Texas Company v. Cohn

Chapter 186, Laws of 1939, p. 581, which repealed chapter 180, Laws of 1935, p. 749, as amended by chapter 116, Laws of 1937, p. 459, imposed upon each person engaged in the distribution of fuel oil an excise tax upon such distributor of one-fourth of one cent for each gallon of fuel oil withdrawn, sold, distributed, or in any manner used by such distributor. In State v. Inland EmpireRefineries, Inc., 3 Wash. 2d 651, 101 P.2d 975, we held that chapter 186, Laws of 1939, was unconstitutional, under the fourteenth amendment to the Federal constitution and Art. I, § 12, of the state constitution, in its entirety. Thereafter, the director of licenses of this state notified the Texas Company, Tidewater Associated Oil Company, Sunset Oil Company, Shell Oil Company, Standard Oil Company of California, Union Oil Company of California, General Petroleum Corporation of California, and Richfield Oil Corporation, that they would be required to again qualify as distributors under the provisions of Title XI, chapter 180, Laws of 1935, as amended by chapter 116, Laws of 1937.

Each of the corporations listed above qualified under the 1935 amended act, as required by the notice to them by the director of licenses, and then commenced separate suits (fifteen in all) against certain state officers to enjoin the collection of any tax under the act. At the same time, each of those corporations instituted a separate law action (fifteen in all), on the ground of the unconstitutionality of the statutes invoked by the director of licenses, for the recovery of all fuel oil excise taxes and petroleum products excise taxes paid by them within the period of three years under chapter 180, Laws of 1935, as amended by chapter 116, Laws of 1937, and under chapter 186, Laws of 1939, since May 1, 1939. Trial to the court resulted in decrees in the equity cases and judgments in the law actions in favor of the plaintiff corporations. The state director of licenses and other defendants appealed.

The amounts for which the judgments are entered are not in dispute. The fifteen actions were consolidated for hearing in this court.

The equity suits and law actions were instituted by respondent distributors on the theory, with which the trial court agreed, that chapter 180, Laws of 1935, and chapter 116, Laws of 1937, amendatory of chapter 180, supra, which imposed an excise tax upon distributors of fuel oil were (as we held in State v.Inland Empire Refineries, Inc., supra, with respect to chapter 186, Laws of 1939) invalid as unreasonable and discriminatory; therefore, as the taxes were paid under duress, coercion, or business compulsion, respondents were entitled, under GreatNorthern R. Co. v. State, 200 Wash. 392, 93 P.2d 694, to recovery of amounts paid as involuntary payments.

The first fuel oil tax statute in this state was enacted as Title XI, chapter 180, Laws of 1935. It was entitled, in part,

"An Act relating to revenue and taxation; . . . providing for the levy and collection of a tax upon the sale, use or distribution of fuel oil and diesel oil; . . ."

That statute imposed

". . . in addition to any other taxes provided by law, an excise tax upon every distributor at the rate of one-quarter (1/4) cent for each gallon of fuel oil and/or diesel oil sold, distributed, withdrawn or used by him in the state of Washington."

In 1937, the legislature enacted chapter 116, Laws of 1937, which amended Title XI, chapter 180, Laws of 1935. The act was entitled:

"An Act providing an excise tax upon the business of selling fuel oil and amending [Title XI] sections 78, 79, 80 and 81 of chapter 180, Laws of 1935 . . ."

The statute imposed

". . . in addition to any other taxes provided by law, an excise tax upon every distributor at the rate of one-quarter (1/4) cent for each gallon of fuel oil sold, distributed, or withdrawn by him in the State of Washington."

The amendatory act of 1937 changed the nature of the tax from one for the privilege of distributing fuel oil to a tax upon the business of selling fuel oil; that is, the 1937 statute fixed the nature of the use of the oil as the standard for the imposition of the tax. Section 2, chapter 116, Laws of 1937, p. 459, amended § 79, chapter 180, Laws of 1935, p. 750, and defined the term "fuel oil" to mean "any liquid or liquefiable petroleum product sold, withdrawn or distributed for the generation of heat or power, . . ." The excise tax upon the business of selling fuel oil was imposed upon fuel oil to be used for the generation of heat or power; the taxation is restricted to that use. It follows that we have for our consideration the question of the validity of the tax upon the business of selling fuel oil which is to be used for the generation of heat or power. It is only the use for the generation of heat or power that is taxable, hence we are not concerned with the fact that the oil may be used for weed extermination, the manufacturing of gas, and put to other uses.

The business of selling, the distribution, and use of fuel oil are in competition with the business of selling, the distribution, and use of solid fuels. Fuel oil and solid fuels, such as coal, wood, sawdust, and coke, together with the mechanical contrivances incidental to their use, such as oil burners, coal stokers, and sawdust burners, are marketed in competition with each other. A distributor of fuel oil is required to pay a tax of approximately ten per cent more for the privilege of distributing fuel oil than is paid by the distributors of coal, wood, sawdust, coke, gas, and electricity. No reasonable ground exists for making a distinction between those who fall within the classification of distributors of fuel subject to the tax and distributors of fuel not subject to the tax.

We held in State v. Inland Empire Refineries, Inc., 3 Wash. 2d 651, 101 P.2d 975, under a state of facts the same as in the case at bar, that chapter 186, Laws of 1939, which imposed an excise tax upon distributors of fuel oil, was unconstitutional as unreasonable and discriminatory, since no reasonable ground exists for making a distinction in classification between distributors of fuel oil and distributors of solid fuels, such as coal, wood, sawdust, and coke. The principle of the case cited is applicable to Title XI, chapter 180, Laws of 1935, as amended by chapter 116, Laws of 1937.

The next question presented is whether the excise taxes for the privilege of engaging in the business of a fuel oil distributor were exacted of respondents under conditions amounting to such compulsion as would constitute legal duress, thereby entitling respondents to recovery of the amounts paid, as involuntary payments, even if such payments were not made under protest. That question is foreclosed by Great Northern R. Co. v. State,200 Wash. 392, 93 P.2d 694.

The contention of counsel for appellants that the legislature has not made an appropriation from which may be refunded to the distributors the amount of excise taxes paid by them under the invalid statutes, and the running of the statute of limitations, if an appropriation is available, in which to bring actions for recovery of amounts paid, is without substantial merit, as the question presented in the case at bar is the right to recovery of judgment and has nothing to do with the means of satisfying the award.

Counsel for appellants next contend that raspondents are not the real parties in interest, as the taxes they paid were passed on to others. The tax was levied against respondent distributors, who are, as the state argued in its petition for rehearing inState v. Inland Empire Refineries, Inc., supra, the taxpayers. All taxes, in a sense, may be said to be paid by the consumer. If one paid a real property tax under a statute which was later declared unconstitutional and such taxpayer brought an action for the recovery of the amount he paid under such unconstitutional statute, the fact that the taxpayer added the amount of the invalid tax to the rental price of the property, would not prevent his recovery of the ad valorem tax he paid under protest. It is unnecessary to cite numerous authorities to sustain the position that the mere fact that the amount of a tax may be taken into consideration in fixing the price of a commodity would not deprive the seller, who paid the tax in the first instance (respondents in the case at bar), of his status as a real party in interest, whether the action was brought to enjoin collection of the tax or to recover it back after same had been paid.

The question raised by appellants to the effect that respondents are estopped to assert that they were induced by duress to comply with the fuel oil tax statutes involved herein, is foreclosed by State v. Inland Empire Refineries, Inc.,supra, and by McDonald v. Pend Oreille Mines Metals Co.,189 Wash. 389, 65 P.2d 1250.

In the second case just cited, the defendant was sued for money due under the president's reemployment agreement, which the court held was executed under duress. In rejecting the contention that the defendant was estopped, we said:

"Respondent is not estopped to assert that the Reemployment Agreement and the acts incidental to it were induced by duress. There can be no ratification ``while the fear or undue influence which operated to induce the original transaction is still effective.' Williston on Contracts, § 1623. The coercion did not cease until the statute was declared invalid in May, 1935, inSchechter Poultry Corp. v. United States, 295 U.S. 495,55 S. Ct. 837, 79 L. Ed. 1570, 97 A.L.R. 947."

Counsel for appellants contend that, if respondents are entitled to any recovery, it must be reduced to such payments as were made within two years of the presentation of respondents' claims to the state auditor. The statute upon which appellants rely reads as follows:

"All persons having claims against the state shall exhibit the same, with the evidence in support thereof, to the auditor, to be audited, settled, and allowed within two years after such claim shall have accrued, and not afterwards. And in all actions brought in behalf of the state, no debt or claim shall be allowed against the state as a setoff, but such as has been exhibited to the auditor, and by him allowed or disallowed, except only in cases where it shall be proved to the satisfaction of the court that the defendant at the time of trial is in possession of vouchers which he could not produce to the auditor, or that he was prevented from exhibiting the claim to the auditor by absence from the state, sickness, or unavoidable accident." Rem. Rev. Stat., § 11007 [P.C. § 6592] (Laws of 1854, p. 411, § 8; Code of 1881, § 2578; Laws of 1890, p. 638, § 12; 1 H.C., § 92).

Rem. Rev. Stat., § 11007, does not require the presentation to the state auditor of claims for tax refunds as a prerequisite to the maintenance of an action against the state for tax refunds. Each respondent filed a claim with the state auditor on or about the date of the commencement of its law action, and it is true, as counsel for appellants contend, that the claims show that they were not filed within two years from the date of payment of the sums claimed.

Article II, § 26, of the state constitution, which was adopted in 1889, provides that

"The legislature shall direct by law in what manner and in what courts suits may be brought against the state."

It is not, nor could it be successfully, urged that the foregoing constitutional provision is self-executing. It was not until 1895, when the legislature enacted chapter 95, Laws of 1895, that suits against the state were authorized.

"Any person or corporation having any claim against the state of Washington shall have a right of action against the state in the superior court of Thurston county. . . ." Rem. Rev. Stat., § 886 [P.C. § 6260] (Laws of 1927, p. 331, § 1; Laws of 1895, p. 188, § 1).

Rem. Rev. Stat., § 11007, is not a limitation upon the right to sue the state, it is clear. In the enactment of what is now Rem. Rev. Stat., § 11007, obviously the legislature did not have in mind the curtailment of a right which then did not even exist. Rem. Rev. Stat., § 11007, was enacted as § 12 of act approved March 27, 1890, which was a reenactment of § 8 of an act of the territorial legislature of 1854. The two acts antedate a number of years the enactment (Rem. Rev. Stat., § 886, enacted in 1895) authorizing the filing of a suit against the state.

It is significant that, while the first sentence in Rem. Rev. Stat., § 11007, provides that all persons having claims against the state shall exhibit the same to the auditor, there is not present any provision that such presentation shall be a prerequisite to filing of suits. The second sentence in the section contains such provision, but the second sentence deals solely with suits brought in behalf of the state, in which cases a claim against the state can be asserted as an offset only if it has been exhibited to the auditor. The cases at bar are not within the provisions of the second sentence of the statute, as they are not actions brought in behalf of the state, and the claims are not asserted as an offset. The legislature was mindful of the fact that, at that time, a suit could not be filed against the state.

The power of taxation by the state is a sovereign power. Stateex rel. Board of Commissioners v. Clausen, 95 Wash. 214,163 P. 744. The necessity of compliance with Rem. Rev. Stat., § 11007, is to be determined by the capacity in which the state, through its officers, was acting in the situation out of which the claim arose. If the state was acting in a proprietary capacity, its liability would sound in tort, and compliance with the statute would be a necessary prerequisite to holding it responsible. But if the state was acting in its sovereign capacity under its power of taxation, which it was, the filing of a claim would be unnecessary under the authority of Decker v.State, 188 Wash. 222, 62 P.2d 35.

The statute involved in the various cases (Buckles v. State,221 N.Y. 418, 117 N.E. 811; Gulf Export Co. v. State, 112 Miss. 452,73 So. 281; and Goodhope v. State, 50 S.D. 643,211 N.W. 451) cited by appellants, expressly, specifically, made the presentation of the claim a condition precedent to the bringing of an action on the claim against the state, which clearly distinguish those cases from the case at bar, as Rem. Rev. Stat., § 11007, does not contain any such provision. It is unnecessary to review the other cases cited by appellants; they are also distinguishable from the case at bar, or are not out of harmony with what we have said.

The foregoing opinion was written and released by the undersigned December 16, 1940. A dissent thereto was written February 14, 1941. The causes were thereafter assigned to another member of this court to write the majority opinion, which majority opinion was placed on my desk April 1, 1941. Today, April 15, 1941, my views are as expressed in the above (now dissenting) opinion.

The decrees and judgments in all of the fifteen causes consolidated on this appeal should be affirmed.