General Oil Co. v. Crain
28 S. Ct. 475, 1908 U.S. LEXIS 1728, 209 U.S. 211 (1908)
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Rule of Law:
Goods shipped from one state to another lose their protection under the Commerce Clause and are subject to state regulation when they are held at an intermediate point for the owner's business purposes and profit, rather than for a delay that is merely incidental to their transportation.
Facts:
- General Oil Company shipped oil from Pennsylvania and Ohio to Memphis, Tennessee.
- In Memphis, the oil was unloaded from tank cars and stored in two large stationary tanks.
- One tank held oil that was already sold to customers in Arkansas and other states; it was stored in Memphis for separation, packaging, and reshipment to fulfill these specific orders.
- The other tank held oil that was stored in Memphis awaiting future sales to customers in other states.
- The company asserted this storage and redistribution process was necessary because it was logistically and financially impractical to ship small orders directly from the origin state.
- A Tennessee state official, Crain, sought to apply the state's oil inspection law, which included fees, to the oil being stored in the Memphis tanks.
Procedural Posture:
- General Oil Company filed suit in a Tennessee trial court to enjoin the state oil inspector from enforcing the state's inspection law against its oil.
- The trial court overruled the defendant's demurrer, which argued the suit was an impermissible action against the state, and entered a decree for the oil company on the merits.
- The defendant, the state official, appealed this decision to the Supreme Court of Tennessee.
- The Supreme Court of Tennessee reversed the trial court's judgment, holding that under a state statute from 1873, Tennessee courts lacked jurisdiction to entertain such a suit against a state officer.
- The Tennessee Supreme Court dismissed the suit for want of jurisdiction.
- General Oil Company then sought and was granted a writ of error from the United States Supreme Court.
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Issue:
Does a state's application of an inspection law to oil that has been shipped from another state and is stored in-state for separation and redistribution to out-of-state customers violate the Commerce Clause of the U.S. Constitution?
Opinions:
Majority - Mr. Justice McKenna
No, a state's application of an inspection law to oil stored in-state for business purposes before being shipped to out-of-state customers does not violate the Commerce Clause. The court reasoned that the oil had ceased to be in interstate commerce. It had reached the destination of its first shipment and was held in Tennessee not due to a necessary delay in transportation, but for the business purposes and profit of the company. The storage, separation, and redistribution activities constituted a local business operation that was receiving the protection of the state's laws. Therefore, the oil had 'come to rest' within the state, removing it from the protection of the Commerce Clause and making it subject to the state's non-discriminatory inspection laws, similar to the principle established in American Steel & Wire Co. v. Speed.
Dissenting - Mr. Justice Moody
Yes, the state's application of the inspection law violates the Commerce Clause. The dissent argues that the oil, particularly in the tank containing pre-sold products, never ceased its interstate journey. The stop in Tennessee was momentary and only for the 'exigencies of interstate commerce'—namely, repacking and conveniently continuing its transportation to its final destination in other states. The oil was not offered for sale in Tennessee. This temporary delay incidental to a continuous interstate journey does not strip the property of its protection under the Commerce Clause. The dissent distinguishes this from cases where property had ended its journey and was held for general sale within the state.
Concurring - Mr. Justice Harlan
The judgment should be affirmed on state-law grounds, without reaching the federal constitutional question. The Tennessee Supreme Court dismissed the suit because a state statute deprived its courts of jurisdiction to hear suits against the state or its officers. This decision rests on an adequate and independent state ground. The U.S. Supreme Court is bound by the state supreme court's interpretation of its own state's laws regarding the jurisdiction of its own courts. Therefore, the case should be affirmed simply because the highest court of Tennessee authoritatively declared that its courts could not hear the case, rendering the federal Commerce Clause issue moot for the purposes of this review.
Analysis:
This case refines the 'coming to rest' doctrine, which determines when goods moving between states lose their protected interstate status. The decision establishes that a stoppage for an independent business purpose, such as warehousing for redistribution for the owner's convenience and profit, constitutes a break in the stream of commerce. This gives states greater authority to tax and regulate goods that are temporarily located within their borders, even if their ultimate destination is another state. Future cases will have to distinguish between interruptions that are merely incidental to transportation and those, as here, that serve a distinct local business function.
