Case Name: CENTURY DISTILLING COMPANY, a Corporation, Respondent, v. BYRON DEFENBACH, as Tax Commissioner of the State of Idaho, Appellant
Court: Idaho Supreme Court
Jurisdiction: Idaho
Decision Date: 1940-01-16
Citations: 61 Idaho 192
Docket Number: No. 6667
Parties: CENTURY DISTILLING COMPANY, a Corporation, Respondent, v. BYRON DEFENBACH, as Tax Commissioner of the State of Idaho, Appellant.
Judges: Givens, Morgan and Holden, JJ., concur.
Reporter: Idaho Reports
Volume: 61
Pages: 192–216

Head Matter:
(No. 6667.
January 16, 1940.)
CENTURY DISTILLING COMPANY, a Corporation, Respondent, v. BYRON DEFENBACH, as Tax Commissioner of the State of Idaho, Appellant.
[99 Pac. (2d) 56.]
J. W. Taylor, Attorney General, R. W. Beckwith, E. G. Elliott, Lawrence B. Quinn and D. W. Thomas, Assistant Attorneys General, for Appellant.
Ealph E. Breshears and Dean Driscoll, for Eespondent.

Opinion:
AILSHIE, C. J.
(After making the statement). — Two principal questions are presented which are necessary to be decided in the determination of this case:
(1) Was the business done purely interstate or essential to or inseparable from interstate commerce ?
(2) If the sales and commerce made were not made and done in interstate commerce, did respondent engage in "doing business" in this state?
For reasons which will hereafter appear, we waive any consideration of the question of the right of respondent to maintain this action and the service of process and other procedural questions.
Preliminary to a consideration of the two legal questions thus propounded, we are asked to dismiss the case for want of jurisdiction of the issues, because of appellant's contention, that he is sued as an officer of the state for action taken by him officially on behalf of the state; and that the state has not given its consent to be sued for a declaratory judgment.
It is generally held by the courts, both state and federal, that where the action taken or threatened by an officer, is alleged to be in violation of the complainant's rights, either because of a misconstruction or misapplication by the officer of a statute, or on account of the alleged unconstitutionality of the statute, the action is not in fact one against the state but is rather against the individual because of his lack of power and authority to do the thing complained of. (State v. Superior Court, 182 Wash. 277, 46 Pac. (2d) 1046, 1049; State Highway Com. v. Younger, 170 Okl. 614, 41 Pac. (2d) 686, 688; Ex parte Young, 209 U. S. 123, 28 Sup. Ct. 441, 52 L. ed. 714, 727, 729, 14 Ann. Cas. 764, 13 L. R. A., N. S., 932; Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418, 42 L. ed. 819, 839; Reagan v. Farmers Loan & T. Co., 154 U. S. 362, 14 Sup. Ct. 1047, 38 L. ed. 1014, 1021; Western U. Tel. Co. v. Andrews, 216 U. S. 165, 30 Sup. Ct. 286, 54 L. ed. 430, 431; Home Tel. etc. Co. v. City of Los Angeles, 227 U. S. 278, 33 Sup. Ct. 312, 57 L. ed. 510, 515; Looney v. Crane Co., 245 U. S. 178, 38 Sup. Ct. 85, 62 L. ed. 230, 236; White Eagle Oil & Ref. Co. v. Gunderson, 48 S. D. 608, 205 N. W. 614, 43 A. L. R. 397, 403, 408.)
The principle announced by the foregoing authorities has been recognized by the practice in the courts of this state, as disclosed by the following cases, wherein injunctive relief was sought against appointive state officers: Geo. B. Wallace, Inc., v. Pfost, 57 Ida. 279, 65 Pac. (2d) 725, 110 A. L. R. 613; Johnson v. Diefendorf, 56 Ida. 620, 57 Pac. (2d) 1068; Garrett Trans. & Storage Co. v. Pfost, 54 Ida. 576, 33 Pac. (2d) 743; J. C. Penney v. Diefendorf Co., 54 Ida. 374, 32 Pac. (2d) 784; Independent School Dist. v. Pfost, 51 Ida. 240, 4 Pac. (2d) 893, 84 A. L. R. 820; City of Burley v. Pfost, 51 Ida. 255, 4 Pac. (2d) 898; Smallwood v. Jeter, 42 Ida. 169, 244 Pac. 149.
Furthermore, section 2 of the Declaratory Judgment Act (chap. 70 of the 1933 Sess. Laws) comprehends this kind of case, in providing that
"Any person interested under a . written contract . . . . oral contract, or . . other legal relations are affected by a statute, municipal ordinance, contract or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract or franchise and obtain a declaration of rights, status or other legal relations thereunder." (State ex rel. Miller v. State Board of Education, 56 Ida. 210, 52 Pac. (2d) 141.)
We conclude that the suit is not one against the state.
We now turn our attention to an examination of the decisive legal questions involved in the case as above stated. The business we must consider concerns alcoholic liquors manufactured in the state of Illinois and thence shipped to Idaho and at some time and place sold to the Idaho Commission. The liquor left Illinois and arrived in Idaho in interstate transportation. It left Illinois the property of the shipper; it was consigned to the shipper in Idaho. When it arrived in Idaho it was delivered by the transportation company to an independent warehouseman as the consignor's bailee, and was thereupon removed from the possession and control of the carrier; whereupon the interstate transaction was terminated and the goods came to rest in Idaho in the possession of the warehouseman, the Distilling Company's bailee. That the interstate character of the shipment and transaction was terminated on delivery to the Idaho warehouseman, seems clear. (Columbia Motors Co. v. County of Ada, 42 Ida. 678, 247 Pac. 786, 48 A. L. R. 950, 956; Wrought Iron Range Co. v. Rich, 32 Ida. 453, 184 Pac. 627; Mandel Bros. v. Henry A. O'Neil, Inc., 69 Fed. (2d) 452, 456; State ex rel. Hays v. Robertson, 271 Mo. 475, 196 S. W. 1132, 1136.)
In General Oil Co. v. Crain, 209 U. S. 211, 28 Sup. Ct. 475, 52 L. ed. 754, 765, the United States Supreme Court said:
" 'The substance of these cases is that, while the property is at rest for an indefinite time, awaiting transportation, or awaiting a sale at its place of destination, or at an intermediate point, it is subject to taxation.' . This certainly describes a business, — describes a purpose for which the oil is taken from transportation, brought to rest in the state, and for which the protection of the state is necessary, — a purpose outside of the mere transportation of the oil. The ease, therefore, comes under the principle announced in American Steel & Wire Co. v. Speed, 192 U. S. 500, 48 L. ed. 538, 24 Sup. Ct. Rep. 365."
No one contends here that the state can either directly or indirectly hinder or place any local burden on interstate commerce. We considered that question more than a third of a century ago and held a statute invalid because it ran counter to the provisions of sec. 8, art. 1 of the federal Constitution. (In re Kinyon, 9 Ida. 642, 75 Pac. 268, 2 Ann. Cas. 699; Belle City Mfg. Co. v. Frizzell, 11 Ida. 1, 81 Pac. 58.)
It is necessary, however, that we pursue the inquiry to the extent of ascertaining where the sale of these liquors took place, — whether in Illinois or Idaho. That is necessary in order that we find where the business was done. The negotiation started in Illinois by the Distilling Company, mailing an application to the commission in Idaho, for permission to ship certain described liquors into the state. This permission was granted and the liquors were shipped and stored in three warehouses located in three different cities in the state and designated by the commission.
The shipment thus made is entirely unlike an interstate C. O. D. shipment. Two essential elements in the comparison are wholly absent from this case, viz., (a) delivery by the carrier to the purchaser; and (b) payment by the purchaser to the carrier. Instead of these acts, which evidence an interstate transaction, the carrier delivers the goods to the shipper's bailee, and when a sale is eventually made on credit, the shipper bills the purchaser and collects, in the usual course of time purchases, in commercial transactions.
It was stipulated (statement, supra) that title to the liquors should remain in the Distilling Company until they are withdrawn and tested by the commission. The provisions of the contract, requiring the commission to make requisitions; and that requisitions be mailed by the warehouseman to the company in Illinois; and the subsequent making of vouchers on the state, mailing them back to Idaho for the issuance of state warrants, and subsequent payment of the warrants, were all matters of detail in bookkeeping and payment of current bills, since the sales when finally made were clearly credit transactions; as the liquors withdrawn by the commission from the warehouses might be entirely sold out at retail and consumed before these bookkeeping and mailing details could be completed and payment be made. The prices at which liquors are sold and billed to the commission are the current prices at the time when the liquors are removed from the warehouses in Idaho and delivered to the commission. Charges for storage are paid by the Distilling Company.
So it seems quite clear that the sales actually took place and title passed here in Idaho at the warehouses where the commission took possession of the liquors on withdrawal of the same from the warehouses. These were clearly not mail order sales. They were sales and deliveries of property which had already been shipped into the state and freed and severed from interstate commerce and control. (East Coast Oil Co. v. Commissioner of Internal Revenue, 31 U. S. B. T. A. 558, 560, and cases cited; 1 Williston on Sales, 2d ed., sec. 270 and notes 75-77, p. 546.) These goods when stored in the warehouse become a part of the mass of the taxable property within the state. (Wrought Iron Range Co. v. Rich, 32 Ida. 453, 184 Pac. 627; see, also, In re Kinyon, 9 Ida. 642, 649, 75 Pac. 268, 2 Ann. Cas. 699; Parks Bros. & Co. v. Nez Perce County, 13 Ida. 298, 89 Pac. 949, 121 Am. St. 261, 12 Ann. Cas. 1113.)
Under the stipulation, supra, the commission was not bound or obligated to take or accept any kind or quantity of liquors; and the only reason why the Distilling Company could not sell and dispose of any or all of a shipment to anyone else, was due to the Idaho Liquor Control Laws (chap. 103, 1935 Sess. Laws), prohibiting anyone selling, handling, or disposing of liquors within the state, except the commission.
It is argued, however, that this latter fact establishes respondent's contention, that these transactions did not constitute "doing business" in this state. It is asserted that, since respondent could not possibly legally sell its goods to anyone in the state of Idaho but the commission, therefore, sales to the one customer only did not constitute ' ' doing business. " In advancing this argument, respondent fails to note the difference between making a single sale or an isolated transaction with one customer, and making several or many sales to á single customer. A foreign corporation might do an extensive and flourishing daily business, all with a single customer, in which case it would certainly be "doing business," within the meaning of the law. Nor does it seem to us that the fact, that the statute limits the field of possible customers or purchasers to a single one, renders the transaction had with that customer any less "doing business," than in the case where the corporation selects, of its own volition, a single customer to which it makes many sales.
"It is not the length of time that a foreign corporation is here, nor the volume of business done while here, — it is the purpose for which it comes that determines whether compliance with the statute is necessary. (Hoffstater v. Jewell, 33 Ida. 439 (444), 196 Pac. 194.)" (Adjustment Bureau, etc., v. Conley, 44 Ida. 148, 153, 255 Pac. 414.)
It has been suggested that the commission could only purchase outside the state. The suggestion is wholly erroneous ; the statute is otherwise. Many sections of the statute are devoted to the subject of regulating manufacturers within the state and issuing permits to them, and authorizing them to sell "alcoholic liquors and wines to the commission and to customers outside of the state." (Sec. 29 of the Liquor Control Act.) Paragraphs (a) and (i) of sec. 7 contemplate the control of local manufacturers of alcoholic liquors as do many other sections and provisions of the Act. Paragraph (1) of subsection 2, section 8 of the Act, authorizes the commission to prescribe the manner and method of delivery of liquor by distillers to purchasers. (See, also, sec. 19.) So there is no room for doubt that the Act authorizes the commission to purchase alcoholic liquors from distillers within the state and also from manufacturers beyond the state line; making the purchase either in the state where manufactured or after shipment to Idaho under permit.
We conclude, upon all the facts and the law of the case, that the Distilling Company has been engaged in the business of selling, disposing of, and delivering (by its bailee) alcoholic liquors to the commission, within the state of Idaho ; and is liable, under the Property Relief Act (Title 61, chap. 24, I. C. A.), to make a return to the tax commissioner and pay such tax as may be legally assessed against it.
The judgment is reversed and the cause is remanded with directions to dismiss the action. Costs awarded to appellant.
Givens, Morgan and Holden, JJ., concur.