Paul Gray, Inc. v. Ingels

23 F. Supp. 946, 1938 U.S. Dist. LEXIS 2089

• Court: District Court, S.D. California
• Decided: July 9, 1938
• Docket: Eq. 1203-C
• Status: Published

Opinions

COSGRAVE, District Judge.

In 1935 the California Legislature passed an act that defined “caravaning” as the transportation from without the state of any motor vehicle operated on its own wheels or in tow of another vehicle for the purpose of sale to or by anyone within or without the state. The act required a special permit for caravaning for which a fee of fifteen dollars for each vehicle was charged. This money was paid into the general fund in the state treasury, “to reimburse the State treasury-for the added expense which the State may incur in the administration and enforcement of this act and the added expense of policing the highways over which such caravaning may be conducted.” Stat.1935, pp. 1453, 1454, § 6.

In a suit brought to restrain the enforcement of the act on the ground that it was a forbidden burden on interstate commerce, and an infringement of due process and equal protection enjoyed under the Fourteenth Amendment of the U. S. Constitution, U.S.C.A.Const.Amend. 14, the plaintiffs obtained judgment in a three judge District Court, Morf v. Ingels, D.C., 14 F.Supp. 922, on May 5, 1936. The defendants appealed to the U. S. Supreme Court, where the judgment was affirmed, Ingels v. Morf, 300 U.S. 290, 57 S.Ct. 439, 81 L.Ed. 653, on March 1, 1937. In its decision the Supreme Court considered only the contention that the licensing provisions burdened interstate commerce and expressly refrained from considering the question of discrimination against interstate commerce by failure of the act to exact a fee from those engaged in intrastate commerce, Ingels v. Morf, supra, page 293, 57 S.Ct. page 441. Appellants did not deny that the permit fee burdened interstate commerce, but urged that it was permissible for (a) the use of the highways, (b) the cost of policing the traffic, including the cost of administering the act. The 'court held (page 294, 57 S.Ct. page 441) that to justify the exaction by a state of a money payment burdening interstate commerce it must affirmatively appear that it is demanded as reimbursement for the expense of providing facilities or of enforcing regulations of the commerce, which regulations are within its constitutional power. Since, under the act, all the license fees were paid into the general fund, and since no part of the general fund is applied to highway purposes, the court concluded that the fees were collected, not for the use of the highways, but for the extra expense of administering the act and policing the traffic, and since the trial court found on sufficient evidence that the fee was excessive for such purpose, the decision of the District Court holding the act invalid was upheld.

In 1937 the California Legislature repealed the 1935 act and passed an entirely new act (Stat.1937, p. 2253), differing in several respects from that of 1935. The license fee is still imposed on vehicles transported on their own wheels for sale. The state is divided into two zones, with the result that each zone contains one of the two principal centers of population, Los Angeles and San Francisco. While a license fee is required in moving cars from one zone to the other, none is required for intrazone movement. A license fee of $7.50 is provided “as compensation for the privilege of using the public highways” of the state, and a like fee “to reimburse the State for expense incurred in administering police regulations pertaining to the operation of vehicles moved.” Section 4. One-half of the fees are paid into the Motor Vehicle fund in the state treasury for the support of the Department of Motor Vehicles. In substance, the new act requires a license fee for all vehicles moved on their own wheels for sale from one of the densely populated areas of the state to another and from points outside of the state to points within either of the zones, but does not require a license fee for similar movements between points within each zone. It devotes one-half of the fee to general highway purposes and the remaining one-half to the expense of policing the traffic and enforcing the act.

Plaintiffs in the present action seek to enjoin the enforcement of the 1937 act on the grounds, among others, that it is an excessive burden on interstate commerce; that it unjustly discriminates between interstate and interzone movement of cars on the one hand, and intrazone movement on the other; that there is no reasonable relation between the charges made and the expenditures necessary.

The defendants plead, among other things, that large numbers of cars are moved in units of two coupled together, with a single driver; that drivers bring cars. into the state, and are irresponsible, not regular employees, are transients; that the bringing in of .a number of cars in single units produces congestion of the highways, increases traffic hazards and increases the cost of the highway maintenance.

It is shown that approximately 15,000 cars are brought into California upon their own wheels for sale annually. Of this number, 3000 are brought in singly, that is each car with its driver and not in association with any others—not in convoys. 6,-000 are moved singly, each car with a single driver, but in convoys of varying numbers, possibly ten to twenty. 6,000 are moved in twos, the rear car being coupled to the one in front with one driver to each such unit; The interzone moving is negligible. 'At the two centers of population and distribution, San Francisco in the northerly zone, and Los Angeles in the southerly zone, there is, of course, extensive sale of cars not brought. into the state' on their own wheels. These .are distributed over an average radius of perhaps'a hundred miles from each of the centers, rarely coupled together, but nevertheless in convoys and generally each car is in charge of a 'driver regularly employed. Distribution is also made by loading the cars on trucks that exceed in length the coupled car unit.

A general comparison between the year 1931 and the year 1937 shows:

1931 1937

Total registrations in California ....... 2,107,275 2,638,150

Cars of outside registry coming into the state......... 324,726 504,943

Total number driven into the state..... 649,245 1,015,886

From this it.appears that the 15,000 cars brought in fojr sale , on their own wheels are not to exceed 1%% of the total number of cars coming over the border in 1937. The 3,000 cars brought in, each with its own driver and not in association with other cars, necessarily must be eliminated for it cannot be that they present anything in the nature of a problem. The remaining 12,-000 cars come in convoys, say averaging 15 cars to a convoy, or 800 different processions of 15 cars' each during the 365 days of the year. This is an average of 66 convoys each month over a distance that can be attained without undue haste in one day. Over a considerable portion of the distance, notably from points of entry at Yermo, Blythe, and Yuma, while the road is a two lane highway, it traverses great lengths of totally uninhabited country with no intersecting roads and with nothing in the way of congested traffic.

15,000 cars means 1 %% of the total of 1,015,886 cars that cross the state borders. The testimony as to the number of men whose employment caravaning requires is indefinite and inconclusive. No ofie on behalf of defendants testified that caravans are actually escorted, with the exception of Captain Personius, who, while stating that he himself had gone from Truckee to Sacramento with caravans, did not know how many caravans had been assisted in his district. Mr. Cato, chief of the patrol, does not say that -a single officer or employee devotes his entire time to the caravaning problem. At the most only Captain Personius and possibly two district officers do so. On the other hand, one of the plaintiffs testified that at no time was any of his considerable number of caravans ever escorted or assisted by a traffic officer. It was agreed that many other witnesses would give similar testimony.

The officer charged with the enforcement of the act testifies that after the enactment of the law three officers were assigned to Highway 50 between Carson City, Nevada, and Placerville, California, south of Cake Tahoe. At the same time defendants present the records of the Public Service Commission of the State of Nevada, from which it appears that during the entire eight months, beginning with January 1, 1937, and ending with August 31 of the same year, the period of greatest' activity, a total' of only 9 cars were brought into California for sale Over Highway 50. These undisputed figures put in grave doubt the question as to whether substantial traffic problems exist by reason of caravaning.

The showing made by defendants as to the traffic problems presented by caravaning is not impressive. The number of caravan-ed cars compared with the total coming into the state, a negligible percentage, seems to force the conclusion that the situation presented is substantially that found by the District Court to exist in the former case, Morf v. Ingels, D.C., 14 F.Supp. 922, that is, that the fee is not fixed on any basis of compensation for the regulation of the traffic.

There is practically no interzone movement. The intrazone movement of cars for sale is approximately 4,000 monthly in Zone 1. While no figures were presented, the movement in Zone 2 may be deemed to be the same. Such cars are entirely untaxed. A tax, purporting to be for the privilege of using the public highways, of $7.50 is ex-cated with respect to every car brought in for sale on its own wheels, while no tax whatever is levied on those brought in otherwise. Those moved for sale from the point of distribution to points of sale within a zone are untaxed. While some of the features attending the so-called caravaning are absent, nevertheless, such cars are often moved in convoys with regularly employed drivers as distinguished from those casually employed. In many cases the cars are loaded on trucks that themselves exceed the length of two connected cars. They are transported through distinctly congested districts, and for considerable distances. Altogether, it is difficult to distinguish between the two systems of transportation.

The creation of the two zones, there being no interzone movement, is highly suggestive of an effort to create a distinction where none in fact exists. The effect of the act is to lay a tax for the privilege of using the highway on 15,000 cars brought in from other states on their own wheels and at the same time relieve at least five times that number from the payment of the tax that use the public highways under substantially similar conditions within the state, but which do not happen to be brought in on their own wheels.

A tax somewhat similar was upheld in Morf v. Bingaman, 298 U.S. 407, 56 S.Ct. 756, 80 L.Ed. 1245. Such tax was levied, however, upon all automobiles transported for sale, whether intrastate or interstate. While the act attempts by creating zones to remove this objection, that attempt is plainly ineffectual, there being no interzone movement, and the result is that a fee of $7.50 is exacted for the privilege of bringing the car from the state line to the point of distribution. In California, with a registration of 2,638,150 cars, this provision is nothing but discriminatory. In passing on the 1935 act, the Supreme Court expressly declined to pass upon this question. Ingels v. Morf, supra, page 293, 57 S.Ct. page 441. A regulation that made a distinction between those who carry farm products for hire and those who carry other commodities has been condemned as an arbitrary distinction by the Supreme Court, Smith v. Cahoon, 283 U.S. 553, 51 S.Ct. 582, 75 L.Ed. 1264. Since public safety was the ultimate object, the distinction was held to be discriminatory, as not based on anything having relation to the purpose for which it was made (page 567, 51 S.Ct. page 587). The same condition seems to exist here.

The Tennessee statute considered in Interstate Transit, Inc., v. Lindsey, 283 U.S. 183, 51 S.Ct. 380, 75 L.Ed. 953, was held invalid because it was evident that the tax was laid for the privilege of doing business and not a compensation for the use of the highways. The tax, laid on interstate busses, was defended as a reasonable compensation for the use of the highways. The Court uses what appears to be quite pertinent language: “But since a State may demand of one carrying on an interstate bus business only fair compensation for what it gives, such imposition, although termed a tax, cannot be tested by standards which generally determine the validity of taxes. Being valid only if compensatory, the charge must be necessarily predicated upon the use made, or to be made, of the highways of the state. Clark v. Poor, supra [274 U.S. 554, 47 S.Ct. 702, 71 L.Ed. 1199]. In the present act the amount of the tax is not dependent upon such use. It does not rise with an increase in mileage traveled, or even with the number of passengers actually carried on the highways of the state. Nor is it related to the degree of wear and tear incident to the rise of motor vehicles of different sizes and weights, except in so far as this is indirectly affected by carrying capacity. The tax is proportioned solely to the earning capacity of the vehicle. Accordingly, there is here no sufficient relation between the measure employed and the extent or manner of use to justify holding that the tax was a charge made merely as compensation for the use of the highways by interstate busses.” Page 190, 51 S.Ct. page 382.

Even in South Carolina State Highway Department v. Barnwell Brothers, Inc., et al., 303 U.S. 177, 58 S.Ct. 510, 82 L.Ed.-, decided on February 14, 1938, the Supreme Court seriously discusses the question whether a state, in regulating the width of trucks used in interstate commerce, may not have laid an undue burden on such commerce. So long as the' regulation was not discriminatory it was upheld.

“The nature of the authority of the state over its own highways has often been pointed out by this Court. It may not, under the guise of regulation, discriminate against interstate commerce. But, ‘In the absence of national legislation especially covering the subject of interstate commerce, the state may rightly prescribe uniform regulations adapted to promote safety upon its highways and the conservation of their use, applicable alike to vehicles moving in interstate commerce and those of its own citizens.’ Morris v. Duby, 274 U.S. 135, 143, 47 S.Ct. 548, 549, 71 L.Ed. 966. * * * This Court has often sustained the exercise of that power, although it has burdened or-impeded interstate commerce. It has upheld weight limitations lower than those presently imposed, applied alike to motor traffic moving interstate and intrastate. Morris v. Duby, supra; Sproles v. Binford, supra [286 U.S. 374, 52 S.Ct. 581, 76 L.Ed. 1167].” (58 S.Ct. page 515.) (Italics supplied.)

Are we not compelled, following Morf v. Ingels, supra, to grant the injunction?

On the whole, it is evident that the employment of any considerable number of traffic officers to overcome problems presented by the entry of 12,000 automobiles, 6000 in twos, and the other 6,000 each with its own driver, presents no problem justifying the expenditure of a tax equaling $112,-500, nor can a charge of $7.50 for the use of the highway be justified with respect to each car transported for sale when it comes from outside of the .state, while nothing is charged under similar conditions within the state unless a car happens to be taken from one of the densely populated areas to the other. The situation presented seems to bring this statute within the language of the Supreme Court in passing upon the statute of the State of Washington that imposed a tax upon common carriers, decided at the same time as Morf v. Ingels, supra: “A law exhibiting the intent to impose a compensatory fee for such a legitimate purpose [regulation and inspection of public utilities] is prima facie reasonable. If the exaction be so unreasonable and disproportionate to the service as to impugn the good faith of the law it cannot stand either under the commerce clause or the Fourteenth Amendment.” Great Northern Railway Co. v. Washington, 300 U.S. 154, 160, 57 S.Ct. 397, 400, 81 L.Ed. 573.

The permanent injunction is granted.