Philippine Refining Corp. v. County of Contra Costa

Three separate actions were brought to recover taxes paid under protest. Said actions were consolidated pursuant to stipulation. The trial court sustained demurrers to the complaints without leave to amend and

This appeal involves the question of whether certain cocoanut oil, which was temporarily stored in tanks at Point San Pablo, was subject to local taxation under the circumstances alleged in said complaints. The three complaints were substantially similar in all of their essential allegations and therefore we need only discuss the allegations found in the complaint in action numbered 19345.

It is alleged therein that plaintiff conducts an importing business from its offices in New York City consisting of the importing of cocoanut oil from the Philippine Islands and the selling of the same to various customers within the United States in performance of contracts previously entered into with said customers; that the cocoanut oil so imported is in most instances sold to manufacturers who do not have large storage facilities and who therefore contract for said oil to be delivered in lots of one or more tank cars over a period of months; that cocoanut oil cannot be economically imported in such small quantities and can only be economically imported in steamer tank lots of from 500 to 1,000 tons each; that by reason thereof, it is necessary for plaintiff to have storage and transshipment facilities at the point of transfer from ship to rail in order to permit it to complete shipments of said oil at the times required in the purchasers ’ contracts; that for said purposes plaintiff owns- and operates a receiving plant at Point San Pablo.

It is further alleged therein that plaintiff conducts said importing business by aggregating orders sufficient to fill one or more tanks available in steamers and when sufficient orders have been aggregated plaintiff makes importations of oil and said oil is discharged from the steamers at its said plant at Point San Pablo; that on the first Monday in March, 1933, by reason of the manner of conducting said import business, plaintiff had on hand at its plant a quantity of oil imported on four steamers. The facts concerning the amount, the time of arrival and time of departure from said plant of the oil in question were set forth in detail. It was further alleged that none of said oil was held by plaintiff for indiscriminate sale, but that it was imported for sale under said several contracts and thereafter delivered to the purchasers pursuant thereto, approximately 90 per cent of the oil continuing

The position of appellant is based upon two provisions of the Constitution of the United States. Article I, section 10 thereof, provides: “No state shall, without the consent of the Congress, lay any impost or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws.” Article I, section 8 thereof, provides: “The Congress shall have power ... 3. To regulate commerce with foreign nations, and among the several states, and with the Indian tribes. ’ ’

These provisions and the authorities construing the same are relied upon by appellant to support its contention that the cocoanut oil was not subject to local taxation under the circumstances set forth in the complaints. In our opinion, appellant’s contention must be sustained. (Carson Petroleum Co. v. Vial, 279 U. S. 95 [ 49 Sup. Ct. 292 , 73 L. Ed. 626 ] ; Galveston v. Mexican Petroleum Corp., 15 Fed. (2d) 208; see, also, Southern Pac. Co. v. Calexico, 288 Fed. 634 ; In re Taxes Pacific Guano & Fertilizer Co., 32 Hawaii, 431.)

Numerous authorities are discussed by counsel in their briefs but we believe that the foregoing authorities are controlling here. In this connection it may be stated that while the constitutional provisions above mentioned are separate and distinct, they are closely related and are discussed together in their application to the facts in many of the cases. The decisions are rested upon one or the other or both of said provisions.

The case of Carson Petroleum Co. v. Vial, supra, is closely in point although the oil there was being exported. The company took orders from foreign buyers and then purchased 011 in Kansas, Oklahoma and Texas and caused it to be

The facts in City of Galveston v. Mexican Petroleum Corp., supra, are strikingly similar to those before us. The company there imported oil from Mexico and held it in storage tanks at Galveston while awaiting distribution under contracts previously made. It was there decided that the oil so held was not subject to taxation by the city of Galveston. The decision was rested upon the import clause rather than the commerce clause of the Constitution. The court cited the leading ease of Brown v. Maryland, 12 Wheat. (25 U. S.) 419 [ 6 L. Ed. 678 ], the opinion in which was written by Chief Justice Marshall and has been frequently quoted in the subsequent cases. In the last-mentioned opinion it is said at page 441, “It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported, that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps lost its distinctive character as an import, and has become subject to the taxing power of the state; but while remaining the property of the importer, in his warehouse, in the original

Respondents cite and rely mainly upon the case of General Oil Co. v. Crain, 209 U. S. 211 [ 28 Sup. Ct. 475 , 52 L. Ed. 754 ], That case is clearly distinguishable. It appears there that the oil was brought from the north to a distribution plant in Memphis. It was there placed in storage tanks and indiscriminately sold and distributed from that point. After a time, in an attempt to escape a local tax, part of the oil was put in tank No. 1, marked '1 Oil already sold in Arkansas, Louisiana and Mississippi”, while the oil which had not been sold was kept in the other tanks. This case is thoroughly discussed in Carson Petroleum Corp. v. Vial, supra, both of said cases having been decided under the commerce clause. The court there points out that, “The case has caused discussion and it must be admitted that it is a close one and might easily have been decided the other way. The result was probably affected by the impression created by the original situation and the somewhat artificial rearrangement of tanks in a large entrepot for redistribution of oil to avoid previous taxability.” In view of the distinction pointed out by the court in the Carson case, it appears unnecessary to discuss further the General Oil Co. case.

Respondents also rely upon Mexican Petroleum Corp. v. Portland, 121 Me. 128 [ 115 Atl. 900 , 26 A. L. R. 965 ]. That case is not only distinguishable upon its facts, but it was decided without reference to the commerce clause. Furthermore, the holding of that case, based upon the court’s construction of the import clause, was expressly repudiated in City of Galveston v. Mexican Petroleum Corp., supra.

In the present case, it appears from the allegations of the complaint that shipment from the Philippine Islands through the plant at Point San Pablo to various purchasers was intended and carried through pursuant to contracts made prior to the time that the journey began; that it was neither practical nor according to business custom to make through shipments in segregated lots to each individual customer at the times and in the amounts called for by the contracts of the purchasers; that the storage tanks in appellant’s plant at Point San Pablo were used solely for holding said oil in its original form during a halt in the journey to the pur

Under the authorities above cited, we are of the opinion that the allegations of the complaints were sufficient to show that the oil was not subject to local taxation while so held and that the demurrers to the complaint should have been overruled.

The judgment is reversed with directions to the trial court to overrule the demurrers.

Nourse, P. J., and Sturtevant, J., concurred.