hy was the property of the Mnited

States when if came te rest in The State of Tennessee, aud

baving at the-same time adh ered to its devisign in Te NNeSSEee

Gul e oanrpany v. Vv. Gow 1 issioner, 1787 Penn. 805, lof. S, W.-2d

e + ee

) , {

, tae iets

mae, Ss

‘ . « 6%

. 267, construing éaid

"a gasoline distributor's ga

hathidled by. such distributé

‘it came to rest in the State

. @

dasoline tax laws are repu

not holding that, as so coustrued and applied, the Tennessee '

: :

° * is “ a K :

. . 7) 3

ay a

ve *

2 e » Z & . ee

; is v

laws as not -pequiring the inelugion in“

soline tax of gasoline storfd-and

r which did not belong to i when

of Tennessee, the Court#rred in

gnant to the Fourteenth Amend-

2, ment to the Constitution of the Unitéd States,and, void ‘as.

_ denying to Esso Standa rd Oil Company the equal protection |

‘of the laws for the reason. that the classification made by

Said laws, as, so construed. arid applied, is. Grbitrary and

>* [fol. 13] wwithoft reasonab

!e’or substantial basis.

‘ . ; > e tae 72> ‘ i fi

* 4. The Court erred iu failing to’-hold that the assessment

: rly tthe Cait tax: liiws,"of gasoline belonging -exelu-°

*. sively tot

United States when it cine

“by including the quatitity 0

* Pa) *

1e United States, wig was the property of thie

to rest in the State of Tennessee,

f such gasoline in the measure of -

. thé tax assessed, is illegal and void, for the reason that such

assessment denies to Esso

protection of the lays, con

Standard Oil Company the equal:

trary to the Fourteenth: Amend. -

ment to the Constitution of the-United States, in that the

Caurt, in upholding such

assessment, adhered ta the con-

> struction placed upon said: laws-in Tennessee Oil Company

v. Commissioner, 178 Tenn, 683, 157 S. W. 2d 267, and the

. ¢lassification made by_4ah

I, laws, as so construed and ap-

plied, is. arbitrary. and without, reasonable or substantial

basis.

3 Wherefore, :compiaitiant-appellant: Esso Standard . Oi] -

Company, prays that the judgment of the Suprenie Court

2 of Fennessee be reversed,

Court: may deem fi* and p

aud for such other religs: as the

POR 8 eae ae |

4 William Waller, Counsel for Complainant-A ppeHant. ,

seg < °

t a

> [fols. 14-254]-. Service of

‘(omitted in printing)”.

‘ . :

hea

appeal papers under Rule 12

sr?

“ea,

we ‘ a Pr

* number of gallons in storage.”’ Texas (Co. vs. Fort

168 Tenn., 679, 687,

““Chaptér 58, Tennessee” Public Acts, 1923, as

amended by chapter 67, Tennessee Public Acts, 1925, is

said, by its caption, to impose a privilege tax ‘on per-

Sons... and corporations engaged in lor carrying’

om the busipess . . |. of selling oY storing or dis-

tributing gasoline - - «ss. Storage of the yaso-

line and withdrawal of it from storage within the State

for ‘use or sale, are, as the State Supreme Court has

_held, the events whieh, by the very terms of the statute,

call it iuto operation. Foster & C. Co. vs. Graham, 154

[fol. 261] Tenn.; 412; Quick Service Tire Co. vs. Smith,

106 Tenn., 102.°? No-C. & St. L. RR. Co. vs. Wallace,

~ 288 U S., 249, 265, 77 L. ed: 737.

‘ : . ” Paka? . t 8 z ‘

Esso. contends that it is a condition precedent to Rability

: for.this tax, that the taxpayer shall have imperted “the

gasoline. While we find no support for this argument in.

the cases.cited above, in the present case, it is unnecessary

to decide that question since technically Esso did’ import

the gasoline into: Tennessee by removing it from the chan-

nels of inferstate commieree on the barges on the river.into *

its trucks and tanks on the bank. zn a

- Further¢ Esso insists that the decision ip Tennessee Oj]

Ce. vs. Me(inless, 178 Perfn., 683, relieves it from liability

‘ in the présent case, We find that case clearly distinguish-

able on the facts. In that case>the Obion County Board: of

Education rented -a storage tank from the Tennessee Qi)

Company, with an agreement that lit would pay the Ten-

nessee Oil Companyan fee’ of two cents a gallon for dis-

tributing ‘the vas.on order of the Board.” In gal effect, :

the Board of Education, which 4was exempt, Was storing

gasoline in its. own tauk. Although the fental of the storage |

tank was a nominal amount, it had the effect of changing

independent contractor to that of. an agent or ‘servant of

the Board: In the present case, the charge which Esso

made the United States @r storage alone, was @ very sub-

the status of the Tennessee Oil Cowpany from that of an

stantial. and luerative business considerjng the. vast Amount -

[fol. 262] of gasoline involved, since the. contracts show .

that Esso charged from 18/100-of a tent to 6 3/10 cents

Sea rate ; ae

‘ ‘ ‘ . . . 2

per gillon for re@iving and storing the gasoline in its tarike |

This was partieularly true, as the State insists, since at the

- time of these contracts the United States owned all gasoline

of this quality, 4nd without this Governihent business, sso

-wéuld have had no lucrative return on its tanks, and nade

no money with which to pay its personnel. apna

~ We conclude, therefore; that Esso ‘was properly assessed

‘with privilege taxed led in Code sec, 1126, et seq.

.Esso further insists that some of the gasoline received

in the Memphis tanks was later, on order’ pf; the United .

Stattes,-exported to Mississippi and Arkatisas. As to the

exported gasoline, it is insisted-that if liable at all for the

privilege tax, it is liable only for the tax at the export rate :

of 1/20 of one cent per gallon. Esso kept no figures of the

amount of the exported gasoline, and made noacturm show-

ing those figures to the Department of Pinance and Taxa-

tion, as the law requires. Apparently, it is impossible at

ethis pgint,to establish with any accuracy, what those figures

were. Since,-under the frame of the Act, the assessment

, for the tax is made on the returns of the taxpayer, and

since the taxpayer is claiming the exemption, the burden

Was on thé taxpaypr.te show the exact amount of the gago-

line exported, in Order to-avpid the higher rate. Hamilton:

'~- Natl. Bank vs. Me€ ‘anless, 176 Tenn, 570; Fidelity-Bankers

[fol. 263].Tr. Co. vs. MeCanless, 181 Tenn., 476, a

As to Esso’s insistence that by reason of the fact that:

the State made no demand for the taxes when they Beeame

due, and that State officers acquiesced. in the non-payment

of taxes, that the State is now estopped and precluded frome

‘collecting the taxes, it is only necessary ‘to say that there

was never any formal remission of these faxes by any re-

sponsible authority, and there is ‘substantial evighgnce inthe

record that the matter of taxability was held in- abeyance.

and never decided. In any event, it ‘is general law. (31

C. J.S8., Estoppel, p, 412, sec. 140-b), which has many times:

. been fMlowed by this Court; Natl. Life & Ace. Ins. Co, Vs..

Dempster, 168 Tenm, 446: Reynolds Tobacco Co, vs. Car-

son, 187 Tenn., 157; American Bemtherg Corp. vs, Carson,

@ 188 Tenn: ae that a mistaken construction of the law by

public ofi2rtannot work an estoppel against the State in.

the collection of its revenue. Phe record does not show that

i /

Esso wag prejudiéed in any way by a failure to collect the.

tay. State vs. MePhail, 156 Tenn., 459, 460,

\ Finally, we consider tke third question, and the assign-

“ment by the State, that the Chancellor committed error: in

‘remitting interest and penalties on the taxes. Under-the ,

facts of this case, where there had been no formal.demand .

by collectors at the time the taxes were due, antl -when there

" Wak a bena fide doubt of tax liability, the remission of inter-

{fol. 264] est. and penalty was within the sound discretion

of the Chancellor on principles of equity; Brewing. Co. vs.

Currier, 126 Tenn., 535, where at page 551 af the opinion,

Judge Green cites with approval, the following statement

from Cooley on Taxation: ees

if Ahe penalty should not be exacted: if the de-

-lay came from serious doubt of the validity of the tax.”’

‘(Cooley on Taxati&n, Vol. my fs SOR 3. oF :

oP his contréversy.is béing waged in-a court of equity .

and this Court, since Mast Tenn. Brewing Co. vs. Cur:

- rier, 126 Tenh.; 930, has exercised the power of remit-

ting penalties imposed upon taxpayers when the equi- »

‘ties of the case seem to demand. See also Shipp v-

Cummings, 158 Teny., 526, and State et Vs. Rowan, |

ef al., 171 Tenn., 612.9". Memphis Natfias'@o. vs. Me-

Canless, 180 Tenn., 695, 703-706. Ch,

oad ' earn A - , 3 .

From eee authorities, we conclude that the mat-

ter of the.ranission of interest and penalty was within the

- sonnd tiseretion of the Chancellor, and on the ‘facts of this

. [fol. 265] case, we find no abuse of that discretion:

- Finally, we consider the intervening petition of the United

States and itS assertion of ‘‘implied immunity.’’ -We ob:

serve that any Tfability of the United States, under ovr deci-’

sion, is the result of private contract with Esso, and not the

‘result of State action. In argument, it-was stated by.eoun-

sel for the @nited States, that the authority upon which

insisténcé for immunity is based, is’ the decision of the

Supreme Conrt of the United States in U.S. vs. Allegheny

County,322 U. S. 174, 88 L. Ed., 1209. Since we have held

that Esso. was only liablé for the privilege tax under Code

sec, 1126 et Seq., and since the only .tax involved in U: 8.

Vs. Allegheny County, supra, was an ad valorém ‘tax on

o :

ax,’ *

12 4 ie ? : : f : fe Sorc 2 4

personal property 6f the United States,. we do not find that

ease ip point here. That Esso was hable for the privilege

tax for doing business in the State, though that business

was done bntirely with property of the United States is set-

tied, we think, by James vs. Dravo Contracting Co., 82 L.

Ed., 125; State of Alabama’ vs. King & Boozer, 86 L. Ed.,

3; Curry va. U.S., 86 L. Ed. 9° In the course of the last opin-

ion, Which avas by Mr. Chief Justice Stone, it was sald:

‘*As pointed out in.the opinionin the King & Boozer

case, by concession of the Goyernment and on author-.-

ity, the cAénstitution, without implementation: by Con-

4 [fot, 266] gressional ‘legislatien, does not prohibit a tax.

Ss .. upon Government: contractors because its burden is

Passed on economically by the terms of the contract or

_ othefwise-as a part of the construction cost to the Gov-

ernment.’’ Curry vs. U.S., 86 L. Ed. 9, 11.

This rule was strengthened by the later cases of Penn.

-.. Dairies vs.°Milk Control Coma. 87. L. Kd. 748, and Mayo —.

vs. USS, 87 L. Ed. 1504. * 2 aah se peeagh

From thése opinions of the Supreme Court of the United -

States, we conclude thiat if. Tennessee sought to tax the

_ gasoline Which was stored, the tax would be invalid. Such

would be the effect of our approval of the tax under section

6821 -of the Code. *In like manner, if the United States was

storing its gasoline in its own ‘tanks, the tax would be in-

-Valid, but i this case we. have approved only the tax on

Esso for exercising the privilege of doing btisiness in Ten-

“hessee by storigg and distributing gasoline which was th®

property of the United States..’ The validity of that tax

‘follows from the decisions.in State of Alabama ys. King

& Boozer, supra, and Curry vs. 17. S., BRD IRs ee

All assignments of-error are overruled and the decree." ~

of the Chancellor is firmed. The parties will divide the

costs of the appeal. see a eet | )

. on

. .

J ‘ pn . s ° %

a: 6 ‘ = " eo ’

. . e , . .

{ ’

a er - .

: v . ‘

a “ad

ae | . sat : 3 | » ? 13

[fol. 267] Is Supreme Court or TENNESSEE -

‘ 4 $ : -°*

ce Decrre— June 7, 1952 Sal

Esso Stanv@hv On: CoMPANY

Vs. %

James Cuarence Eyans, Commissiones, Ete. ° ;

* ..: .- Davidson Equity. Affifmed

ere * , ‘ ite . $e f ———————

‘ This cause coming on net ma transcript of the

— —-;—~ record trom the Chancery Courtgof Davidson County, ‘as-

“gasoline tax fron

signments of error, reply brief and argument of counsel,

upon coysideration whereof the Court is of ‘opinion that in’

the decree of the Chancellor’there is no error. ;:

‘It. is therefore. érdered and decreed by the Court that the

deeree of the Chancellor be in all things aftirmes and that

the complainant haye and recovér of Jolin F, Kizer, Com-

missioner, efe. or his successor. in office the sum of $110,-

770.83 with intérest thereon from November 26, 1951 to this

date, being $3,138.50, in all .the sum of $113,909.33, and

two-thirds of the cost of the Court below, which will be |

. « certified for paymerit in the manner prescribéd by law. The

remaining thirgd of the cost of the Court below wil] be paid

by the Esso Standard Oil Company, principal, William Wal- s

ler, surety om cost bond, for which let execution issue.

_Itis-further decreed by the Court that the deferidant,Com-.

. -the complainant f8r the

ary, 1944 as asses8eq November 30, 1949, is sustained. .

_One-third of the cost of this appeal will be paid by the

missioner’s right fi collect and receive the baat Sere

—~

lonth of Jah. |

Esso Standard Oil Company, principals, and Willian; Wal- ;

ler, surety, for which let execution issue.

- The remaining two-thirds of the cost of this appeal will ,

be paid equally by the State of Tennessee and the United: ‘

. States of America, which will be certified for: payment in

the manner prescribed by law. 6/7/52.

(fal. 268] [File endorsement omitted, } rae

~ °

ft - = : | ° Bn

[fol 269] -In~ Supreme Covrtr or Tennesske

, -s . & \/

ag [Title‘omitted] 4

Petition For Renearinc on Benarr or Apreitant, Esso

STANDARD On, Company-Filed. June 16, 1952).

“.

" May it Please the. Court: a

~ Your petitioner, Esso’ Siandard Oil Cc ompany, one of the

appellants’ herein,. referred to as. ‘‘Esso’’, respectfully

states that it is much aggrieved by the opinion and decision .”

of this Court rendered in this case on Jane 7, 1952, in that

Your Honors affirmed the decree of the’C hancellor, denying

to the petitioner refund of gasoline privilege t axes assessed

against it under Sections 1126 et seq. ‘of the Tennessee Code.

Your Honors: held in the opinion of the Court written by

Mr. Justice (tailor that Esso was properly assessed the

seven cents per gallow. tax for exercising the privilege of

storing aviation gasoline belonging to thé United States

[fol. 270] Government, including gasoline exported by com-

mon earrier to other states, but that penalties and interest.

and the inspection fee should be rermitted to Esko. |

1. Esso id not- import the gasoline into Tennessee. .

In holding that Esso. was properly assessed with privi-

-lege-taxes under, Cgde Section 1126 et Seq., it was stated in

said opinion of this Court: : P

;

“«* Esso contends that it. is a condition precedent, to

5 liability for this tax, that the taxpayer shall have tm-

ported the gasoline, - While we find no support -for

this argument in the cases cited above, in the present

ase, it is unnecessary -to decide thht question since

technically Esso did import the gasolme into Tennes-

see. by removing it from. the channels of interstate com-

merce on the barges on the river into its trucks sand -

tanks onthe bank.’’ (Unless otherwise noted, all em-

_phasfs in quotations has been added. )

Esso cohtended that the mndiien erecndetl to its tax

liability, that the gasoline shall have been importéd or

transported by it ‘‘into’’ Tennessee, is expressly provided

bs .

a) ; . 2 5 : . 15

: niet <a , = ; ae

in Code Section 11.27. imposing , the tax und inthe > Gefinition’

‘of the term ‘‘distributor’” in, Code Section 1126.: Esso did

‘not contend that this statutory condition was also to Ve .

fSund in the cases cited by the, Court. In all the cases cited,

ow nerf the-gasoline had/not only stored the casoline but

had previously imported. the gasoline into Tennessee from

outside the State. ( -

[ fol. 271)" The primary . meaning of the wor, import? e

‘*to bring from a foreign country mto one *s own county:

we import wines from France. * Twentieth Century Die.

“Cort of the United States-in Canton R. Co. v. Rogan, 340

U.S. 511, 95 L. Ed, 488, as follows (340 U.S, at p. 515):

To: export means to carry or send abroad; to import

means to bring into the country. Thos@acts be gin and

e nd at iwate r’s edge. eee

» \ °

Importation hae one sfate into another i is analogous. to

‘the eondifion precedent ‘was in fact satisfied because the |

ae: The word was recently defined by the Supreme

importation | from, ,one country into another.” W hen the’

barges tied up "at ‘the docks on the Mississippi River the

-. gasoline in them was already inside the State of Tennessee.

Arkansas v. Tennessee, 246 U.S. 158.. In fact, as found by —

the Chancellor, the gasoline had been inspected by the State

(R. 363) and had, therefore, become subject to’ the jurisdic-

tion. of the State of .Tennessee before Esso took possession

the gasoline. ate ° ‘

A ease closely in point is State v. Fidelity & Depesit Co, of

Maryland, et ‘als 78 P. 2d 1090, decided by the Supreme

Court of Washington in 1938. In that case.the State of

‘Washingtm attempted to collect the. “fuel oil tax from

a railway company for the privilege of distributing oil. The

court ‘analyzed the statute in question MS follows (78 r. yi

at p. 1092) :

[fol. 272] “It appears, ‘upon analysis of sec we 79 of

the act, that taree classés of distributors are taxed,

namely :, (a) Persons whe refine, manufacture, pro-

duce, or compound fuel oil and se 1; distribute it, or in

any manner use the same‘ within the State; (b) persons

who. import any fuel oil into the State, and store, sell,

. . e

a «a ”™

&® y ; ’

withdraw, distribute, or in any manner use the same

within. the State; (c) persons why, having acquirgd fuel,

- oil in original packages or containers, distribute ®r sell

the same, whether in the original package or container or

otherwi ise, ‘or in any manner use > the same, .

It then held that the railway company was not liable for

the tax becanse, although it had received and stored the oil

in question, the oil, had keen imported | into the state by

another party. The Court said:

‘‘The word ‘import? when used as a verb, means, by

~ derivation, “to gear. or carry into,’ and by common

usage, ‘to bring in.’ In its technical meaning, it is

usually ‘employed to designate the bringing in of arti-

cles from a foréign country. In this statute, it evi- .

brought into the State by.

[fol

for

dently mezns the bringing into the state of fuel oil from

n who ‘imports’ -

brings fuel oil into

any place without the state. A per

fuel oil into the State is one wh

the State. sd

** we ad s *

‘ce * * it is admitted Mat the ofl i in question was

e oil company and was there |

sold to the railway compat}\just as the contract con-

templated. “We therefore hold that -the oil company,

and not the railw ay company, imported the oil. Accord-

ingly, the railway cgmpany does not fall within any of «.

the classes of persons which the statute makes subject

to the’tax, for, althgugh it stored and used it, it did not .

* # #5)

import and atore, ete.

273] 2. The grounds givenin the opinion of the Court

distinguisiing Feanessee Oil Co. McC anle SS, 178°

Tenn, 683 raise new issues of sonstitubiono® lax.

The opinion of the Court on this subject was as follows :

‘“Murther, Esso insists thet the decision i ill Tennessee”

Oi] Co. vs. Met ‘anless, 178 Temi. 688, relieves it from

‘liability in the present case. We find that case clearly

* distinguishable on the facts. -.In that ease, the Obign

‘County Board of Education rented a storage tank from

: f ae on 7

the Tennesse Oil Company; with an agreement that it

- would pay, the Tenfiessee Oil Company a:fee of two

'. cents a ealina’ for distributing the vas on order

~ Board. In legal effect, the Board of Edueatio . whicl

Was exempt, Was storing gasoline in.its owy ank, Al-

though the, rental of the storage tank wis a nominal

° amount; it had the effeet of changjng thd status of the >

Tennessee Oil C ompany from that’ of, an independent

contractor, to that of an agent or.servaht of the Bonri,

’ the.

In ‘the present case, the charge which Esso made the.

United States fer storage alone, was a very substantia]

and lucrative business and consklering the vast amount .

of gasoline involved, since the contracts show that: Esso _

charged from 18/100 of a cent fo 623710 cents per

. gallon for ‘receiving and storing the gasoline in its

tanks. This was particularly true, as the Gate insists, |

_since at the time of these contracts te United States

owned all gasoline’ of this quality, and without this.

Government Business, Esso would have Yaad no Tuera-.

tive return on jts tanks; and made no: money with which

to pay its Personnel. OF ae

.° In the fase at bar’ ‘the Court: hold for the Virst time, in

construing Code Sections 1126 et seq., that the ownership

of the gas@line is immaterial. In the Tennessee Oil Com-

pany case the Court: held that the determinative question

was ‘¢To whom does the gasoline belone when it comes to

rest in the State of Tennessee’’ (1178 Tenn. p. 691). As now

construed, Code Sections 1126 et seq., impose a tax of seven |

cents per gallon under the facts disclosed by the:record in

‘

[fol. 274] the case at bar, but no tax under the facts of the oes

Tennessee Oil Company casg, -@8-s0 construed Code See-

"> tions 1126 et seq., deny Esso The equal protection of the laws

guaranteed by the Fourteenth Amendment and are unconstle,

tutional and ‘void: because there is no reasonable basis for ~

the’ classification made’ by the Court, es ee

Your Honors did not undertake in the. opinion filed to

‘sp@@,out in detail the distinction or. distinctions between the

two wy sses of Gases, “the one where the tax is not due, awn -

the oher where the taxis due. Your Honors did hold, as wh

read the opinion, that the dis ‘titiction or distinctions between

2330, 338 9 eres ae

> \ : : . go hi “ a eat

iy the two-clissHic@tions are not such that Esso

. . \ ae ge

and the United

* States could have chosen to come. within. the exempt class, —

'~ rather than in the .won-exempt. class, and fave: made this

choige effect ive by a formal thange in the contracts, such as

* a provision for the payment of a nominal flat-renfal for the Bons

~ fise of the tanks in addition to the #@arge. per gallon., We

say this because Your Honors held that Esso was not ‘‘preju-

diced dn any way’? by the State's failure to collectd the tax

-ascand when it became due! Obviously if Esso ‘and the

“themselves in the Tennessee Oil Cempany classifieutton, the

_ Stnte’s failure to cellect theetax‘as and when it beCame“due,

misled Esso and did préjudiceit. The collection-pf: the tax

for one month would have,enubled. thé parties tofavoid the

_tax:for all succeedittg months: © 5 0°: 0 =

- Since Your‘Honoys did not spell out the distinetion or dis-

finetions betwéen the two classifications, we can do no more

“in this petition for ‘rehearing than .urge, as we do; that &

A fol. 275] whatever thé distinction or distinetions ate, they

oS a re-se anreasontble and a rbitrat-and (feking in substance.

void because they deny Esso edual-protection. of the laws,

— We deem it proper té-point out in. this connection that the

statutor@Mancuage itself: gives no su¢evestion of a distinction

or distinctions now made by the Court andythat no prior

\ decision of the Court suggests such distinction’ or distine-. —

~~. tions, Bees [hans td eee . a Nore

" \; We further deem it proper ta point out that the charge of :

_ to cents per gallon made in the Tennessee Oil Comphny > *

case-coveted hoth storage and distribution (withitr Obion

County) atid the ramge of fees in the efse at bar, 18/100 of’

avcent per gallon to 6-3/1) eent-per gallon, is based mainly

‘upon the mileage involved in distribution, where such Jistri-

bution was ta be made in.Esso’s own equipment. Inthe éase 4

cat bar (in volving Jannary 1944) the only distribution-from

the Memphis Terminal in Exso’s qwn ¥ehields was of gaso:

line going to\Memphis Airport: All the other gasoline was

delivered by Ksso to common earriers and the total charée

made by Exo was a fraction of a eent per-gallan: The facts

in this regard ark clearly set forth invthe briefs heretefore

_ filed, with specific veferences. to the record. Fig oe agri

It is well settled that ana rbitrary classification for pur-.,

as to render Code*Sections 1126 et seq., unconstitutional and a)

irs Of | ‘

‘ al \ rath ay a “ : J

- 8 =a x ; : : iS e

“

‘

United Statex could, by, Some such formal change, have put .

oo?

-3

> \ : ca ; ° e are: ° 19

“ P ‘ . . - ‘ a .

‘ poses of* taxation conilicts with the Fourteenth-Amendment.

Schlesinger v. Wisconsin, 270 U. §. 280. The Fourteenth

-Amendment requires that the classification be riot arbitrary,

{fol. 276} but baséd on a real and substantiat difference

having a reasonable relationtothe subject of the particular:

6 “se . * Safehy : y ? end ?

legislation. Qnaker ‘City Cab Co. v. Pa. 277 U. S. 389,

Phrasing the same principle differently : a :

~- «

» °*; The; equal protection clause of the. Fourteenth

- Amendmst_nrotects the individual from state action

which selects him out for discriminatory treatment by

subjecting him to.taxés not imposed en ethers of ‘the

_ same class.. The right ts the right to eqnal treatment.

Se ates ieee (Hillsborough v. Cromwell, 326 U. S. 620).

7 eave at

Section {126 et seq. of the Code of ' nnessee,s now con-

strued by the Court,. is wg a to amount to no

classification af all, and Esso specifically relie’ upon the, .

“equal protection of the laws clause of the Fourteenth .

Amendment as a ground for-this petition for rehearing.

° .

O29::"3

~ Itis respectfully submitted that the classificatien-nfade hy

3. Export gasoline. - . Ie oe ae

”

In the opinion of this Cogrt, it was. stated ‘that ‘Esso’ :

kept no figures of the amount of the exported gasoline, and>,

- made no return showing ¢lose ‘figures to the Department of

"’Finagee and Ta:;ation, as the law required, Apparently, it. ©.

is infpossible at tuts point, to establish with any acenraty, ~‘

what those figures weyeé.’?) gga 7%

There has been no dispute as to the amount of export

gasoline involved inthis case. Esso did keep the figures and:

(fol. 277] the exa@t amount for the -menth of Jantiary 19%

was 1,005,832 gallons This was the exact amount alleged

in the complaint (R. 7) and proved=yithout contradiction

~ (R.159, 174), and is the amount pec Ra in Exso’s third .

assignment oBerror., * Sei ts Pe cee Boog Cine

It is true that in Esso’s monthly report to the Commis.

sioner of Kinance‘and Taxation whieh included all the gov-

_ ernment oWned gasoline for January 1044, Esso did not five

separate figures on the 1,005,882 gallons‘of- export gasoline, °

"The reason for this was obvious. At the.time the gasoline

“in question was inspected, stored for export and exported, -

2 “4 {- . ry

te F

. .

: t e : : ° ©

ae A o . : oO ¥ t 8 <

a \ : e Sox nfs e

s d Fa 8 : , Ps *

2° OY. a Hae rates | =

~~ a pees \s

ys Ks amas de . Heke Ma.

the State was not claiming that any of the government

owned gasoline Was Subject. to either the gasolivie privilege

‘taxes or to the inspection fee. It was useless’ for the ‘tax-

‘payer to pay 1/20 cent per gallon inspection.fee and elaint

e angxemption as to additional taxes at a time when the State

" was not claiming ally tax liability, SVL re a Spt

‘No requirement of law has been pointed out whereby Esso

was required tor-make any return or report on the export

‘gasoline other than it has done. Chapter 50‘of the Publi¢

@ <° Aéts of 1943 (Williams Cade, Sections 6850.7-6850.11), the +

“a

statute whiclf provides for the exemption, was attached as an —

appendix. to Essa’s Assignments of Error, ete. on this -

appeal. We find no ‘provision in this statute requiring Esso

tomake gny Yeports other than the reports it has made, . “In

the letter’ of December. 16, 1948, in which Mr. Weakley re-

_ quested Esso to make monthly reports of the governinent.

owned gasoline, no request was made that the export easo-

line he reperted separately (Defendant's Exhibit 4)/° Esso ;

«included in its monthly rdturns -all the information, the

Departmgnt of Finance and Taxation ealled for and no tax’

[fol. 278] was assessed thereon until shortly before’ this -

likigation commenced, Beginning promptly after the assess: -

_ ment and collection of this tax on all the governmegt owned———

gasoline, Esso has co sistently claimed that it is entitled at

least to exemption from all but the inspection fee of 1/20 of -

~~ Leent pexgalion on the 1,005,832 ealions of export gasoline. —

In’ dette g the contention of Esso that becquse of the

inequjtable course ot conduct ef the State, the State: should

be denied recovery of the taxes at this late date, the Court

—-coneluded with the statement that “The ‘record does not

show that Ksso has been prejudiced ir any way bya failure

to collect the tax.?"7 | | $y SAL

¢ Even if the State-eantot be estopped, still it should not.

be ‘pefmitted. to’ profit from its own wrong. The State

Officials misled Esso into believine that Separate rejjorts

——and_payment ‘of 1/20 cent per gallon on the expert gasoline ° -

were not required, TheCourt correctly states that ‘under .

the frame @f the Act; the assessment for the tax. is made on

the returns of the taxpayers’, Here, the State did not make

such assessinents until several vears lafer. Esso’ has heen

prejudiced by sueh action-of the State, at least in so far as

the export gasoline is concerned,

- * °

° °

. : nf J e a;

a % * . ‘ = anes * ; - ae

’ , é ‘

2 to see Pisin em,

. Your petitioner respectfully requests a rehearing based’ ‘

/ upon the propositions disenssed above. nh stecorwel am

A copy of this petition has been furnished counsel for the 3

State. fe te c Pek “” x; chara

Respectfully submitted, Waller, Davis & Lansden,.

.. by William Waller, Solicitors for Petitioner, Esso

“ 2 Standard Oil Company. A eee ON

{fols. 279-280] Stare or TENNESSEE, hy ; thie hier

Pageant ge County of Davidson: sey an

I, William Waller, make ‘oath: that [am one- of the -so-

licjtors f the petitioner in this case and that-in my opinioy.

the petitioner is entitled to the relief sought. os ey fie

Ie 8 William Waller.

- Sworn to and subscribed before me this 16th day\ of

Ais June, 1952. O. Lawrence Darteh, Notary Publ\

' ~My commission .expires: 1/42/55, (Seal.)

‘ s

Receipt iseacknowledged of a copy of the foregoing peti-

tion for rehearing. 'Phis 16th of June, 1952. ee Sas

_ Walker & Hooker, Cummings & Crabtr ¢, Solicitors _

a: for State. of Tennessee, by K. Harlan Dodson, Fr, :

, [fol. 281] Ix Supreme Court or TENNESSER | e Spt

x. ° : - ~

i ST [Title omifed]’” : : ee

i. as

Reply ro tat Perron rok Reneants Prep py run Ape." 7

LANT, Esso Stanparp On. Company—Filed June 26, 1952. 4!

May It Please the Court; ”

. sie sn Tass : Set Se

sii Under date of June 16, 1952, the appellant, Essg Stand-

+" ard Oil Company, hereinafter’ referred to‘as Esso", filed

a petition. to rehear to the opinion and decree of this Court”

dated June 7/1952, which said opinion and. decreevafiirmed |

a [ fol. 282] the-deeree of the Chancellor denying the appellant,

Ksso, the complainant below, a refund of certain privilege —

faxes assessed acainst it by ‘the Commissioner of Finance «

and’ Taxation, Ne ete ied , bead

se , 6 ite

A : : , , ' ‘ 9

et 3 - ; \

Be = os

-—

4 x Bat ae . . \s P .

Xt The petition to rehear is divided into three ‘parts, and

3 we will reply to the same for clarity in the same manner.

2 \ 1. Appellant’s insistence that “‘Esso did not import the

“ "\gasoline’ inte Lemnesege”’. 0 te 2... ae” RE Set

\ As we read appellant’s argument, it is identical with the

argument nade by it im‘its original brief filuri in this cause

(pp. 18-20,° ** Assignments of. Error, Brief and Argument

of Appellant, Esso Standard Oj} Company’). This being

true, under Rule 32 of this Court, the petition’ to -rehear

Should be.refused, > eee aah tin ese iee

-Evenif this Wee not true, appellant's argument is fallaci-

» Qus for two reasons. In the first place, this Court*and the -

~-, Supreme:Court of the Untited States, as we pointed cut.in

>" our original reply brief (pp, 14-18, ‘*Reply to the Assign-

ments of ‘Error, Brief and Areument Filed by Appellant, .

Esso Standard Oi] Company’’) have, previously found that

our. Statute imposes. a privileye tax on the ‘business of

_ Storing gasoline-which Esso admittedly did.’

N. Cvd Nt.L. Ry. v- Wallace, 288 US. 249, 52.8. Ct.

; haa NPs hy & Gees preeere etrtes :

ee pi F 283] \Texras Co. v.Fort, 168Wenn. (4 Beeler) 679,

as SOB. W. (28) G58 I

. le? Quick Service Tire Co.°v. Smith, 156 Tenn. (3 Smith)

ae 96, 299-8 W. 807 . eatin ¢ ;

‘~ ". Poster &. Creighton v. Graham, 154 Penn. (1 Smith)

“412 985 8, W\ 570. . ;

+; Seeodndly; as the appellee pointed out in its brief and”

, 2H oral argument, to-which argument. appellant attempted

to reply when the case was heard, and as found by this

Court, (p. 7, Opinion of\the Supreme Court—of Tennessee

by Mr. .Fustice Gail6r),*Rsso did import the gasoline-into

Tennessee’ by removing it\ from the-channel of interstate. .

gommerce into Exsois storage facilities. “e .

wae: results, therefore, that under: either theory, as pointed

out by Mr. Justice Gailor iIn\ thé: Court’s Opinion.(p. 7),

. . e ° ‘ ‘ P es

this ¢ . “22 © * ee ee eet " :

this Court wes ergmiently correct in-its response to this”

° assertion made -by Bxso on theoriginal hearing, |

8 . ;

; ake

i me ae * A)

ate tee : &-y ' P ss ‘ - 93

= ¥ a 3 3 : J

2. Appellant's insistence that * The grounds given in the’

- . - y : 1 ‘ , eel 4 Ree ie ~ 7 a Sah eal ak ry ,

opinion of the Court for distig.guishing J ennessee Oil Co,

wv.’ McCanless, 178 Tenn. 683 raise new issues’ of constitu:

tional law.”’ Re - :

Appellant, now for the first time, seeks te raise a new

Toke Sie . "3 . 3 : . >/ > e

eonstitutional question; ofie not raised in the Court below

or in this Court on the main hearing of qe cause, ’ This,

of course, cannot be done; this Court having previously.

held that it will not consider a Federal constitutional ques-

[| fol, 284] tion raised for the first time in the litigation on

a petition to reheag. - | ay

ae Tenn, Ou Co. v. 'McCanless, 178 Tenn. (14 Beeler)_683

at 703, 162 8. Wy (2d) 1084, app. dis. 68.8. Ct. 34, 317

—s. U: S. 588, 87 L. Bda4so. Ane

Even if this were not the: law, petitioner's C@cTusion

‘would be without merit, being based upon spurious reason-.

ing. This Court properly held in its Opinion by Mr. Pastice:

Gailér that thé case of Tennessee Oil Co, uw. McCanless, 178°

Tenn. 683, was completely distinguishable on the facts.” In

the Tennessee Oil Co. ease the Court found that a vovern--

mental agency, complétely exempted from the tax, was

storing in its owm tanks. There is no tax on the privilege

of owning tanks, but only on the storage of vasoline in such

tanks. It is true in that case that Tennessee Oil Com.

pany owned the tanks, but it was not exercising the privi-

lege of storing gasoline, the privilege taxed, Here Esso.

Was exercising the* privilege of storing the vasoline, the

taxable privdege, from which it received substantial revenue,

and therefore the tax was properly. imposed. :

There is, we respectfully submit, no‘merit in the angu-

ment that because,’one, whe is found by the Court aot to.

Me exercising the privilege taxed, is not. taxed, whereas

[fol.. 285] one, who is found th be exercising the. privilege

taxed, is subjected to the statutory tax. — bard

3. Appellant ’s insistence as respects “‘Edport gasoline”.

Again, appellant is confronted with Rule 32 of this Court

requi¥ing a refusal of the petition to rehear for the reason

that the. argument now made isathe same as that made

s @o

ee renee

| before, even though it be couched in slightly different lait

guage (pp. 36-37, ‘*Assignments of Error, Brief and Argn-- .

thent of Appellant, Esso Standard Oil Company.

~ Certainly, Esso cannot now elaim the benefit of an exemp-

tion when it did not furnish any records to the Department

at the.time fropi which the epartment could. make any

' ”. considered determination of the accuracy of the same. Nor —

is it any answer for Esso to say that at this late date they .

can now.come forward and furnish such. | Ea.

: Based on the returns filed by Esso with.the Department, q

from which the assessment here complained of was made,

the assessment was entirely proper and legal, and in fact

was the only assessment which could have been made from

the records furnished Oy Ringp. 05 ee

‘[fol. 286]" Wherefore, we respectfully submit that the

petition to rehear is totally without: merit; and the same

should be forthwith denied. ; ones

Respectfully | submitted, Cummines -& Crabtree,

~~ Walker, Hooker, Keeble, Dodson & Harris, by:

re ee K. Harlan Dodson, J r., Solicitor for the Respond-.

ent, the Appellee. . ;

| ed

‘Proof of bervige (omitted in printing), © ° A

-(fo]. 287] . Ix SUPREME Corr or Tren Sesser

Davidson Equity *

- .Ksso Stanpakp Or Company ? | .

ope Re ares F SAN eM eat tag ay ne ea ND

James Cuarence Evans,‘Commr., ete,

‘ Ovrxtoy on Petition to Rewear a

' Petition to%ehear has been. filed secking a hineidcen:

tion of our former opinion. The petition'is divided ‘into

three parts. - | «- a E ; es

By the first part, it-is insisted that Esso did‘not ‘“*import?’.

the gasoline upan which the tax was laid. In our former

¥ °

pecs | | = 35

. opinion, we’ held that it was unnecessary td-a deéision, to

_ decide whether or not Esso had imported the gasoline, and

| expressly so stated. . aoe SE Oe kK. :

—_—

“*Nsso contends that it is a condition precedent to

liability for this tax, that the taxpayer shall have im:

ui ported.the gasoline. While we find no support for this. .

>. [fol. 288] argument’in the eases cited above, in the

present ease, it is unnecessary to decide that question

since technically Esso did import the gasoline into’

‘Tennessee by removing it from the channels of inter-

* state commerce on the- barges on the river into its

Poy ‘trueks and tanks on the bank.” Oe iigs

. . ; p ? : a

. , We reaffirm that holding. i eee i

By the second part of the petition te rehear, it is re-

argued that we should apply the rule ni@® in Tennessee Oil

> Co. vs. NCanless, 178 Tenn., 483. -We' fully considered

that case in our former-opinion (pp. 7 and 8) and fonnd

and held that it was clearly distingalishable from the, case -

at Bar. We find nothing iit the re-argument to change our

_ former opinion,.and the re-argument itself, clearly does not

_ justify: a rehearitig under Rulé 32 of this Court. 185 Tenn.,

“ 1p eee eee nies =

By the third and final part of the petitioh to rehear, Esso

"claims that we should modify our former opinion, and make

- < . allowance to it on account of that part of the gasoline han-

Med and taxed which was ‘‘export gasoline.é’ Under the

law, the tax is assessed on the returns af the taxpaver. It

» is not insisted that the Commissioner didnot ‘make the

assessment inthe present ease, in accord withyfie eeturn-

_made by Esso. The Petitioner is, therefore, in the position.

[fol. 289] of seeking to falsify Ws own return. This Coirt

ould only decide between conflicting returns and assess-

ments,.that is to say, if.the Commissioner proposed one

return and assessment, and the taxpayer proposed atiother,

* . |» doubtléss, this Court could decide: betweett them, but the

| sent record presents no such coniflict.. he |

: “We find. nothing*in thé petition to rehear to escape the

+ & ~ appljeation of Rule 32, 185 Tenn.. 879, and the petition to

: rehear is dettied, _- . : | >

a ~ 7

: a's 7 < i J

5 : ox a Ta oy, ss

. . .

[fols. 290- 20a] In Suprene Caner OF Tex NESSEE

: Al

y - Davidson Equity

Petition to Rehear Denied

Esso Stanparp On, Company et al.

- a”) vs. | : “2

JAMES teeta Evans, soba pec epanead ete.

This cause coming. on pee en a Retition” to is ‘

reply thereto, upon consideration. of all of which, for the ..

_ reasons-statéd by the Court-in its opinion ‘filed, the opinion

is denied at the cost of the petitioner. 7/31/82.

_{fol. 291] In -rHe Cuanxcery Court or Davipson Country.

- 3° . .[Caption omitted]

Chair: ‘Bu 1—Filed acenhar 29, 1949 ° |

To the Honorable Thorfias A Bhesvert Phanestior Holding

the Chancery Court, Part One, for Davidson County, |

“Tennessee : No. 68050

. “pl of ( ‘omplaint of

[fol. 242)”

Masso “Stanparp On ‘Costpany,

QWualified To Do

-plainant,

James Cbarenc E Evans, C

Taxation of the State 6f

Residence in Davidson (Cc inty, Tennessee,

Complainant respectfully

Vs.

eur

The parties are as stated in the ‘cation.

_ Corporate name of complainant’ was Standard Oil Company

QO.

Delaware’ Corporation,

usinegs in sonatas and Having an,

Office and Age ney in Dav ideon (' ounty, Tennessee, Cc

OM-.

Inissioner of Finance and

‘ennessee; Having Tis Official

Defendant:

tates rm he C ark as follows:

The Sodviey

of New Jersey, which by charter amendment.effective Janu-

ary, 28, 1948, was changed to Esso Standard Oil Company.

Complainant is the. successor to the Business, £2 nchises,

property and fights of Standard Oil Company of Louisiana,

a corporation organized under ‘the laws of Louisiana on

April 10, 1909. By an agreément of merger dated Decem-

ber 8, 1944, effective as of. the close of business on Decem-

ber 31,1944, Standard Oil Company of Louisiana Was

merged with and into Standard Oil Conmipany of New Jer-

sey and -under’ said ‘merzer_ the surviving corporation

* - thereof, Standard Oi} Company of New Jersey (complain-

ant’s former corporate name) suceeeded Standard Oil

Company of Louisiana. and has continued without interrup-

tion the business theretofore conducted by Standard Oi

~ * Company of Louisiana in the State of Tennessee. In 1944

‘and for many years prior thereto Standard Oil Company >

* of Louisiana was a distributor of gasoline in the State of

‘s Tennessee as defined in Section: 1126 of the Code of Tei.

nessee. and was properly qualified as such, and since the

- ** merger complainant has been a distributor of e¢usoline in

the State of Tennessee as. defined in Section 1126 ef the

‘o #Code and,has been properly-qualified ‘as such. The word

‘complainant’? as used in this-complaint means Standard

Oil Company of Louisiana whenever references are mace

to a period of time priogge the aforesaid merger.

fol 298) 222 ZF Il ;

This is a suit’ brouctt to recover $295,810:10 alleged to

have been due and owing by the complainant for gaseline.

7° taxes and inspection fees for the month of January, 1944,

together with penalty and interest thereon, and gaid under

protest by complainant on-November 30, 1949,-atfer a dis-

tress warrant had been prepared and signed by the defer

ant, Commissioner of Finance and Taxation of the State

of Tennessee, and itseissuance and service threatened,

: 1 Pe

* (a) During the entire year 1943,-or for the greater part

of that year, the complainant was engaged in the perform.

ance of a contract entered iito by it with the United States

of Ainerica, to wit, Contraet No. W 535 ae 36547, and duly.

g AZ recuted supplemeuts thereto. . ba

ga?

_ (b) During the entire month of Jannary,-1944, and suh-

. Sequently thereto through June 30, 1944, the complainant

_ was engaged in the performance of contracts into which if

entered with the United States of America, being contracts

» Nos! W-33:038 ae 1683, W-33-038 ac 1863 and W-33-038 ae -

_ 1669, and.duly executed supplements thereto. isha Nek

-(c) During the balance of 1944, the entire year 1945 and:

during part of the year 1946, the complainant was éngaged

in the performance of contracts.entered into by it with the

United States of America, . being Contracts Nos. W. 33038

-- ae 13022 and'W-33-038 ac 12046, awl duly executed slpple-

ments thereto. =. @ : foe ors as fncae siewa

_ (fol. 294] (d¥ 44] the above mentioned ¢ontraets are. in

“all relevant respects similar in form; nature and effect.

co) AD of the above mentioned ‘contracts were entered

into @ the United States in thé Purtherance of its prosecu-,

- tion of World War IT which was then iti progress. |

: Serit if pas

| : a av Ey rian ae eae

Under the provisions of the cqntracts mentioned in, para:

graph Il hereof, the eomplainant, for fixed considerations

Fanging from eighteen one hundredths of a tent to 6.3 cezits

per gallon, undertook to, and did, recewe from the United

States, in. Tennessee, aviation gasoline which it was to, and:

_ dil, place in its own facilities and in facilities belonging to

others and leased by the ¢omphinant for thegspecifie pur-

pose of its performance.under the mentioned contracts. 21]

located in Tennessee, and which it was to,.and did, deliver

to the United States at points within the St&te of Tennessee

or to common carriers or cofitract Garriers employed by the

United States for “transportation to points without the

State of Tennessee, all in accordance with directions given

- to it hy the United States as provided in seh contracts.

”

: , .

Vv ot eee ae

. .

Under the provisions ofthe contraets mentioned in this

'. bilb of complaint all applicable and valid State or Jeeal.

taxes, fees and charges required: tobe ‘paid by. .the ‘cone

_ [fol 2957 plainant because ofits performance thereunder

are made reimbursable Yo the complainantas am obligation

of the United States under, the ‘terms of. the yespective

° . ° ¢ d J

u ;

\ 7

contracts, Therefore complainant alletes thay the United

States-is direetly and immeidately affected by the. prosecn-

tion af this'eause” | i: : tate

: . . ,

Dureing.the period of time involved in this suit and dur-

_ ing all of the periods when this complainant Was engaged

in the performance of the contracts hereinabove mentioned,

this complainant at- the tine of its receipt of government .

owned gasoline in Tennessee, had no interest or equity “in,

or other ownershtp of; or independent control ‘over, any

government owned gasoline delivered to it by thé United

States. - , Atk ae op | eye

: 73 ia — Vili Rr oaieg

| ‘Complainant alleges that with respect to all government

owned gasoline received by it in Tennessee under the” pro-

: Visions of the contracts mentioned above, employees of the

Gasoline Tax and @il Inspection Division of the Tennessee -

. Department of Finanee and Taxation signed inspection

reports showing the receipt of such gasoline. These reports

_ were filed with the Department of Finance and Taxation at

> Nashville, Sei pee ean : .

| . id # os Re ices

Complainant alleges that upon the written request of the

Tennessee Department of Finance and Taxation, ‘this com-

~ .. [fol. 296] pldinant, beginning with the month-of December,

19483, made monthly .reports ‘to ‘said Department of all of

its receipts of. government owned gasoline and continued

to make monthly reports of similar receipts for the entire

years.1944 and 1945 and for the year i946 up to the time

the performance of said contraéts had been completed.

° | : ; = - IX '¥

At no time during any of said years, nor at any time until

Rugust ‘10, 1949, did the defendant in this cause, or bis

predecessors in office, make any demand upon this complain-

ant forthe payment of any -tax_or inspection fee on account

of government owned gasoline received by the complainant

as, aforesaid, but to the contrary the. defendant and Ms

- * ptedecessors in.office, with full and actual knowledge

complainant's perfo&iance of the contraets above men-

3p a, Ses

. tioned, treated the receipt, storage iad delivery of govern-

thent owned gasoline in conformity with the contracts agove

mentioned as being free from tax and not subject to any

exdction under the Tennessee gasoline tax ahd oil inspec-

tion. Jaws. rs fei

% Pate

[In refance upon the sclibetaubranenes and continued

adininis rative construction placed on the Tennessee gaso-

flue ta and oil inspection laws by the State of Tennessee

and th & officers of that State charged with the ndministra-

‘tion and ‘entarcement thereef to the effect that gove ica

owned gasoline received, stored and delivered in TO -

“eitras yot subject to the Tennessee gasoline fix

or to the payment of any Tennessee inspection charge, Ybe— .

complainant and the Qnited States entered into and’ per-

‘ formed for the) year 1944, and subsequent years, contracts

"similar to the/ contract applicable | to the year 1943, and

neither eomspiainaal nor ‘the: United States woykb have

‘entered into such’ contraets except in reliance upon that -

recoznized construction.

< 9 tn ee Stree Os ; /

The defendant has advised complainant that in ‘addition

- to the payment exacted of the complainant for the month

of January, 1944, nientioned and described in paragraph IT

of this bill of complaint, taxes, penalties, interest and in-.

‘spection Tees are dae for the remainder of the year 1944,

. for the. year 1945, and for the first six months of the ‘year .

1946 agsregaling "$5,818,212.16 “of. daxes, $381,821. 19 in’

penalties, $1,157,677.81 in interest to Setkambes 1, 1949

and $220,203.40 in inspection fees, ie additional

Interest to November 30, 1949 of $87,273.18, and ineluding

the assessment for-the month of January, 1944,. ($295,-

- 810.10) the total -figgre is $5,830,997.84- The defendant at

‘first made an additional -cluim for 1943 but, wRhdrew it

because it was barred by the statute of limitations. « ne

o fing . °

XH:

(a) The gasoline taxes and inspection fees exacted of the

complainant and paid as alleged: in paragraph Il of this

"bill of complaint, are based entirely npan and measured

a . é.: = > ~

; , -

4 ® 3 "Pitas Veer i - :

es | 31

Pfol..298] by aviation gasoline owned by the United States

and brought by it into the State of Tennessae and in which

the complainant had no interest or’ ownership, Upon the

delivery to it-by the United States in the State of Tennessee

of such gasoline, the complainant beeame, under the provi-

sions of the contracts hereinabove mentioned, a bailee ‘of

the United States for hire. |

(b) Complainant pArade no deliverjes from the aviation

gusoline owned by the Unifed.States and received by it us

aforesaid, other than at the direction of the United States

and at no time“did complainant divert to itsown use, or to

‘the use-of any other, any of the aviation gasoline so received

by it. With respéct to such gasoline the complainant was’

at all times subject to the directions and control. of the

- United States. d :

Oe Oa

; Complainant alleges that during the morith of January; -

1944, the government ow aviation gasoline,-upon or by

Which the tax, penalties, interest and inspection fees. men-

tioned and -deseribed in paragraph IT of this bill’ of ecom-

plaint were based. and. measured, aggregated 2,840,529

vallons and-was received as will appear from attachment .

hereto marked Exhibit A to this bill of complaint.. *: -

fog i eae

Complainant, allege*that during the month of January, -

1944, upon or at the direction 6f duly authorized agents

_[fol. 299] of the United States, complainant made deliveries

to the United States as follows : |

° o ae

‘At points within: the State of Tennessee—1,760,213

‘gallons | Reha aT :

. To common carriers for’ transportation ‘for the

United States to points without the State of Tennessee

~-1,005,832 gallons. _ ad ape

Complainant? further alleges that both before and after

-the month of January, 1944, deliveries of covernMent:owned

gasoline were similarly made at the direetion of duly au-

thorized agent sf the United States, Hata

° i \

| XV : tna

Complainant alleges that included in its receipts of gov-

ernment owned gasoline during the month of January, 1944,

and ‘upon which the tax mentioned and described in para:

graph IE of this bill was based and measured, wer™recei pts

of $2,198,915 eflons of aviation gasoline purchased ‘by’ the

UniteStates from competitors of coniplainant without the

“State of Tennessee... Complainant had no-part in the refin-

ing, manufacture, production or compounding, and no part

in the shipment, transportation or importation into Tens

nessee, of such gasoline and‘at no time did complainant

have any interest whatsoever im such gasoline except that of

a baileé for hire. . e eg NE \ |

[fol, 800} - - XVI

Complainant alfeges that ineluded in the “receipts by

coquuplainant during the month of January 1944 of govern-

ment owned gasoline as se¥forth in Paragraph XIII of this

bill of complaint, were 2,833,987 gallons of aviation gasoline ,:- -

Feceived by-complainant at Memphis, Tennessee as follows:

(a) 995,082 gallons were punsped into three tanks woned

“by Lion (Oil Refining Company, designated Tanks L-1, L-2,

‘and L-3) located adjacent to complainant’s .own storage

facilities,-which three. tanks were leasedLgy complainant’ -

for the sple purpose of containing govegiment owned -gaso-

line and) were not otherwise utilized Hy comphainany. In -

-accordanté with its contracts, the United States paid éom-

-plainant for handling this gasoline, in addition to a specified

rate per fallon, fixed amounts which were exactly equal to — -

the rental’ paid by complainant for said tanks plus its ex-

penses in| connecting them to its pumping facilities,

(i) 79),744 gallons were pumped inte a special tank of ~

“complainant, désiguatéd Tank 17,. which was not otherwise

utilized by complainafit but which, at thé time. government

owned. vasoline was-first-introduced theréin, contained a

small amount of. complainant’s gasoline of like grade and’

quality upon which Tennessee gasoline tax and inspection

fees were duly paid, that.could not be removed from the

bottom of the tank. @ ;

-, [fol 301] (ce 1,058,161 gallons were pumped into two

tanks of complainant, designated Tanks 7 and 8, that also

+. ss

contained_a quantity gf complainant's gasoline of like grade.

y ee J a

‘and: quality placed therein during 1943 and upon which ,-

‘Tennessee gasoline tax and inspection fées were duly paid.

During the!month°of January 1944 no company owned

gasoline was placed in any of said Tanks, L-1, L-2, L-3, 7,

Sorl7. Alleustodyot govermnent owned gasoline by com-

plainant ceased when déliveries thereof during January

were made (1) from the foregoing’ tanks to government

- owned carriers or to common carriers for transportation

contracted for by the government, or (2). from com plainant’s

tank trucks to government owned storage sfacilities in Ten-

nessee. Throughout the remainder of the period in which

complaimant handled government owned gasoline, the same:

tanks were used to contain such gasoline and the manner of,

utilizing such tanks continfed as hereinabove alleged for

the month of January, with the exception that company

owned gasolirfe of like grade and quality upon which Ten-

nessee gasoline tax and inspection fees were duly paid, was -

placed in Tanks 7 and’ 8 at times during 1944,

has ie XVI un eyo

Complainant alleges Yat included ‘in the receipts by com-

plainant during the month of January, 1944, of voveru-

ment owned gasolimre as set out in paragraph XIIT_ of this

bill of complaint were 6,542" gallons of aviation gasoline -

received by it -at Knoxville, Tennessee, This receipt was

| fol. 302] from a common ‘arrier tank car, shipped on gov-

ernment bill of lading from outside the State of Tennessee.

Upon receipt of this government: owned gasoline it Was

placed in a tank of complainant along with gasoline of the’

Same grade and quality owned by the complainant inewhieh

the United States had ‘no interest, During the month of |

January, 1944, deliveries of government owned gasoline

were made to the United States from complainant’s tank by

fu@ling geverninent owned airplines at the Kn rille, Ten-

nessee, airport, by use of complainant’s tank Wee

Ae : ° ey ° .

CA Sac es eae

Wholly aside from any Federal question, complainant

ailéges that the gasoline involved in’ this suit conld not

; > “3990 ‘390 ©

’

be made the measure of gasoltne tax or dil Hispection fee -

& liability of compjainant\ under the provisions of the’ Terr-

nessee gasoline tax and bil inspection laws, properly, con-

struéd and applied, for the reason that such wasoline was

tke’ property of the United States prior to and at the time —

@t its impottation into tha State of Tennessee; that’ none

of it was refined, manufactured, produced or compounded

within the State of Tennessee »that.none of Tt came do rest

' ~~ in Tennessee_as the property of complainant; that the °

: - United States’ was the owner of ‘such gasoline at the time:

it was shipped, transported ‘and imported infio thé State of

Tennessee; that it was shipped, transported and imported

'. into the State of Tennessee by ,the Vhited States ‘and yone

[fol. 303] of it was shipped, transported: or imported by =

complainant into the State of Tennessee, within.the mean-

ing of Section 1127 of the: Code of Témessee, as amended ;

and that the Unjted States as the owner of sugh gasoline’ ”

was both the consign and the consignee of sueh gasolige

Nd te NT aA

and complainant was neither the eonsigner nor the ‘eon-

: signee thereof, within the meaning of Section 6971 of| the

Code of Tennessee. Seer Pats els

ae sb Ce ade ers

= Complainant alleges that under the Tenntssee gasoline

tax and oil inspection laws the gasoline delivered .by it to

“common carriers for transportation for the United States

to points without the State of Tennessee, including that set

_ forth in paragraph, XIV of this bill‘of coniplaint, to wit

1,005,832 gallons, was not, in any event, includille in the.

measure of tax liability by the State of Tennessee and that

the inclusion of such .gasoline'in the measuré of the tax

mentioned and deseribed in paragraph IT of this bill is il-

- legal and void, under the provisions of Chapter®56, Public:

> Acts of 1943, as amended by Chapter 147, Publie Acts of

1947 (Williams Code, Sees. 6850.7-6850-11). Under said

statutory provisions, not more than oné-twentieth sof one

cent per gallon inspection fee was collectible’ on. such

gasoline. as pes

. ~~. : e XX i “a / ae ‘ HE

3 é ‘ 2

- _ ‘Phe Tennessge gasolint tax law. if construed ‘as requiring?

iy" _ the inclusion in the méasure of*the’complainar's tax, to be

e ; Sanh, -

computed: under that law, gasoline belonging to the United

[fol. 804] States-exel sively and merely if the possession -

of the complainant as a baileé is repugnant to the Consti-

‘tution of the United States ‘and void. ° z

. os eee erate | ge

Moa 4 :

3 ‘The assessment to the complainant for the purposes, of

the Tennessee gasoliné tax law of gasoline belonging ex-

) clusively tothe United States, by ‘ineluding the- quantity ,

of such gasoline in the meas re-of ‘the tax assessed, is

illegal and void for the reason-t)at such assessment is upon.

the exclusive property or instrunfentality’ of the United

iat i which is immune from, taxation by the State of

Tennessee under the Constitution of, the sre States!

- *

. XXIT eee

. The assessment to the comiplair ant and the exactionfrom

it of the taxes mentioned in parigraph IL of this bill of

~ complaint imposes a tax ujjon_ property which is ai instru-\_

mentality of* the United: States amyl constitutes an uneon-*

stitutional imposition ‘upon the United Sfates.

TG ARR ee: 0 411 eee

. The sere ugant” by inchiding gasoline @wned: exclusively’ .

o\. by the United States int the measure‘of the tax alleved to be

: \ Pane ; -. pn = Me F}

| \due by the complainant’ for -the purpose of the, Tennessee

asolinetax law has applied the,provisions of the Tennessee

gaXoline tax law in a-manner Which renders=thattaw

Invalid under the Constitution of the United States. |

a = ; ae < “* i}

fo = oe. 3 :

[fol 305) = ot RV

With raspect to the Tennessee dil ‘inspection fees ‘ex-

acted of this complainant as mentioné! in ‘paragraph II of

this bill of cowiplaint, the complainant alleges that, insofar

as any portion ef wach exaction may represent the imposi-

tion of a tax eth State of Tennessee, such exaction_is

Invalid, unconstitdtional and yoid for-the reasons alleged.

in paragraphs XX Yo XXIII, inclusive, of this bill of com-

piaint and-above set Yorth. . eee

in TNS

36 a atey eR ea ere °

cl, Oaeien

Se egy

— Thé complainant allege’s.that with respect fo.so.much of

the Tennessee oil inspection fees exacted of it as mentioned 5. -

in. paragraph I of this bill of complaint as may represent <. -

an exercise ofthe polige pqwer’of the State-ot ‘Tennessee,

or a charge for servicés by the State of Tennessee, said ex-

3 : : or we d % ; see

action is violative of Article VI, Clause 2, of the Constitu-

tion of the Und States, since such exaction constitutes -

an uncoustitutional interference by the Staté of: Tennessee

with the exercise of. powers. granted to the United States

under the Constitution of the United States.

i ‘

me se SET

Complaint alleges that under the facts hereinbefore set

forth the imp®sition of penalties is-inequitable and that

complainant is entitled in this Court of equity to be re.

lieved against them, all other questions aside,

[fol: 306] | - Co 0.421 ee

* Complainant aiieges that, for all the-reasons hereinbefore

set forth, it is entitled to recover of the defendant the. sum

of $295,810.10, applicable to January, 1944, paid by it under

protest on November: 30, 1949, as hereinabove alleged in

paragraph IT of this bill of complaint; together with inter-

est at the legal rate of 6% per annum pn said sum until the

date of the deeree, and that it is further. entitled to a de-

claratory judgment or decree that it does not owe taxes,

penalties, interest or inspection fees for the remainder of”

the year 1944, for-the year 1945, or for the year 1946, or

for any part ef any of said years, as claimed by the defend-

Premises considered, Complainant prays:

-1, That proper process issue requiring the defendant to

appear and answer this bill at any early rule day but his

oath to his-answer is waived. Sake thee mee E

2. That upon the khearine the complainant have a decree

against the defendant for the sum of $295,810.10 together °

with interest at the legal rate of 6% per annum from and

after Noveniber 30, 1949, and that.the proper certificate |

eS s

teeta tamed

: 37 «

he. ‘made, pursuang,to. the requirements of Code Section

1793, to the end that the. Comptroller of the State of Ten-

_. nessee shall issue his w arrant for the amount of said decree,

* » Which shall be paid in preference to other claims on the

treasury. - [ftom ,

ffol. 307] 3. ‘That: a detlarniacy judgment or decree de. ’

entered ad Judging and decreeing that-the complainant does

not owe taxes, penalties, interest or inspection fee# for the.

remainder of the ye: ar. 144, for the year 1945, or for the year .

1946, or for any part of: any. of said } years. :

4. For general relief, ore . Suey

Armistead, W aller, Davis & paneden » Solicitors for

C ‘omplaint.

T am surety for. tie costs of this cause not to exceed

$250. 00.

‘William Waller.

_ 2

Q : : ;

Ute °

7 ie

£ : e

ad o

ad 5 r

Neal i aneee ae ieee | | pee | | | 3

. : c

} | ; 3 z

, 3 :

. 4 - ° «

[fol 307a) \\ "°° SEE aa can | ; | : | . |

orate » hy eae .* at ¢ .. | Exurpir A to CompLatnt’ ata! aoa

af ; ae th 60-Degree Gallons. Received

Received — Shpped * Shipped. ies ea ea Oe ee Tank — —— ar ae -

aE ec s POMS 3 ys PR en ten nara Received Number , .Grade 87 -Grade 91 Grade 130

Memphis _ Baton Rouge, La. Barge DPC-113-UBL Jan. 6 YS ee 90,661 -*

Memphis Baton Rotge, La. Barge DPC-113-UBL °° Jan. 6 8 aa) 159,728

Memphis . St. Rose, Las . Barge ROR-103 — Jan, 11 L-1 224,988 A

>: Memphis ~ St. Rose. La. ™ Barge ROR-103 Jan. 11 L-2 216,563 - ates 5 “i

~ Memphis St. Rose, La. ie Barge ROR-103 winiree: Se 4 | - LB * 291.9779 nd CDE Sete: tet

Memphis St. Rose, La. - - “¥Barge ROR-103' Jan. 11 Line Fill . 3,099- a rf .

. Memphis Baton Rouge, La: ge DPC-425 X °° Jan. 15 17 # eit Peas 393,225

lfol. 307b-308] ae fad ae ee J Pid a

Memphis Port Arthur, Texas Barge LTC- < Jan. 22 = ve 10,128 Piie es

Memphis. Port Arthur, Texas Barge. TC-24 on ae Jen: 2S " iL-2 * + 106,892 ale Pear

Mémphis Port Arthur, Texas Barge MTC-24° a Jan. 22 ” * Tee. 109,862 .

Memphis Port Arthur, Texas Barge LTC-94 | oe 5 an, 22. Line Fill.) gare heap ne

Memphis Port Arthur, Texas . Barge DPC--494 X Jan, 22. 8 398,031 .

Mernphis Port Arthur; Texas Barge DPC-424 X ’ Jqn.23 °° ~—*.. 8 . 399,741°. 2 .

Memphis Kast St. Leuis, Hl. Barge DPC-408 X @: Mh 28 ATS im tip te VW 397,519

Knoxville ~ Bator Rouge, La. Tank Car at Jan. 31 16 ’ ‘ "6,542

Total: . - 995,082 1,048,161. 797,286

NOTE: Tank numbers prefixed “I,” indicat tanks leased from Lion Oil Refining Company. “Line Fill” indicates gasoline in the

pipes leading to said tanks. : | "

:'@ . 4 vice * ¥ 8

+ 5 * ; Ky see o™ ee ies e Peat

¢ /

bd .

» 4 a

/ + sco

. ‘ ne : mine ~

f- v ed |

~ ‘ ! 5 : * 39

. . ‘ we Reh ‘ _ i. « ; e

[fol. 309]. SuspdtNa to A NSWER Issurp DeCemper 20,7049 |

AND Suenire’s Rerurn (omitted in printing)

ee. *, *

¥ i: e |

fol. 310] In tue Chancery Cotrr or ws Country

{fel 3107 Ix THE Crancray Cotrr or -Davips is. ( OUNTY

“ “A: Tay :

[Title omitted]. 32

[Title omitted] +f. Pre RES

”

ANSWER OF ‘THE Dgrenvant, James CLARENCE Evans, goa

-MISSIONER—-Filed February.9,1950 °°. *

The defendant, James Clarence Evans, Commtissioner of

Finance & Taxation of the State of Tennessee, for answer .

‘fo so much and such parts of the bill filed against him in this

cause.as he is advised ‘it ig Necessary and material for. him

to answer, and answering says:

. 2 ante : - @ : ¢ 5 . . :

; a iar SH nar ee

Fhis defendant adinits the allegations contained in See-

tion.1 of the bill. eet is

aes is pike

This defendant admifs that this is a suit brought to

recover $295,810.10, which said amount this defendant eb)-

lected from the complainant as‘a_ privilege tax for the

‘privilege of storing gasoline.in the State of. Tennessee and

*« . e

. a ° " s * dguy 4 .

as an inspertion fee on gasoline stored ley the complainant

[fol.311] in the State of Tennessee for the month. of JRun:

ary, 1944, together with penalty and occa Rasa Thy Ss

defendant’ further jdmits that the same w s paid “under? -

protest’ by the complainant on November 30, 1949, after dis-

, tress warrant had been prepared ind signed by this‘degend-

ant and its issuance and service threatened. Sie

4 ; 25 Semen ; een

° vey 4

This defendant admits all the allegations’ of Section Lil

“of the bill. :

Bb 3 ae

This, defendant : admits the allegations ‘of Section Iv at

Of the bill. Ps = a

Fie

°40

ete

This defendant is not advised as to the-effect of the pro-

‘Visions contained in ‘the contracts referred to in the bill of

complaint with respeet to whether or not the United States. —.

must reimburse the complainant for the taxes here involved —

Insofar as this defendant,is advised, turing the period of

and demands strict proof of the same if it be is Adan

’

ONE Pe a ye

time involved in this suit the complainant batl Ho interest er:

equity in or ownership of the gasol{ne delivered to it by

ihe United States, but stbmits that the ee of whether

or not the defendant had any independent con

‘ol over the

gasoline delivered to it is a question to be determined by:

f fol, 312] the Court from a proper construction of the cor .

‘tvacts between the complainant and the United States’ In

this connection defendant would show that at least a portion

of the gasoline delivered ‘to the complainant by the United

States was commingled by the complainant wit? gasoline

Which cowiplainant did own.

_ the bil. ..

ey. . Vit. :

The defendant admits the allegafions of Section VII of

WHE, 2

. . -

| This defendant admits the allegations of. Section VIII of.

the bill! .

4 .

. .

| ae

This defendant admits that he af'no time prior to August

10, 1949, made any

demand, upon the complainant for the

payment of the privilege tax and inspection fees here’ in-

. volved, and is advised that his peedecessors in office made

no suchi ped es demand, This defendant, however, denies

that tle reéeipt, storage and ‘delivery of the rovernment

~ owned gasoline pursunnt to the contracts referred to in the

milk of. coniplaint was. free from tax and not subject’ fo

the privilege tax and Mspection. fees levied on the privilege .<#

of storing such gasoline, On the contrary, this defendant is

advised that on at ]

ast one occasion complainant's agent

. : . . : fa) .

Pee ee : eg ii a

tv ; ° s

was informed that he must make a complete report showing *

{fol. 313] all such gasoline stored because the Department . *:

did expect at-some future ‘date to collect the privilege

taxes and inspection fees incurred by the complainant as a

‘result of its storage of the gasoline.

Going further, this defendant denies that even if his

predecessors in office had treated the storage of the gasoline,

stored by the complainant as free from tax, such would be. +:

totally immaterial since nO Commissioner of Finanee and

Taxation would have any authority to waive:the. State's

right to collect the tax, °° Theta, EE Tae as 2.

pre ey ieee

This defendant:is not advised as to the réason for corw-

.. plainant entering into conyracts with the United States for

"the year 1944, and demands strict proof of the same if it be

deemed material. This defendant does deny, however, that’

there has been-any contemporancons or continued adminis.’

trative construction placed on the Taxing and Inspection

Laws of the. State of Tennessee by Its officers to the effect

that the activities of this coriplainant Were not subject to a

_ privilege tax, This defendant would further shew to the

Court that éven if there had been any such-tonstruction, the

same svould be ineffective to bind the Staté of Tennessee in

"the collection of its taxes since there is no ambiguity in the

? . ad

Taxing Sfatutes. | ‘ a me , :

‘This defendant admits the allegations. of Section XT of

- the bill. . f Ree 3

[fol. 314] Ae a XII

This defendant denies that the taxes and fees here ifs. -

volved are based upon gasoline owned by the United States,”

but does admit that the amount of the tax and fees for which

the complainant is’ liable is measured by the number of eal-

lons of gasoline which the complainant stored, that is the

extent of the privilege exercised by it in the State of Ten-

nessee,.-As to the other matters contained in Section XT]

‘of the Bill, this defendant is not fully advised and: there-

fore, neither admits nor denies said allegations,” but Ue- -!.

Inands strict proof ifthe same be material, ; ~

- $ a

3 * ec 5 Galera.

This defendant adntits that during: the month. of skanu-

» ary, 1944, the fomplainant stored in the State of Tennessee

an aggregate of 2,840,529 gallons of gasoline, as appears

from Exhibit A: to the bill of complaint and it is fot the

privilege of storing this gasoline that the assessment was

made, =

j XIV,

are. This-defendant admits the allegations of Section XIV of

the bill. ’ ee ; ;

* XV

This defendant is not adviged as to the allegations con-

tained in Section - XV of the Sill, therefore neither admits

nor denies the, same, but demands strict proof if the sanie_

[fol. 315} ‘be material. In this connection, however, this

defendant would: show to the Court that it is the insistence

of, the Department of Finance & Taxation that eomptlain-

ant’s interest in or ownership of the gasoline. involved jis

totally immaterial, the taxes and fees in question being

based upon the privilege of the business of storing the

gasoline rather than the ownership or use of the gasoline, .

XVI -’: con

This defendant is not fully advised as to the allegations

confained in Section XVI of the bill, and while insofar as

defendant knows, the allegations therein’ are true, the de>

fendant demands strict proof of the same if they become

material. o sient Reo aR ome eS ray : :

ea 3 ? Peer. ali Ae owe ety) Sept nea eat

a > “

In like manner, this defendant is not fully advised as to -

the ‘allegations contained. in Section XVIP %f the bill and,

While insofar.as this defendant knows, the allegations con-:

tained therein “are true, defendant demands strict proof if

the same be material.

mS BATS

* .° This defendant expréssly denies the areument contained

in Seetion XVII of the bill; denies that the owhership of

“the gasoline by the United States. prevents the same under

the statutes from being taxes: and denies that the United

: : N : 43 + @

Bog gee ates shih ey

States was both the congignor and thé consignee of the gas-

oline withire Section 6821 of Nhe Code of Tennessee,

[ fol. 316] = ecm XX. ie SE Peet

This defendant is not advised as to whether or not the’

Cwnplainant delivered 1,005,852 gallons or any other amount

to Common carriers for transportation to points without the

State of Tennessee, as alleged in Section XIX of the bill

* and, therefore, ‘neither admits nogMenies the same but de-. »

mands striet proof thereof. I yg: hiv’ event, this defendant .

would show to the Court that the complainant did hot com-

_ply with Chapter ,50, Public Acts of 1943, as amended liy

. Chapter 147, Publie Acts of 1949 (Williams Code GR50.7,

6859.11) ‘in, that the complainant did not niake proper re-

_ ports conéerhing such gasoline to the Commissioner of

Finance & Taxation und did not pay the inspection fees in

. accordance with law, so that complainant is not entitled to

"any of the benefits, exclusions or credits: provided for in

said Acts, ia - :

‘ = op

Defendant'denies that the laws of Tennessee taxing the

privilege of storing gasoline as applied in the instant case °

are repugnant to the Constitution of the United States and

void. - ~ oa met

XXI

This defendant denies that the assessment to the com-

plaitiant is iNegal and void for the r ‘ason-that such assess-

ment is upon the exelusive’ property or instrumentality of

the United States and, on the contrary, would show that

{fol: 317] no-attempt is: made or-could be made to tax the

property of the United States, this tax being simply a“#yx

_ upon the privilege éxercised by the eqmplainant of stofiig

fasoline, ‘ >

XXH Rear eas

; ‘ <

Defendant denies that the assessment here complained of ©

Lnposes a tax upon property which is an instrumentality of

the United States or that. it constitutes any unconstitu-

tional imposition upon the United States, ue

43 ; eo ae » ue

4 ew Ae |

» ° ee 3

a “f xxi 3 ;

+ This defendant denies that the provisions of the Ten-

¢ kessee Gasoline ‘Tax Law are beingapplied in any manner

whieh renders the kww invalid under the Constitution of the

' United States a& alleged in Section YXYL of the bill.

2 | XXIV

This defendant denies the allegations and conclusions

set forth in Section XXIV of the bill, :

way cus

This defendant denies the allegation’ and conclusions of

Section XXV of: the bill and would show that the inspec-

tion fees exacted of the complainant are based upon com, }

plainant’s storage of gasoliné. within the State of Ten-

nessee, pong tee oe as

[fol. 318] | ree ew eee

This defendant denies that the imposition of penalties is

inequitable-or that the complainant is entitled to be refieved.

against toy eS

g . é e . ~ .

RAVI Soret,

This defendant denies that the complainant is entitled to

recover of him the sum of $295,810.10, together with inter

est, or any other sum. °

| XXVIII ae ve

"All other allegations of theeriginal bill not hereinbefore

‘admitted,-explained or denied, are here and now generally

— denied as fully us if set out and specifically denied,

And, now, ‘having fully answered, this defendantsprays

to be hence dismissed with his reasonable costs.

TK. Hatlan Dodson, Je Joe Brown Cummings, Seth

M. Walker, Solicitors for tie Defendant, James

Clarenee Evans, Commissioner,

‘[fol. 326). IN THE (

ass. : >

(fol. 319] Ix THE Cuixcent Covurr Sr Davipson. County

~ [Title omittal] make Bae

Okper. ees THe Unirep Srates Leave TO Inrerver ae

az) April 11, 1950 ‘

This caise éante on to be heard.this day upon the petition

of the United. States for leave to intervene in the thoy. e

‘ayse and was argued by coulsel, Upon consideration

w Mociet the Court doth order and de¢ree that the United

Suites be and it hereby i is granted leave te intervene in this

ause. It is further order ‘ed, adjudged and decreed that the

. petition for interventions filed herein on behalf of the United

States be and the same is filed in this cause as the interven-

ing petition of the United States, and that the answer: here-

totore filed by the defendant will stand as the : answer to the

intervening petition,

Approyed for: entry’: W iltiaim W aller, Solicitor for Com.”

plainant; Walker & Hooker, by K. Harlan Dodson, Jr.,

Solicitors for Defendant: Berryman (ireen,; Solici tor for

Intervenor, United States.

ass ; . - _

NERY Court or Davipson County

itle omitted] iececa

es Soy

P ETITION OF THE U NITED States ror Leave to Ix TERY vENE, AND*

Interv ENING Petition

The United St: states of ‘Aniovt ica, by its attorneys, J. HHoward

MeG ‘ath, Attorney Gene ‘ral of the U nited Stites, Theron Ih.

Caudle, Assistarit: Attorney Genera} of the United St: ites,

and Berryman Green, as Speci ak Assistant to the Attorney

Generaly respestfully alleges that it has a-real and sub-

stantial interest in ‘the. matter in litigation and therefore

desires to become. a patty to the [i wtion by-nitine. with

the complainant in the furtherance of Ay claim for refasid

and its recevery in this action for the us »and benef it of the

United States, and as grounds therefor alwyes: -

: aac I “2

That the intervention for whieh teave is prayed herein is

authorized by the. Attorney General of the United States

and is at the request’ of the Department of the Air Force. ~~

‘

46 Le Aad ;

MOL SN ee i ae

That the intervenor adopts and incorporates herein by

reference dll of the allegations and conelnsions contained.

in the original bill herein. | -

it aetna,

Phat by Feason of the facts so alleged, | your petitioner has

.an interest in this cause which it is entitled to protect by

intervention’ herein. Wherefore, your petitioner, United

Statesof America, respectfully prays that leave be granted

to it to intervene in this cause; that an order be entered

‘illowing intervention; and that this petition for leave to

_ intervene be considered and adopted by this Court as the.

intervening petition of the United States,

' Your petitioner further prays that the judgment prayed

fer by the complaint in tts original bill be entered and that

the Court grant such other and further relief as it may deem

proper. . :

‘Caudle, Assistant Attornév General: By Berryman

orem Spe ‘ial risptecicsseh Attorney General.

hel ¢ $ o&

J. Howard Mé Yrath, ae Geese Theron L.

i ; .

fol 322] IN THE CHANCERY Court or Davipson County

ear ae ‘Rule N +O. 68050 - : Cis

= ° 7

< i

‘

<- : “agin te a

In the Matter of: eso Sranparp Or. Company,

Vs.

James @Lanence Evans, Commissioner.of Finance and Tax-

ation, State of Tennessee,

said . and ‘ rar

. Tte - U virep STATES OF “Aaenica, Interverior -

& ie

Transcript of Evidence isa

STIPULATION RE Derposrrions

The depositions of Paul @, Stratton;.C. E. Br: adley, W.

Randolph Pietseh, FP. V. ‘Thompson, A.W. “Gol Ischmid, T. G.

Sleeker, and J. M: Mvriek, taken by consent at the offices of

Pe Fa nee a ae

4 . \

Armistead, Waller, Davis & Lansden, Aimerickn Trust

Building, Nashville, Tennessee, beginning on April 13, 1950,

—at 9:30. a.m., and concluding on A’pril 14, at 4:00 p.m.) said

depositions to be read as évidence on behalf of thes ‘onrplain-

ant and the Intervenor'in’ thé above styled cause,

.. - All formalities as to naticé, caption and certificate are

~ waived: AN olsjections are reserved to the hearing, except

_ objections based upon the ‘best evidence rule, or the form of

the question. : |

[fol. 323] It is agreed that the court reporters, being

notary publics, may swear the witnesses and subseribe their

names toshe depositions when transeribed. - :

ae arr

APPEARANCES: : °

. pe e be “if. : + ‘ : . :

For the Complainant; William W aller, Nashville, 'Fetines-

és See, . ee

ite oS : Pree : :

For. the Defendant: K/Tlarlan Dodson, Jr., Joe Brown .

Cummings, Janies Clay#nee Evans.~

. : y, # . 5

OF Ekg IN Evipence *

Mr. Waller: Gentlemen, we chave prepared a list of .34

exhibits, of which we have given you a copy. All of these

exhibits are now on the table.. They are numbered 1 to 34

inclusive. We would like to offer thoségn evidence, for eon-

venience, ali.in a bateli-at this time, and they will be liter

referred to by the witnesses as they are introducetl.

Some of these exhibits you will notice have been referred .

.to in the bill and admitted in the answer, but have not beer

_physically filed. Others are eertified copies and some will

be further identified later, ;

Mr. Cummifigs: Defenghant objects to offering in evidence

of the exhibits Nos.1 through 34 for the following reasons:

A.. They have not had ‘an opportunity to exaniine, these

exhibits, prior to this time. ;

_[fol. 324] B. The-exhibits have not been proved by any

Witness, and it is the position of the defendant that they

should he offered at this time for identification only, |

. ‘fa

For the intervenor: Berryman Green, Francis W. Sams.

cember, LE

ar. x cS

(The Exhibits referred to above are listed as follows :)

Exhibits 1-7, inc.—Service contracts (three applicable to

first period, 1-1-1944 through 6-0-1944; two applicable .to

second period, 7-1-1944 through 6-30-1944; @nd two appli- -. °

cable to third period, 7-1-1948, through 6-30-1946.) |

Exhibit. 1~-W-3308 ac 1683, covers storage in company’s

tanks, period. 1-1-1944 through 6-30-1944,

Exhibit 2—W-33-038 ae 1863, (Sb he storace én Lion --

Tanks, period 1-1-1944 throngh 6-30-4944.

Exhibit 3—W-33-038 ac 1669, covers storage ht Knoxville, «

\ (and Kingsport), periofé 1-1-1944 through 6-30-1944... *

\\ Exhibit 4—W-33-088 ae 3649: covers, storage at. Memphis

in\commpany’s tanks and Lion tanks, period 7-1-44 through

5-30.45 4 By aa * ee ] e

o> a >.

Exhibit $—W-33-038 ac 4485, covers storage at Knoxville,

period ES oh through 6-30-45, -

Exhibit

tanks and Lion tanks, period 7-1-45 through 6-30-1946.

Exhibit 7°~W-33-038 ‘ac 12046, covers storage at Knox-

ville, period 7-1-45 through 6-30-1946. te

Exhibit 8—Certified copies of letter dated December 30,

— 4942, from Defense Sypplies Corporation to P. A. W., with

[fol. 325]-+attachnient£.and. DS. ¢. 56, dated January 4,

1944, eee

Exhibit %—Four-party agreement dated December 19,

1942, No. W 535ae 370R0—A rmy, Navy, RAW and REC, |

with supplemenfs relatitte to grade 100 Av, ras, |

. Exhibit 10—Monthly fuel release by Army Air Forces’

..Hq., A. 8: C..

atterson Field, erade 100 Avy. gas, to Stand-

ard Oil Cor

Exhwit 11—Monthly fuel release by Army Air Forces

Hq., 4. S. C., Patterson. Field, erade 100 av. gas, to Stand-

ard #il Compant of Louisiana,: fer Baton Rouge, for

January 1944. aes af nti 8

Exhibit 12-91 Octane aviation gasoline supply contract,

“No. W-22-038 ae 1018, between War Department and Stand-

ard Oil Company of Louisiana, dated November 24,-1943, °

covering period October 1, 1943, through June 30, 1944.

Exhibit 13—Menthly fuel release by Army Air Forces

Hy.; ALS. C., Patterson Field, grade 91 av. gas to Standard

: 2? NN

$ W.SRIES ae IDORG ‘covers dtovage ta comiaccia

——W-35038 ae 1 22, covers storage in company ’s

vainy of Louisiana for. Baten Rouge, fox, De-.

tie

‘. ; ie SN

; = 3 eke

Oil Conipany of Lonisiazia for Baton Rouge, for December®,

1943. - Fe i ae eg eahe ies XN

Exhibit 14-—Invoice datad December 30,1942. from Stand... \

ard Oil Company of Louisiana to U.S. “Army, covering OL: |

octane gasoline shipped on DPC puted 113." "<>

_ ° Exhibit 18: (Government Bill of Ladine No. WT 343860,

' covering shipment 91 ovetane aviition-gas, Barge DPC 115,

from Baton. Royre, Louisiana, to Memphis, Tennessee, +

‘ [fol. 826] . Exi ee) t M—Govermnient bill of lading, VW Q)

* 16739508, Barge ROR 103, fronr St. Rose to Memphis (di-

fee verted from Greenville, Mississippi.) and letter relatine

| ete thereto.dated Jhnjia ry 1d, 1944, from Husky Transit. ( ‘orpo-’

Noe ration to Standard Og Company of Louisiana,

aes « Exhibit 17—Government bill of lading, WT-343864, Barge

PC-425X, from Baton Rote do Memphis, a

-\Exhibit 18—91. and $7 octane aviation gasoline supply

putract bet wega Gulf Oil Corporation and War Depart-_

ment, No, W33-038, ae 1008, period October 1, 1943 .to0

‘June 30, 1944.0. * on ae q

Exhibit 19--Gulf Oil Corporation inveice dated January |

7, 1944, to U. S: Army, covering 87 octane shipped by Barge -

_ LTC—24, from Port Arthur,-Texas, to Memphis. ma

Exhibit 20—Government bill of lading, WT-2 2891, cover- .

_eing shipment 87 octane aviation gasoline by Barge LPC.94

from Port Arthur, Texas, to Memphis, Tennessee. i

Lively ‘Byhibit 21—Gulf Oi ¢ ‘orp. Invoice, dated Janua ry 7, 1944, |

tee es « to Wnited States Arm Vv, Covering | octing gasoline shipped—————

by DPC-494X, from Port A rthur, Texas, to Memphis, Tenn.

* ° \ Exhibit 22—Government bill of lading, WT-342885, ecov- -

| - ering Shipment 91 octane aviation gasoline by Barge DPC

" 494X, from Port Arthur, Texas, to Memphis, Terinessee.

Exhibit 23—Sales iInvelee dated January 7, 1944 from

Gulf Ogk Corporation to United States Army, covering 91

, octane, Shipped by Barge DPC-424-X from Port A rthur,

Texas, to Memphis, Tennessee, ;

[fol. 327) Exhibit 24-—Government bill of lading. WT-

3422886, covering Shipment of 91 octane aviation ensoline

°* by Barge DPC-424-X, from Port A rthur, Texas, to Meniphis,

Tennessee, :

Exhibit vo-—Bill of Jadine. W'T-S322998), covering ship- .

4330, 338 : ate ae

5 | TAG Worker

—#fent LOO octane av. gasoline (diverted froin Louisville, Ky.):

from East St. Louis to Memphis, Tenn. by Barge DPC-409X,

‘Exhibit 26-—Pumping contract between U.S. Army Air:

Forees and Standard. Oil Company of Louisiana, No. W-

33-040 ae 61, : '

Louisiana, dated March 31, 1944, covering pumping servicers

for the month of January, 1944, at Memphis, Tennessee, fur.

nished under, above contract... ~

Exhibit. 28--Monthly: fuel release by Army Air Forces

HQ., A. S. C.. Patterson Field, to Standar Oif Com; any of

\\ Louisiana fér Memphis terminal for January 1944 relating -

\ J ks ’ !

‘to 190 eetane gas, i

“Exhibit 29-—Monthly fuel release by Army Air. Forées

HW®., A. 8. C., Patterson Field, to Standard Oil Company

of Louisiana, for. Menrphis terminal for. Javuary, 1944,

relating 40 91 octane gas. : i

Exhibit 830—Government.bil] of lading WT-343183, cover-

ing shipment 91. octane gasoline from Memphis terminal to

'- Smyrna, Tennessee (typieal bill of lading covering ship-

ments from terminal to destinations in Tennessee by eom-

[fol. 328] mon carrier.) , (upto er

Exhibit 81-Government bill of lading No, WT-343187,

covering shipment of::91 colane aviation gasoline from

Memphis terminal to Grenada, Mississippi, dated January’:

10, 1944, (typical bill of lading covering movements from

Memphis Terminal to destinations in Mississipi} by comnson—

Garrier) 3725. !

~ . Exhibit 32—Government bill of lading, WT-343690, eoy-

‘ering shipment of 91 oetane vasoline from Memphis terminal

to Little Roek,: Arkansas (typical bill-of lading coverine

shipments by common, earriers:into Arkansas.)

Exhibit 83-—Standard Oi] Company of Louisiana shipping

notice, dated Janna rv 25, 1944, covering 91 octare gasoline

transferred from Memphis terminal to United States Army

“Oth sub-Depot,. Memphis, Tennessee (typical Shipping

notice covering transfer of Government gasoline by Stand.

ard Oi} Company of Louisiana tank truck from Memphis

terminal to United States Army Sub-Depot at Memphis.)

“Exhibit 34-—Lease commencing January 10,1944. of three

Storage tanks from Lion Oi] Refining Company to Standard

Oil Company of Louisiana, .

Exhibit 27-—Invoiea from Standakd Oi ‘Company 6f.

uma _Devosrtion or. Pavi C. Srratrrox-—Filed

P October 30, 195 0

Paur ( Srna TTON, the first witness, hatine fitst duty” sworn,

ie deposed as follows: * ° 4

Mr. Waller: This witness will be examined. first, if it is

axreeable, by.Mr. Green; representing the [ntefvenor, al.

_ though perhaps the “more arderly procedure would be for

the ( ‘omplainant?s ‘Counsel to examine him. Howeve r, Mr,

Green is more familiar with the ¢ testimony of these wit-

nesses, and-1 prefer that -he ¢ onduct the direct exm@uination,

Mr. Cummings : There Ts no obiecti ion,

Direct examination, ‘

By Mr. Green:

Q.1. Mr. Stratton, state your: ee, es present

ocen pation?

A.1. Residence is W ashington, D. (., on the stall of the

Munitions: Board Petroleun, ommittee,

Q. 2. St ie for the record the purposes and duties of that

Sera

The Munitions - Riera Pe troleur Committee is

Sates with the responsibility of-all logistic planning for

the military Forces, fina

“Q.3. W ith respect to petroleun

“A. 3. With respect to parce

(Q.4. How long have you heen assoviated « r emploved

by the United States? _ -

A. 4. Since October, 1941, ies

Q.5. Beginning t that tinie, will you st: ite the several

positions. whie - you have held? f

[fol 330] ~A.5 Beginning fronr 1941 until May, 1943, {

was,with the F va Division, Air Material Command, Wrieht

Field, Dayton, Ohio. IT left there in 1943, and wet to the

Petroleum Administration for War. I was associated with

the Petroleum Administration for War, in the ‘Refining °

Division, until November, 1945, at whieh tim eT went tothe

Army- N: avy Petroleum Roawd: whie lis now the Munitions

Board Petrole ‘um Committee.

(). 6. In what capacity, were vou emiplore din those se sical

agencies?

have in front of you_there-’

fe At: At W tight Fic Mi " was the Assjstant Unit C hief of

the Overseas Fuel 1 nit. At the Petroleum Administration

for W arel was P etroleuni- Tee ‘hnologist i# the Aviation Re-

fining’ Division. We diad responsibility of allocation and

‘ntrol of all aviation gasctine and components thereof.

Q):7. Do you know when fhis Petroleum Administration

Jor 7 ar came into being? rt

..The Office of Petroleum Coordinator was éstab-

Wicca by «x letter from the President in-late 1941. It had

no .définite authiorify at. that time. Later there was an

‘¢ xecntive order issued after the declaration of war. It Was .

‘an executive. order issued. giving definite responsibility to

the Petroleum Administration for W ar and: < ‘ontrol.of the

production of aviation gasoline, seer 2 3

().$. Do yeu"know the number of the exeeutive: order

= that wou have me ritioned?

AMR. “Offhand IT dan't. . Tt ean. be oa int the History |

[ fol. Boh] ‘ot Petroleum Adniinistrition for Ww ar which you.

Q.9. Will vou look at that and see if you e& an find it ?

'A.9. The ‘letter—of the. President,’ Ww hich ‘stablished the

Office of Petroleum. Coordinator: is dated May 28, 1941,

signed by “Franklin D, Roosevelt. xe ‘cutive Order No:

92 76, issned 2 Dée ‘ember, 1942, established : the Pefroleum

‘Administration for War, and de fines, its functions and

‘duties.. [ thigh add, Executive Order No. 9319, amended:

the original Order No. 9276, /Then Executive Order No.

Je a 7 18, alated. 8 May, 1946, wen, functiens: of the.

Petroleum « Administration. for War

.Q. 10. Suppose you continue your ‘answer and come ap.

to when the } etroleum Directive 7 (7 was issued?

“ALTH-The Execitive Order whieh I previously referred

ty here established de finite® responsibilities of the Petrolemn

Administration for War. On the 24th: of a 1944,

Petroleum Directive Xo, 77 was a whigh fuvther: de-

fined the .responsibility. of the Pe ‘trolenm Administration -

for War. They'h: 1d phe en functioning under the ; authority:

-#iven theri in the original -exeentive prder. This merely

sprel}s ye thei detailed responsibility a bata

a. 1%. :F- will ask you the “uestion af this’ aint. doew. +i

2 veetive 77 do any more’ than exemip Nits the practice and the

af .

3 ri . . be ‘ 4

Are Ret tp oeaernne- St ~

citbiiniidtex wiaaeee eee ee

‘authority to act: .- ;

exercise of authority previously exercised by the Petroleam'

O° roa. of War, under the Exeentive Order?’

& 11.°The Executive Order evave the authority. This.

[ fol. 332] merely spelled out, in detail the functions which

they had prev iously been doing under the Executive Order.

Mr. Dodson: You may put in such portions as vou want.

We don't object. 5 ee ;

By “Mr. Green: j : ate

Z TREE ;

Q. Turn to your page and let the reporter copy it. *

(Petroleum Directive 77 was ine Orporsiga | into the’ rocerd

hy agreement as follows :)

: «Petroleum Directive Br iv # Part 1535.—Petroleum |

Processing and ‘Refining. ee nS

. “* High- Octane Avi lation Gasoline. - .

“The ons of the. requirements for the dle ferse of

_ the United Statés has ereated in certain areas-a shortage. in

the supply of aviation gasoline for defense, for Private

aceount, and for. export; and the; following directive is

deenjed necessary for the prosecution’ of the war and to pro-

vide adequate: suppliesiof av iation gasoline, for militar v and

other essential uses. /

1950.4 Petroléum Directive 77.+(a) Scope and Purpose:

This directive: governs the manufacture, bleriding, transfe kT,

and delivery of high-octane aviation gasoline and its com:

ponents, It also deseribes the functions of. tle two woy-

yrmmental agencies which exercise coordinate jurisdic tion in

this field, And specifies how to make. applic ation to them for

‘The Petroleum: Administration for W: aris an executive -

ageney derivi inig its authority from: Executive Ordérs 9276

and 9319, ‘The Aviation’ Petroleum Products Allocation

[ fol. 3334 Committee is ao subcommittee of the Munitions

. Assignme nt Committee “( (air) and derives its authority

: from directives-of-the ( ompined ( ‘hiefs of Staff dated: June

2, 1942, and: September 25, 1943. ear:

‘*The ‘Petroleum Administration for: War controls all

.transfers within the pet roleum, ingtustry he harerh rrade

"> base stock, blending agents, anWhich-setane avia tion fuel.

Fie Te trole um, Administration for War ‘instructs industry

/. ’ , ,

. . ; , : . i *

54 Tea

Y Ji? . i: <n * ng oe

with respect to specifications for the We and grades of

high-octane aviation fuel which shgll be manufactured or

blended in regular commercial] proe uction. For the manu-

factiirer, or blending of any “ether grade or type of fuel,

_-Such_asexperimental fuels, ‘specific authorization unjust. be.

obtained from the Petroleum Administration for War.

“The Petroleum ‘Administration for War and the Avia-

tion Petroleum Products Allocation Committee exercise

Joint control over all deliverieés, fromthe petroleum gudust ry

| to consumers (or their agents), of blending agentS@ay iation-

grade base stock, and ‘high-octine aviation fuel. After thAR >,

Wriation Petroleum Products Allocation’ Committee PAs *

made an assignment to the War Departanent, the Navy De-

partment, or for export to any person, the delivery cannot

be made until, in addition to the assignment to the War De-

partment, the Navy: Depa rtment, or for export fo any per-

son, the delivery cannot be.made until, in addition fo the

assignment by. the Aviation Petroleum Products Allocation’

‘[fol. 334] Committes, a release for eath specific quantity té

_be assigned has %een issued by the Petroleum Administra-.

_tion for War. .An assignment by. the Aviation Petroleum

Products Alloéation Committee is deemed to carry such

reléase hy the. Petrolenm Administration for War anto-

matically in all-eases other than-deliveries to the Waf De-

_* partment, the Navy Department,-or for export. — | es

within the petroleum iMdnstey (for instanee, in researeh j

| Fequires release in advance by the Petroleum Administra.

‘tion for, War, which is deemed to carry with it automatically

the approval of the Aviation Petroleum Products Alfoea-

tion Committee. ”* ae :

(4) ‘High octaneggvia fuel’ means finished’aviation —

gasoline which has an oot: rating of. 87 of more (ASTM

1) 397-42 T), or which would have an octane rating of &7

or more by said’ method after the addition: of sufficient

actraethyl lead to bring the total thereof up forthe tofal

tetraethy] lésd: content tien authorized by current Army...

Navy specifications for

number, Craig STE

° . ‘ . “ig ose A.

aviation ie of Sé octane 7

t ib of

. : sf . &-

Par af oe

| acts Soe MS

‘‘(c) Limitations upon transfers,.- No person shal! de.

liver or transfer blending agents, avéation- grade base stock,

or high- octane aviation fuel Jo any other person exce Pt As -

authorized or directed by the ageneyv having jurisdiction,

iis set forth in Paragraph CY ra :

[fol 355] **(d) Limitations upon use. No person, unless

~~ otherwise authorized by the age ney having jurisdiction as

Wace hey _ set forth in Paragraph (a), shall ‘us® or consume ble nding

+ "agent? and blending of the regular types: and grades of

high-octane aviation fiiel as directed by the Petroleum Ad-

/Ministration for War. No person shall use. or consume

hfch-octane aviation ‘fuel unjess, and until, assignmént of

such fuel has been made by the agency having jurisdic tion

as set forth in Paragraph Cy elena aro ‘

Q.13. Mr. Stratton, are youstfiniliar with what is Hola

me pine larly ee the 4- Party Agreement? ‘

ie ee Q. te eof Tiegernher 19, 19422 - Retin

c A.14.: Yes, sir. «8 Lata ; |

Q. ‘To. That 4-Party Ag rreement is forge technically. re-

ferred to asa gontract, i is it not? :

A.15, Phat.is right, sir. :

(). 16. Being Contract No. W-535AC270007 ~

' x16. That is-Nght. ~

-A.17.. To the purehase of 100/130 aviation gasoline and

Mn at portion of it one other erade,-namely 91 oe tane, under

certain conditions, 91 ottane as covered.

“> QL 1S. Betvegen whom was that agreement ente red into?

i IS. The Peywroleun | ‘Administration for W ar, Defense

-Supplins Corporation, the Departme nt of Air Force, and’

Department of Navy. .

Meri * » 19. That is carried on the list of. xhibits as RFC?

{fol 536] A.19% The Defense Siipplies Corporation wee

an agency/of the RED.

Sy ES: (). 20. T hand you duly aiitheitic: ‘ated copy of that. con-

j tract, and ask you te ‘ook at that: contract, Exhibit No. 9,

and and ask vou to state whether ‘or not that i Is a true copy

of the contract popularly ealled AC “870902

A:.20. Yes sir it is a true copy, certified by the Secretary

. of the Air Force, f

| | Ys 7

4 :

_ 06 Ta ey Neen rhe wt

(). 21, Aré you familiar with that contract? Rae

‘A.21. Yes sir. I was on the original discussions which

lead—— eed

(). 22. Wait’a minute now. Did you have any associa-

. tion with the evolution or ultimate dévelopment. of tliat

contract ?

‘A, 22. When I was employed at Wright Field. I sat in on -

' the original disensstons which led to the writing of this

contract, ? Tene

@. 23. Will you state the ciréumstanees which led up to

a negotiation of the contract known as AC-870902 - <

A. 23.- The, President of the United States and Prime

I remember it. Tt was determing

.. Minister Churchill Tad some asd by the in early 1942, as

Staff; dirgeted that’ they establish a procedure for the pur-

chase and allocation of-all aviation gasoline. The letter, as

T.remember, was dated 9 February, 1942, that the Presi-

dent wrote to the Cotmbined Chiefs of Staff. I understand

$fol.337] that that js.in Hyde Park, in his files. “I don’t

have a copy of -it. Twas unable to get that. yA

and Defense Supplies supuliee Cn worked out this contract

whereby the Defense Suppliés Corporation would purchase

- all 100 oetane-aviation gasoline and in some. eases 91 octane

was covered under this contract, but that was only where

‘there was ext raordinary expenses involved in't he producing:

of this fuel. The main reason for writing this contract was

that reimbursement had to be made to various producers for

high cost of producing in order to squéeze out.the last bar-

rél, there was.a lot of gasoling which was very @xpensive, «-

and we felt this was. a means whereby industry would con

*y° eA Boney # 17

tract. The ee en could off @ontract for a

period gf/one year. Phe Defense Supplies Corporatien con-

tracted with the companies for purchase of everything they

produced on a 3-vear basis. hat was. one of the main rea-

sons that the contraet:was ntered into, The same letter of.

the President dlso directed that they establish a procedure

for the allocation of all aviation gasoline and as the result

of this——< : Poesy

vd by them that the supply

‘of aviation gasoline was critiéal. The President af the

' United States, threugh a letter to the Combitied .Chiefs of

| As fhe result,

the Air Porees Navy Petroleum Administration for War,

_Q. 24. Just a minute. I want’ to ask you, what. do you

mean by ‘‘allocation of the gasoline’? and to whom? -

A?24. All aviation gasoline waf allocated to the. indi.

viduak user. The entire inilitary services and ‘essential

civilian users, - Aas ; a Aas oa

[fol 338] Q.25. Russia and. England? | @

_A. 25. They were ineluded- under the lendlease program. .

The Department of Navy would repurchase the fuel from.

Defense: Supplies Corporation, and re-lease it under the’

lendlease program to our allies.

(). 26.. Why was that necessary, if you know? | ‘

A..26. You mean the re-lease of the fuel? 3,

Q. 27. No, why this procedure, this contract, AC8700Q?

A. 27. Because of critical shortage of aviation fuels, it

was necessary to have absolute control by -somé Govern-

ment body of all aviation gésoline produced. We were short”

of aviation gaseline up to the end of the war.

Q. 38. Stibsequent to the 4-Party Agreement, know as.

. ~ 2 \ ‘

ACSTO00, will vou describe the method of ‘purch-se, «he

allocation, and fhe.re-lease of all aviation fuels, and eoim-

ponetits of aviation fuels, until the controls imposed by Di-

rective 77 were released, and in that connection, wil] vou

state, if vou -know, how that was done and how it wis

accomplished? a ans

A. 28. After this contract was written, the RE¢ ‘—-prior to.

the completion of this contract, the RFC sent ont a letter

_to all producers’ and prospective producers of 100 octane

aviation gasoline, they sent cmt a letter describing this

contract and advised that they .woufd send thet more

‘detailed infornlation at a‘later date.. One of our exhibits

‘there— : a eyo eon ye

Q. 29. Exhibit 8, it will be. > e ;

[fol. 889] A. 29. That brings out the RFC's directives to

these companies to the provedure that would b fiollowed,

It was—xasoline was produced ‘at these refin Cries and at

the time it was run off into storage tanks by the companies

and the quantities determined, the Air Forces Inspector, |

‘acting as an agent for Defense Supplies Corporation, would

determine the quantity and sign, as agent of Defense: Sup-_:

plies Corporation that he received the Quantities that went, 9.

into the tanks. THAt awa} done on this DSC-50, . He was -

“o

Fs SS « . ¥,

2 tn 8 as @ : eM ; "

Ds : E % ‘pe

. “ ps .?}

authorized to do so by Defense Supplies Corporation. On

the same form, the Air Forees would take’ title, the same

inspector, Inspector for the Départment of Air Forces, the

Inspector would sign on this same form for the Department

of Air Forces, taking title from, Defense Supplies Corpora-

‘+ tion, and the Air Forces’ was in control of the gasoline until

it was finally used ‘up. The Air Ferees handled all the

transportation themselves after it- left the refinery; On -

the allocation side of the-—— |

Q. 50; Wait a minute, heforé vou get to nlloeation, As I

‘understand jt then, Defense Supplies Corporation, acting

under Contract AC-37000, purchased from the refineries at

the points of refining? an hee

A. 30. That is correct.

(). 31. All 100 octane gasoline? :

Q. 32. And at-the time of the refining at the refinery, all.

100-octane, gasoline hegame, under this contract, and the -

several executive’ orders mentioned, ‘thie property of the

_ Defense Supplies Corporation? . aa Apion

[fol. 340] A, 32. That is correct, > Mat,

+. Q.33. You have made inenioe of this inspection by. an’

agent of Defense Supplies Corporation, who was ‘also an

igent or Air Foree Inspector at the Refinery, is that true? .

»A.33. That is true. ; oe, .

> Q. 4. Is that what, is popularly referred to as D.50?

A. 34, DSC. Form 50. «| ¢ Se Sa

()..35, i have made mention.of a letter from Degbense-

a ‘Supytlies Cofporation with respect to present and future

mayufacturing of 100 octane aviation, gasoline?

A. 385. Yes‘sir. ‘

_2 + Q. 06. behand you a document duly authentieated by the:

Seerétary of tha REC, marked Complainant’s Exhibit 8, in:

which there are: photostats of certain documents. IT will.

ask you to look at those documentsand state whether or not.

you are familiar with those ‘documents?

AL 36. Yos lt be familiar with these, : coi

YQ. 37. Lwill afk you to describe; those. photostats? -

»* ALS7. Here. is a letter dated SO December, 1942. to Mr.

Fie ai ‘B. Gragin, Assistant Director of. Refining, Petrs-

eum Adniinistration for_War, signed by George Hil, Jr.,

Vice President-of Defense Supplies Corporation, forward-

6 ‘

3 . , - ‘ ~

i) a9

“ing to him copies of correspondence which KAd heen sent to

| the preSent and future manutaeturers of 100 octane easo-

line, which describes the procedure that would be followed.

Also attached are sample copies of DSU Fernt 20, and one

copy of-a shipment whiceh- was raised itt question in this

. ‘ase, re :

(fol. 341} Q.38. Then the photostatic copy of the DS

Form dated January 4, 1944, is a receipt ‘signed by the

single man acting as agent for Defense Supplies Cor-

poration, | :

A. 38. It is signed by L. T. Carson, as agent for the De-

fense Supplies: Corporation. «Then he ‘has further siened

it at the bottom of the page as ‘*Army Air Forces" In- |

spector,”’ : os

Q. 39. T believe you said that

shipments involved in this. case?

A. 39. Phat is right, sir,

e's effected one of nk

Q. 40. Do vou have in mind the shipment made in Janua ry

— * and: reeeived_at the Memphis .Plant in January, 1944?

eo A. 46. That issright, sir, Me

~ Q. 41. Now, Without interruption, if you will just proceed

-with allocation, with whom vou are familiar.

“AL AL. As the result of the President’s letter, the Aviation

‘Petroleum Prodycts Allocatiows Committee was established

| as an agency of the Munitions Assigument’ ( ‘ommittee (Air)

| Which in turn was an agency of the combined Chiefs of

7 Staff The workinape

of.the Aviation Petrole

and were furnishe@

War. f

n Products Allocations, Committee,

the Petroleum Administration for

rsonnel, PAW, Jiandled the functions.

Py, . 2 . r ‘

Rs 42. Wait angnute. - These gentlemen don’t know what.

— the APPAC is. Q@jve the name and then we wilfeadl it the

_APPAC. °

. = a .

A. 42. Well, the personnel that handled the‘ work of the

abo wearing a Petroleum Administration for War hat,

| Selao we Pefroleum Products Allocations Committee were |

[fol. 8342] so we saw both sides of the picture at the same

time. The total fuel awas made available, the estimate éf

the quantities that would be produced. ee .

*Q.43- Let mequalify you there. Tt is understood that

your testimons at this phase of the case relates only (6-100

octane gasoline and certain 91-oetane gasgling, . here there

: ¢

60 .

° were winaual, extraordinary costs | ine urred in 1 the produe-

tion? ;

A, 43. That i is trie in connection with this contract.

Mr. Cummings: W hat contract, Mr. Green? ;

Mr: Green: Contract; 37000, Exhibit 9, That i is the ony

contract lie is discussing. |

an)

}

_ By Mr. Green:

-(). 44. Go ahead.

A. 44. The total available, estimated available. aviation

; gasoline, both grade 100/130, 91, ‘and 87 octane was: made

available to the’ Aviation Petroleum - Products Allocations

Committee by the Petroleum Apesnistratiog. for War. T hey

would carry the requirements 4f the British, all of our allies,

as Well las: the United States Miltary and essential civilian

users, such: és commercial airlines, engine builders, and they

would_alloecate the total quantity. availablk in aeeordance

with the requirements of the military forces, and éssential

civilians. The Petroleum Administration for War in turn,

after this allocation was made, the Petroleum Administra-

tion for W ar would notify the refineries, all refineries that

' were producing this grade fuels, to release the gasoline in

‘the quay untities which were allocated by refinery source, *

' [fol 34: §). 45. Release to whom? <

A, 45. Helena to-the user oi

€). 46, Ww ho do you mean ie user???

A. 46. The Departme nts of Air, Force, Navy, airlines,

engine builders, and would at tHe same’ time notify the

Navy, how much each of our allies were to get under tHe

. fend. lease prograin, and the Department of Nav ¥ took care

{ the handling of all Jendlease gasoline, The? alloe: ations,

were made to Department of’ Air Force and De ‘partment of

Navy,'and in the ease-of airlines and engine builde rs, they

wére notified usually for a three-month period off the total

eg si of aviation gasoline that they, could rabieoags

r their, use. sem ona nts

6 47. W ere they’ the pul ones to when alloc ations were

‘inde?

AV4TO NO sir athotthemifitary “alive obtaitieds aHoes-.

tions bat that of course was handled by the United States

Nav: winder the lendlease > programn, ;

(). 48. And under the cont ract?

A, 48. Under the AC-37000 in the ease of 100 octane.

549. Who reéeived the allocations when made?

A. 49. The Department of Air Force and Department of

Navy. -#: ould immediately get them on ‘the phone, tell

them—after allocations were’ made, L would get them ‘on

‘the phone, tell them their total quantity of aviation -fyel

that they were allocated for’ use in individne! theaters of

operation, also the RGe boas that they were allowed

to use here in the United States. At the saine time T would

[fol. 344] ‘assign refinery sourees ‘to’ the Air’ Forces, would

nerely state that they could withdraw “X" barrels from

-this refinery in accordance with a yorked-out distribution

plan, which was worked out hy Wright Field, Department

of Navy, and The Petroleum ; dministration for War, and

Bic Office of Defense Trangportation, He a

(). 90. That is the allocation made, not only in gallons,

but the refinery source was designated? ;

A. 50. The refinery source was designated, not by the

Aviation Petroleum Produets Allo ‘ations Committee! but.

by Petroleum Administration for War. Ss!

Q.5f. Petroleum Administration for Wart.

A. ol.’ Yes sir... - . * Ps

52. Did the’ refinery g¢t notice of the alloeation? =:

A. 52. The refineries were notified: We always contacted

the main. offices of the yarioys companies, and thay in turn

would notify th refiyeries how much fuel had heen au-

thorized for bree

ase from their plants. Further notifiea-

tion was made by the Air Force, which f think some of the

Air Force .people-are more familiar with than I am.

().53. From January 1, 1945, until the termination of the

war, V-J Dav, was it possible for anyone to purchase gaso-

line which T have mentioned, covered_in the letter -aeeem-

panving Complainant’s ve ae it possible for any

_ pérson to purchase this typé oP Mine without an alldca-

- tion? : , sales s aby wef

~ A958. No'sir they could nof. 5 | SPATE on

[fol. 345] .-Q. 54. F will ask vou this question, from the date

nientiéned and up to the date later mentioned. by way, ‘Gf

description, could Standard OiJ Company of Louisiana, ds :

producer of 100-octane gasoline, retain title to that vasolind

‘from the tise of production ? tee Pale ees:

: ; ae ,

n .

A. 54. No sir, they could not.

Q. 55. In other words, your testimony is that from the

time of production at’ the refinery, all 100-oetane gasoline,

and the others which you have mentioned under Contract.

OD hard

HL OOU, and the letter set forth in Complainant’s Exhibit 9,

at the instant of production, that gasoline became whose?

A. 55. It became the property of the United States Gov-

ernment. ° PERS :

(56. Acting through whom? .

A. 56. Through its Defense Supplies C orporation,

Mr. Dodson: Let the ree ord show that thé Defendant i

the one case objects, that is, the case of Esso Standard Oil

Company vs. James Clarence Evans, Rule No. $8050, United

States of America, -Intervenor, Part I, Chancery Court. of

~ Davidson County, objects to the three « preceding questions

and answers, on the vround that the cortracts and letters

themselyes are the best evidence. There will be additional

objections at the time of the hearing,-but those objections

are net being reserved-and we are initerposing them at this

time. Let the record show further that we tre objecting on.

the ground that the questions are leading, all three ques-

tions,

[fol 346} s By Mr. Green: te Ee . 7 [

mae, sf. During the period mentioned,. in your testimony,

he donstituted the PAW?

The secretary of Interior was. designated hy the

r sealdest as the Petroleum meyoys! esprit for War.

()..58. Harold Ickes: It was further staffed by cAyvil serv-

ice employees, a great portion of them being on Idan to the’

» Government from various oil companies in/the United States.

Q). 59. Ln'yeur testimony you mentioned the Joint ¢ ‘hief's

of Sti “\ i Saale im . 2

AL OD. cabbhiad: Chiefs, of Staff, |

(. 60. Will you'state for. tlie reeord who the Com: ined

Chiefs. of Staff were? T'don’t mena by name; who consti-

tuted the ¢ ‘ombined Chiefs of. Staff?

AAV. The € *ombined Chiefs oft Staff were the Chief of

Stat U ee shes i Arny, [United States NAVY. ‘: pet of

I don i ‘kaa “ho be ided ti British Sa ne i

/ i / , .

df yr

> l/

.Q: 61, Was that mil{tary, or both? ~

“As 61. It was militany. : iH

_ 4). 62. Who constitutkd the organization referréd to as

APPAC? Se es

A. 62. Departitent of Air Force Representation, Depart-

ment of Navy, Department of: Army, The Office of: British

Petroleum Representative in thé United. States; and it was

Chairmaned by a member of the Department of Air Force.

Q. 63. The Secretary? wens cies

A. 63. The Secrefary was a civilian from the Petroleum *

’.” Administration for War. ‘ era

[fol. 347] -Q. 64. Under whose authority did APPAC fune-

tion? eae | es ST

A. 64. Cider the Combined Chiefs of Staff.

_ |. 65. Combined Chiefs, of Staff? Ren aeencis

WN. 65. Yes sir. In the early. days of the wa r, the Russians

did. not Have. representation oni APPAC. However, in the

‘latter stages, they did have representation. “A’ United tates

Naval Officer, was designated to represent the Russians on

(66. “Were the Army Air Forces notified from time to

* * time of allocations made to the Air Force by APPAC?

‘ NX. 66. Copies of the minutes of the APPAC meetings

-were furnished to-the Military Services; and they, were

notified officially by copies of the minutes of the meetine>

Of course the refinery source, that was not developed that:

way, We merely: advised them by telephone and as‘ there

were clianges that came so fast in availability as to sources.

4 —herause of various changes in their plans, that it was neces-

sury to keep in Gonstant contact with the Air Forees and’

Navy by phone, giving them any changes in the various

refinery production. Fee RN, - ee

(. 67, Of your own knowledge, do*vou know whether dur-

_ing-the périeds involved ‘in this suit, it would have been

possible to’ stockpile or build uy reserves of aviation Tuel? -

A. 67.-We were always short of aviation gasoline through-

‘out the entire war. As new refining facilities ¢ameé into 3

Operation, we were able to increase our operating stocks ‘in

the overseas thette s, and also our operating stocks in the

#. [fol. 8348] United States. Howes r, it was still something

* that had to be watehed daily becanS> we were in ne position

at any time, where we had surplus stodkdé or anything that

we.could call reserve storage, It was not until-the spring of -

1945 that the Joint Chiefs of Staff directed that it appeared

that the Kuropean wir was to be terminated, and it appeared

that if we could build up a reserye-in the United States af

“any size, we could possibly shut down; based ona one-front

war, that is, with Japan, tha’ we could shut down possibly

“some of the very very high-cost operating plants, and as of

V-J Day, .we had been able to put into storage’some 13,000,-

000 barrels of 1U0-octane aviation gasoline, but the majority |

of that gasoline was'placed. in storage between V-E Day and

\-J Day, after the requirements in Hurope had gone down.

Q. 68. Prom your association with thé Greanizations which

you have mentioned in your testimony, and your duties, are

you able to state that you,were familiar with, or will you

say. you-were familiar with the operation ef the’ Memphis

Terminal of. Statidard O# Company of Louisiana?

~ AL OS. Twas familiar with it, yes sir. The detailed operat-.

> ing’ procedure, however, I am not familiar with all the

details. Genérally, I knew how the’terminal was operated.

Q. 69. Prom—yeur knowledge of the operdtions at. the

_. Memphis Plant of the Standard Oil Company of Louisiana,

— are you able’ to state whether or not there was a storage

area? Gite eae ee

(fol. 349] A. 69. Tt was merely a ternfinal for use to ‘ship

aviation fuels to using airfields in this area, in the Memphis

area, ¢ hae rae eta

(). 70. How did the in-put and out-¢o a} the terminal com-

pare, if you know? ii :

A.71. What was the question?

A). 71.. Tow did the in-put aml dut-eo ‘it ‘that terminal

compare, if you know? peta cea

A.71. I don’t believe [ could answer that question.

()..72. Mr. Stratton, I will ask von to look again At Ex.

hibit 9, whicli Wwe have been calling AC-37000, and’ fell us

What the date of that 4Party Agreement wis? - |) -

/ A.72.-The original, document is dated A9 December, 1942.

o). 73. Now, in the later contract. ACC37000 can yon state

*A. 73. The Defense Supplies Corpordtion would tabulate

all of the DS6 Form 50's that were. purchased by.the De--

} partment of Air Force, and the. Department lof Navy, and

e a

Ce 65

would bill the Departments monthly for the total quantities

of fuel that they purchased, . |

+ Q. 74. To whom did the Air Forces and the Navy Depart-

“ment make payment of the amounts billed to them under

_thesDSC Form 50’s? hc

_ A. 74. To the best of miy knowledge, direét to the De-.

fense Supplies Corporation. Inasmuch as -that is a Gov-,

ernment Corporation, I wouldy’t imagine that they would

go back into the Treasury. TI aim reasonably sure that they

were billed direet. Some of your Air Force people. ean

[ fol. 350] probably answer that better than I. ;

Q.75, In what manner was’ the payment to the refineries

of the gasoline made, mentioned and covered in AC 37000?

A.75. The-Defetise Supplies Corporation paid ai re-

finery direct. toe FES . |)

( Further direct examination, . Se >

By Mr. Waller:

_Q..1. Mr. Stratton, you mentioned in your testimony the

Petroleum Administration for War, and the PAW, were

they one and the sane? eae ‘

ye They were one and the same.

— aa

OS. You mentioned Aviation Petreleum Proditets Allo-

cations Committee and the APPAC, were they of@ and the

“same? ee mt |

“A. 2. They were one and the same. cS Oe aba

Q.3. You mentioned Wright FE l...Was that the Head-

quarters of the démestie Army Air Forces, or what was,

Wright Field? = | >: : : : :

A.3. Wright Field, well it had quite a few names. fi

was” Air Materials. Command and Air Technical Service

Command and Air Service Command at different -stages>

during the war, but it was one and the sanie/

Q.4. So, when you mentioned that: you -notified Wright

. eo .

Field, whom did*you notify? FS

_ A.4. Headquarters.of the Air Forces which handled the *

stribution and purchase of aviation gasoline. eA

Q. 5, Por the Air Forces within the United States77

A. 95. Yes sir, * fad bean

-[fol. 351} Q.6. You tmade some. mention between grade

5—330, 338: . SNA : here

y » : = e a

.@.

Of allocation was abso utely

only difference was that the Air Forces bought 87 octane

= e ~~

- 2 t * °

: ;

: oy

° ¢ '

. » . *

. . os ; at =; | Rt

. ¢ “4 e

tinction in the method of,control? See os } 3

_ A. 6. There was no distinction with fegard to the method

-of control. The Petrolegm Administration for War under

Directive 77, had absolute contro}

the authority contained i

of all ayiation gasoline a nponents thereof. The.method

the satue for all grades. The

100 aviation gasoline and lower grades, what was that dis-

themselves, directly from the producer. In a case of 91

octane, the Air Forces purchased directly from the. refinery, |

or from the producer. With the exception of the smail

increment that was purchased by the DefenseSupplies Cor-.

poration, because it was yery high-cost. gasoline: The

refinery. would sulamit¢to RFC a claim and he was reim-

\ bursed for the“extraordinary cost by the Defense Supplies

“Corporation for the

extraordinary cost involved in produe-

ing that gasoline... : ;

Q.7. So far is control was cope Tied, there was ng dis-.

tinction between .the different ‘g#ides of aviation gasoline?

A. 7. That is correct. ats : *

Further direet examination.

By Mr. Green:

. . 7 1s 1 . < s,

1.%n my examination, Mr, Stratton, I mentioned: up'to

the time when controls.were terjninated. Do tou know the

date when controls over aviation fuels were terminated?

*[fol. 352 \. J: Theday following V-J Day.

Q. 2. It Was August 14, 1946, I think, lam not sure, is that.

A. 2. The termination ef controls is in‘a copy of the Fed-

“eral Register that we have here; Directive 77 was revoked

on*the 13th of September, 1945:

Q. 3., Mr..Stratton, will you state when and low, ?f you.

know the Petroleum, Administration for War. was tetini-.

nated? ~- Z

PNAS Terminated by a letter from the President. 2p indents

“a letter. ° aie

= . e

A. 4. Excuse me. gat =

Q. 5. Exhibit 4, Page 378

et sie eee ; ot c

minéted by ah executive order, No. 9718, dated

Nsigned by Harry S. Truman. ay daa

tion gasoline were terminated by way of revocation of -*’

- Petroleum Directive No..77 issued as of Septeniber 13, 1945,

and effective August 15, 1945; is that correct? sus

_ A. 6. Wes sir, RR as tas Pes aces

Q. 7. \If you know, will you please state what happened

te in Je of aviation fuels covered: by#the Directive 77

A.7. Do yow mean the finished product, sir?

Q.8. Yes «=. LDA Foes Jes :

8. A. I don’t just recall how long it wa’ after the revoca- -

‘tion, thie Services purchased ‘all gasoline from Defense -

Supple Corporajion and miade arrangements with the

[fol. 353] refinerivs in the United States for the. refineries

(<A thie gasoline under storage contracts made by the |

‘Q.9. 1 n short,sthe Government beught all of that gasoline?

~ A.9,.That is right. We chad approximately * 22,000,000

. barrels of 100-octane gasoline in the Uniied StateBas of

'V-J Day, and the: refineries in lot of eases were unable to

produce peacetime products because of the enormous quan- * *

tity that we had stored in our refineries, so the Air Forces

and the Navy had to buy all of that gasoline and tried to

- Work it off into other storage in the United States, in order .

that the refineries could commence operating te predutve

peacetiine products. * | : Asasebal gy

Q. 10. What then became the position of the Federal Gov-

~ ernment in relation to the gasoline market from the time on?

AL 1. Well, we didn’t ‘buy any aviation gasoline for

Approximately two years. We continued to use these prod-

ucts that we had stored all over.the: United States, and we. °

- were about two years working jbem off. + +.) 9 Sn

Q.11. Are you able to say from the effective date of fhe:

revocation ‘of Petroleum Regulation 77, throughout the

whole period, from that time to the’ end of the last period

involved in “this litigation, that the Government owned

gasoline? Bret hey ea =

. i TD. That is correct, the Government did.

; ) -

oe . ® 3 ? . j “e-%

- {fol. 354]. Mr. Canine’. For. the CEASE 1 madecined

-'rO.

that counsel had stipulated that this deposition only goes to

the-month of Janpary, 19447

Mr. . Green: That is corfect, , Aivhow, tlie, oint 4 am

making is that from the time of tre. effective date of that _

order, “the Government ow ned all gasoline for a period of —

two years. T-have already proved the potnt.

Further direct examination, gen Were

By Mr. Waller: ‘

P1. Mr. Stratton, do you want is clarify ‘one answer

« y 4

you gave on one matter that’was disc sec? :

A.l, This eontract, AC’ 37060, that is the-Aiy Force éon-

tract. number. “The- Department of Navy also used this

identical document as-their contract, under another contract

number. The RFC, ‘Defense Supplies Corporation, theye

merely referred to it as.the 4 Party-Purchase Agreement

‘and the Petrolei Administration for W ar also referred to

At as the 4- Party- Porchasé Agr eement.

, F urther direct. examination,

te Bie By Mr. Green; °° | we

Q. 1. Under those different n names, they all mean- i Ale ante ;

document? —.

A.1. The same document: but referred to differently by

the four parties concerned. g |

mS a og Te

" [fel. ee Kurther. direct-examination..

By"Mr. Waller; _ Pele ier ie tins

Q. 1. Mr. Stratton; reference has bees nade to Grade |

100° aviation gasoline, or 100 Octane. ;

A.1. We had several ‘differ ent fuels: that fell, into the

‘range of.100/130. -The specification itself calls for 100/130,

‘“Flowaver. because of various conditions in the re fineries..

there were Waivers: granted) at different times. Possibly

on the lean mixture side, the refiner couldn ’t reach the exact

specifications, so he was given waivers. We had 98/130,

99/130 and 100/130 Sand in order,to avoid‘all of that detail,

we only refe rred to all gasoline i in that range as 100 octane,

aK, 4

ore . : ‘ eek e j

a rk , a

‘ é .

. ; ney ia . A

° E eee ce ¥e ; . x re ’

7 ‘ Ms a - 9

‘ . ae.

. 5 .

aK Cross-examination. °° ve

g By Mr. Dodson: -—*

X Q.1. Mr. Stratton, in the’ beginning of your direct ex-

amind@™ign, vou referred-to Executive Order No. 9276, which .

Created the PAW, and.as amended by Executive Order

9319, which gave the PAW certain powers, as I understand,

it? Pian corel se vas

A.1.. Yessir. ~ 32 eee ete eed ®

~XQ. 2. You also referred to the Pet roleum Directive No. —

77, as appears in the Federal Register of Fuly 24, 1944?

A.2. Yes sir. - Pade ets Migs Ne Aayae

XQ. 3. When you were referring. to termination dates,

as I understand it, you stated that Directive ‘No. 77 was

revoketl or terminated on the 13th of September, 1945? -

-Look at -thaf-and_ tet me finish my question. (Witness

examines dogiment.)- I believe that is Federal Register ’

[ fol. 356] whieh shows September 14, 1945 efféetive August

14, 1945, and shows issue date of September-43,1945?

A.3. Thatis correct, 9

. XQ.4. Whereas, Exécutive Order 9276 as amended by

Executive Order 9319, Was not terminated until. May 8;

1946, by Executive Order dated: May 3, 1946? ees

A. 4. That is correct Aas ee

X Q. 5. In order % dvoid confusion that 1 have in my

‘mund, and maybe -im. this record, what was the difference _ «

between terminating Directive ?7 and terminating Exeen-

tive Order 9276?- : Brg al nolan Ne :

_.A,5. Terminating Directive 77 released the controls.

However, the Petroleum Administration for War continued

to function until the 8th of May of 1946, in order to clean’ |

up a ‘lot of the :work that: someone had to wind up, and

they had a very small staff left to complete the Aviation- <

Program. Actually they could not compk.*e all of the claims

that were outstanding, and so tliat responsibility was trans-

ferred from the Petroleutn Administration for War to the

Army-Navy Petroleum Board, and the Army-Navy Petro--'

leum Board, which is now the Munitions Board Petroleum

‘Committee, are 7 esently winding up that’ program. We

are still working on it. mete hs

X Q. & The point I am making is this, from and ‘after —

coe Ure oes | ® os

. . . : . . ’

; ° e . 7+ e's

os . x . < re - ‘

‘ : " <

. q . I~ ba ’ . : S. e a

0 ets, ri ¢ . e¢

4a [a - : 5 Yow Sn i

| Angust "15, 1945, there was no eontral aver av iation gaso~ Bie

net 3 ae Beira oath ey Sr ae,

A. 6. That 1S: correct, sir.

; “~XQ. 7. Petroleum Aviation. ‘Yor War, or PB AW,

A. 7. Administration. i

X Q.8. Petroleum Aduiniaitativs for War and APP AC

‘were two separate and distinct agencies? |. ».

| 4 Staff? BG peaer a

fol. oo A.8. That is ¢orrect.

XQ.9. APPAC operated under the coinbined Chiefs of

A.9.. Yes bir.) Rr ee ae

XQ. 10: And APPAC, if I understand your testimony,

was the agent for—or authority—allécating or dir eeting w lio.

should use all of the 100 octane gasoline and ‘some of thy

91 octane: ‘ Wee

A.10. No. All aviation gasoline and components thereof |

is defined by Directive 77. ‘s

X Q. ‘11. What would that include, would it include waRg.

line of a lesser octane than 91? ite

A.W. That included 87 octane and. any . base stock that

‘ would go into the production of 87 octane, 91 octane or

_ 8

;

160/430. <

X Q. 12. Then were ‘hace any: patrideats see that

were not under the supervision of AVPAC?

A. 12. Yes, there-weré petroleum products thaf were not ”

under the supervision of APPAC, APPAC controlled the. -

_ eemponents that would go into aviation. .However, asphalt

or‘motor gasoline, that was under OPA. We had no ¢on- ..

trol ov er pthat. ’

XQ. ns Any. gasoline that. was used by the ‘siviirida:

civilian airlines, then, was-under the control ‘of APPAC? |

A.13.. That is right, sir.

X Q. 14.. The Combined Chiefs of Staff alldeated to He

civilian airlines the gasoline they could Use, is that correct? |

* A.14. Throvgh the Aviation’ Produets Allecations Com- -

mittee, as° their agency. é

«[fol. 358] XQ. 15. That is APPAC? Y

A. 15. That is right.

XQ. 16. And likewise any other ecivilian, Army, Navy

us¢, whether’ in this country or In Russia or any ‘of thie

other allied countried?

A. 16. That is right sir,’ °° j Seay

~ aX Q.17. To whom did APPAC issue.its allocation direc-

| tiye?. ® 9 oy, oe oe A: ! :

~AL17 They sent out copies of tlie ‘quantities released

togthe using. service or-to the airlmes or to the motor manu- ~

facturers: A regular form was used that we had for those

released, fisiee at eee /

X Q.18.:Then did the airlines or tke Air Corps simply

.. take that form that you had sent out to them to the refinery

~ and say; ‘This is how my gasoline?’’ :

A. 18. No. + The Petroleum Administration For War —, .

would send out a telegram Yo each refinery-in the United

‘States, authorizing release of gasoline, purchased. from

Defense Supplies Corporation, ““X’? quantities, to the con- |

sumers. PAW notified the refineries that they were tg>-

releas bstrefinery location. 8 ; J

X4#719. Ent] the refinery had receiyed*that telegram or.

official notice, yas it necéssary. that thes-retain that gaso-

line atthe refinery? Sean Supe are Moreen tee tee.

A.19. At the time the zasoline went -in the stordge and

the quantity was determined, the Air Force People, atthe

time it was turned over to the Air Foreé Inspector, usually >

he Imd his instructions from the: Air Force. I don’t know

[fol. 359] too much about how that part worked. Soine of -

. the other Witnesses know more of that detail on that thant

Ido. - ‘ Be ar ed ee “p retaeasormens

XQ. 20. Pot a little lost with you, so lets ‘go again,

please. At the refinery the gasoline is refined and who

advised then APPAC how much gasoline was there refined

as 100 octane? : BE Pty, Oe ee gis

A. 20. Petraleum . Administration for War advised

APPAC the estimated quantities that were going te be

made available for the following month. ° . > |

X Q. 21. They advised them in advance? by

A.21. That i8 right. 4\

X_Q.22, What Was to be expected? ’ : &.

A. 22. That is right. ~ oe | |

_X Q. 23. Then did APPAC then make their allocations, or /

did they wait until: the gasoline had been reftfned to make.

their“allocations? °

A. 23. No, it wa

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.