Crescent Cotton Oil Co. v. State ex rel. Collins

Sykes, J.,

delivered the opinion of the court.

This is the second appearance of this case in this court. Upon the former appeal we held that chapter 162 of the Laws of 1914 (section 4750 et seq., Hemingway’s Code), was constitutional. This case is reported in 116 Miss. 398, 77 So. 185, and reference is here made to that report for a more complete history of the case. Upon the remand of the case to the chancery court the oil company upon motion was allowed to make the following amendment to its answer:

*637“Respondent, Crescent Cotton Oil Company, would-show that it is engaged, and had been for a long time prior to the passage of the act of 1914,. mentioned in the said bill, engaged, in the operation of a cotton oil mill in the state of Tennessee, and in order to procure seed to run the said oil mill was during all of said time engaged in the buying of cotton seed in the state of Mississippi, and that all seed bought in the state of Mississippi were shipped in interstate commerce from the state of Mississippi into the state of Tennessee.
“This respondent would further show that conditions arose which rendered it impossible for a person not operating a gin to compete sueessfully Avith a person owning a gin in the purchase of cotton seed.
“Respondents would show that in order to stay in the market and continue to buy seed at Rulevlle, to be so shipped in such interstate commerce, it was necessary for it to acquire and operate a gin plant, which it did in 1910, and has continuously operated same since that time, and that the ownership and operation of said gin was a means and instrumentality made use of by this respondent in carrying on its business of cotton seed buyer and interstate shipper of cotton seed, and that the operation of said gin was an incident to the business of cotton seed buyer, and was a necessary and essential incident.
“Respondent would further show that to deprive it of the right to own and operate its gin plant will greatly burden and destroy its business of interstate commerce, in the shipment of cotton seed from the state of Mississippi into the state of Tennessee, and would be in conflict with the commerce clause of the Constitution of the United States, being subdivision 3 art. 1, section 8. ■ Respondent would further show that it is now engaged in no business in the state of Mississippi, and was not at the time of the passage of this act or the filing o.f this suit, or at any time prior thereto, except *638such as is necessary to acquire cotton seed and ship them in interstate commerce and incident to such business of interstate shipper of cotton seed.”

The testimony in the case for the complainant showed that at various and sundry times when the other cotton gins at liuleville would not agree to sell to the defendant oil mill a certain amount of seed bought by them, the defendant would put down the price of ginning below its "actual cost, for the purpose of destroying competition in ginning. The testimony also showed that the ginner has a great advantage in the buying of cotton seed over one who doesn’t operate a gin; that at Rule-ville it is almost the invariable custom of the cotton owner who wishes to sell his seed to sell it to the one who does his ginning. From the testimony it appears iJiat the ginning business of the appellant company at Ruleville is operated in this manner. The owner of the cotton in the seed brings his cotton to the gin, and if he wishes to sell the seed to the gin the cotton is then ginned, and the seed blown into the seed house of the defendant. The lint cotton is then baled and gotten by its owner. It seems from this testimony that the defendant company actually negotiated for the purchase of the seed before the cotton was ginned. If the owner of the cotton does not sell his seed to the gin the seed are not blown into the seed house of the gin, but are reloaded on the wagon of the owner. The record does not show what proportion of the seed of cotton ginned by the defendant company is thus purchased by it. One. who operates a cotton gin is thereby enabled to buy a larger quantity of seed, and at a more reasonable price than he would did he not operate a gin. In other words, the advantages in operating a gin are that the ginner is thereby given a better opportunity to buy seed from the person who gins with him, and also probably at a lower price, than if he did not own and operate the gin. The manager of the defendant *639oil company testified that in order for him to buy as much seed as he néeded in his own mill business and at an advantageous price, it was necessary for him to operate cotton gins. He also testified that, his mill operated eleven different cotton gins, two being in ■Mississippi, and the others probably in Arkansas and Tennessee. The testimony for the complainant in the case further shows that the seed bought by • the other gins at Euleville were sold to other oil mills. That it-was usually customary for them to make arrangements with some oil mill to sell the seed bought by them to these mills for a certain profit. The testimony for the defendant also shows that it máde money from its ginning operations at Euleville. From all the testimony in the case, we think it proves that an oil mill in operating a gin is enabled thereby to purchase a larger volume of cotton seed at a lower price than is possible by being forced to go into the open market for for cotton seed, or having to buy these seed from other gins.

The uncontradicted testimony in the case shows that all of the seed bought by the defendant company from its • ginning customers were bought for the purpose of shipment, and were actually shipped to its' oil mill in Memphis, Tenn. To use the phrase of the general manager of the defendant company, this gin was used as a feeder for its oil mill in Memphis, Tenn., meaning that its principal object and purpose in running the gin was to enable it advantageously to purchase these seed from its customers for shipment to its oil mill in Memphis.

The decree of the chancery court found that the Crescent Cotton Oil Company was guilty of violating the above law, and also of violating the anti-trust statute. Chapter 119, Laws of 1998 (section 3283, Hemingway’s Code). The oil company in this decree is perpetually enjoined from operating a cotton gin in. Mississippi, *640and was given ninety days within which to dispose of its two gins in this state, in default of which a receiver is to take charge of these gins and sell them at public auction to the highest bidder, in thirty days. The defendant oil company is also perpetually enjoined from doing an intrastate business in the state of Mississippi, and is enjoined from violating the anti-trust law. For the violation of chapter 162 of the laws of 1914 (sections 4752-4756, Hemingway’s Code), the defendant company was fined one thousand nine hundred dollars, and for a violation of the anti-trust law it was fined one hundred dollars. The decree also provides that the defendant oil company shall forfeit its right to do business in the state of Mississippi. From this decree this appeal was prosecuted.

It is the- contention of the appellant, and ably presented in brief and oral argument, that the question now before the court is different from that on former appeal; that the testimony here shows that the defendant oil company was engaged in interstate commerce, namely, in shipping cotton seed from Mississippi to its oil mill in Tennessee; that as an incident to this interstate commerce and in order to obtain what seed it needed at a reasonable price, it was necessary for it to operate the two cotton gins in Mississippi; that the operation of these two gins is but an incident of its interstate commerce business, namely, that of shipping cotton seed from Mississippi to Tennessee; therefore, that it is a burden on, and an interference with, interstate commerce to prohibit this mill under these circumstances from operating gins in Mississippi; that the gin is but an incident, and not the dominant object or business of the defendant company; that in this case the interstate commerce is the paramount and dominant business, and the operation of the gin a mere incident in aiding and assisting the carrying on of the interstate business-. To sustain this contention the learned counsel for ap*641pellant rely upon the cases of Pullman Palace Car Co. v. Kansas, 216 U. S. 65, 30 Sup. Ct. 232, 54 L. Ed. 385; Western Union Tel. Co. v. Kansas, 216 U. S. 1, 30 Sup. Ct. 190, 54 L. Ed. 355; Ludwig v. Western Union Tel. Co., 216 U. S. 146, 30 Sup. Ct. 280, 54 L. Ed. 423; Harrison v. Railroad Co., 232 U. S. 318, 34 Sup. Ct. 333, 58 L. Ed. 621, L. R. A. 1915F, 1187.

In the first two cases above cited the statute of the state of Kansas was involved, which attempted to tax as a charter fee a given per cent, of the entire authorized capital stock of a foreign corporation as a condition of its continuing to do a local business in the state. This was held to be a burden and a tax on the company’s interstate business and on its property located or used outside of the state. The Ludwig case is quite similar, involving a statute of the state of Arkansas.

The Harrison case holds that the right of a foreign interstate railway company to ■ remove a case to the federal court under proper circumstances cannot be prohibited by a state statute.

None of the points actually decided in any of these cases is authority or applicable to the point before the court. The question of what is or what is not a burden on, or an interference with, interstate, commerce is ably discussed in these opinions, especially in the case of Western Union Tel. Co. v. Kansas, sufra.. In that case Mr. Justice Harlan reviews at length the decisions of the supreme court of the United States bearing upou this question. It is to be noted,' however, that every case above cited is one in which the principal business of the corporation was interstate business, though these corporations also did an intrastate business. In the case at bar it is admitted by counsel for appellant that the ginning of cotton is not interstate commerce. This is undoubtedly true under all of the authorities. But counsel contends that the ginning and the interstate *642commerce are so interwoven and intermingled that they are inseparably connected in this case because of the fact that appellant was engaged in interstate commerce in shipping the cotton seed from .Mississippil to Tennessee. In this case, however, after a price had been agreed upon for the cotton seed, and the seed thereby sold to the defendant company, it was necessary for the seed to be separated from the cotton by the process of ginning. In this ginning process the seed of the appellant were blown into his seed house. After which time, either immediately or at a later date, the seed were shipped by appellant in interstate commerce from Mississippi to Tennessee.' The buying of the cotton seed was not interstate commerce, the ginning of the cotton was not interstate commerce, and it only became interstate commerce after it had been tendered to and accepted by the interstate. carrier for transportation from Mississippi to Tennessee. It makes no difference what the purpose of the appellant company was in erecting and operating its ginning plants at these two points in Mississippi. By their operation it was doing what is well recognized as a business, namely, the ginning of cotton within the state of Mississippi. It is well settled by all of the authorities that the state has a right to regulate its internal affairs, and a ginning plant operated in Mississippi is of this classification. In one sense of the word, ginning is manufacturing seed cotton into lint cotton and cotton seed.

.The purchase of the cotton seed is a separate and distinct transaction from the ginning of the seed, and the ginning of the seed is a separate and distinct transaction from the shipping of these seed from Mississippi to Tennessee. In other words, before these seed become a part of interstate commerce, or before this defendant company becomes engaged in interstate commerce in this transaction, it has to do three things; namely, purchase the seed, gin the cotton, and then deliver *643these seed to a carrier for interstate shipment. The fact that the defendant company had purchased the seed from the owner before the ginning of the cotton, and was the owner of the seed at the time of the ginning, and intended at some future time to ship these seed from Mississippi to Tennessee, does not make the ginning of this cotton interstate commerce.

In the case of Kidd v. Pearson, 128 U. S. 1, 9 Sup. Ct. 6, 32 L. Ed. 346, the supreme court of the united States through Mr. Justice Lamar, in holding a law of the state of Iowa, authorizing the abating as a nuisance of a distillery used for the unlawful manufacture and sale of intoxicating liquors, not unconstitutional as an attempted regulation of interstate commerce, in part says:

“We think the construction contended for by plaintiff in error would extend, the words of the grant to Congress, in the Constitution, beyond their obvious import, and is inconsistent with its objects and scope. The language of the grant is: Congress shall have power to regulate commerce with foreign nations and among the several states,’ etc. These words are used without any veiled or obscure signification. £As men whose intentions require no concealment generally employ the words which most directly and aptly express the ideas they intend to convey, the enlightened patriots who framed our Constitution, and the people who adopted it, must he understood to have employed words in their natural sense and to have intended what they have said.’ Gibbons v. Ogden, 22 U. S. (9 Wheat.) 9, 6 L. Ed. 23.
“No distinction is more popular to the common mind, or more clearly expressed in economic and political literature, than that between manufactures and commerce. Manufacture is transformation — the fashioning of raw materials into a change of form for use. The functions of commerce are different. The buying and *644selling and the transportation incidental thereto constitute commerce; and the regulation of commerce in the constitutional sense embraces the regulation at least of such transportation. The legal definition of the term as given by this court in County of Mobile v. Kimball, 102 U. S. 691, 702, 26 L. Ed. 238, 241, is as follows: “Commerce with foreign countries and among the states strictly considered consists in intercourse and traffic, including in these terms navigation and the transportation and transit of persons and property, as well as the purchase, sale, and exchange of commodities.” If it be held that the term includes the regulation of all such manufactures as are intended to be the subject of commercial transactions in the future, it is impossible to deny that it would also include all productive industries that contemplate the same thing. The result would be that Congress would be invested, to the exclusion of the states, with the power to regulate, not only manufactures, but also agriculture, horticulture, stock raising, domestic fisheries, mining- — in short, every branch of human industry. For is there one of them that does not contemplate, more or less clearly, an interstate or foreign market? Does not the wheat grower of the Northwest, and the cotton planter of the South, plant, cultivate, and harvest his crop with an eye on the prices at Liverpool, New York, and Chicago? The power being vested in Congress and denied to the states, it would follow as an inevitable result that the duty would devolve on Congress to regulate all of these delicate, multiform, and vital interests — interests which in their nature are, and must be, local in all the details of their successful management.....
“It is true that, notwithstanding its purposes and ends are restricted to the jurisdictional limits of the state of Iowa, and apply to transactions wholly internal and between its own citizens, its effects may reach beyond the state by lessening the amount of intoxicating *645liquors exported. But it does not follow that, because the products of a domestic manufacture may ultimately become the subjects of interstate commerce, at the pleasure of the manufacturer, the legislation of the state respecting such manufacture is ah attempted exercise of the power to regulate commerce exclusively conferred upon Congress. ...
“ ‘As has been often said, “legislation (by a state) may in a great variety of ways affect commerce and persons engaged in it, without constituting a regulation of it with.'j. the meaning of the Constitution,” unless, under the guise of police regulations, it ‘imposes a direct burden upon interstate commerce,’ or ‘interferes directly with its freedom.’ Hall v. De Cuir, 95 U. S. 485 (24 L. Ed., 547, citing authorities). . . .
“. . . The manufacture of intoxicating liquors in a state is none the less a business within that state because the manufacturer intends, at his convenience, to export such liquors to foreign' countries or to other states. . . .
“Does the owner’s state of mind in relation to the goods, that is, his intent to export them, and his partial preparation to do so, exempt them from taxation? This is the precise question for solution. . . . There must be a point of time when they cease to be governed exclusively by the domestic law and begin to be governed and protected by the national law of commercial regulation, and that moment seems to us to be a legitimate one for this purpose, in which they commence their final movement for transportation from the state of their origin to that of their destination. When the products of the farm or the forest are collected and brought in from the surrounding country to a town or station serving as an entrepot for that particular region, whether on a river or a line of railroad, such products are not yet exports, nor are they in process of exportation, nor is exportation begun until they are committed *646to the common carrier for transportation out of the state .to the state of their destination, or have started on their ulimate passage to that state. Until then it is reasonable to regard them as not only within the state of their origin, but as a part of the general mass of property of that state, subject to its jurisdiction, and liable to taxation there, if not taxed by reason of their being intended for exportation, but taxed without any discrimnation, in the usual way and manner in which such property is taxed in the state; . . . that such goods do not cease to be a part of the general mass of property in the state, subject, as such, to its jurisdiction, and to taxation in the usual way, until they have been shipped, or entered with a common carrier for transportation to another state, or have been- started upon such transportation in a continuous route 01 journey.” Coe v. Errol, 116 U. S. 517 (6 Sup. Ct. 475), 29 L. Ed. 715.

Another case directly in point is that of Hammer v. Dagenhart, 247 U. S. 251, 38 Sup. Ct. 529, 62 L. Ed. 1103, 3 A. L. R. 649, Ann. Cas. 1918E, 724. In this case the court held that Congress did not have authority under the commerce clause of the Constitution to pass a law to control interstate shipments of child-made goods. In the course of his opinion Mr. Justice Day said:

“The thing intended to be accomplished by this statute is the denial of the facilities of interstate commerce to those manufacturers in the states who employ children within the prohibited ages. The act in its effect does not regulate transportation among the states, but aims to standardize the ages at which children may be employed in mining and manufacturing within the states. The goods shipped are of themselves harmless. . . . when offered for shipment, and before transportation begins, the labor of their production is over, and the mere fact that they were intended for interstate com*647merce transportation does not make their production subject to federal control under the commerce power.
“Over interstate transportation, or its incidents, the regulatory power of Congress is ample, but the production of articles, intended for interstate commerce, is a matter of local regulation. ‘When the commerce begins is determined, not by the character of the commodity, nor by the intention of the owner to transfer it to another state for sale, nor by his preparation of it for transportation, but by its actual delivery to a common carrier for transportation, or the actual commencement of its transfer to another state.’ Mr. Justice Jackson in Be Green (C. C.), 52 Fed. 113” — citing authorities.

The above two authorities from which we have so liberally quoted, and the authorities cited by them, sustain the proposition that it makes uo diffeernce for what purpose the appellant operated this gin or what was his intention with reference to the cotton seed he' bought from the owner; that the ginning is an entirely separate and independent and local business, and is not interstate commerce; and this law which prohibits this mill from owning the gin is in no sense a burden on interstate commerce.

The testimony for the complainant in the case shows that the appellant attempted to destroy competition by putting down the price of ginning below its actual cost This was not a violation of either secton (m), (n), or (o) of the anti-trust law as alleged. That part of the decree so finding is therefore reversed, and the fine of one hundred dollars annulled and set aside The remainder of the decree is affirmed.

Affirmed in part, and reversed in part.

Ethridge, J., having been of counsel, took no part in the decision of this case.