Cities Service Co. v. Governor

Eldridge, J., delivered the opinion of the Court. In Maryland, producers or refiners of petroleum products are generally prohibited from operating retail gasoline service stations with their own personnel or with a subsidiary company. In 1979, the Maryland Legislature enacted two exceptions to this prohibition, one of which, it is claimed, in practical effect allows only one producer and refiner of petroleum products (the Mobil Corporation) to continue operating retail gasoline service stations through one of its wholly owned subsidiaries (Montgomery Ward & Co., Inc.). The principal questions in this case are whether that exception constitutes a prohibited "special law” under Art. Ill, § 33, of the Maryland Constitution and whether it denies to other producers and refiners of petroleum products equal protection of the laws.

The statutory background and underlying facts are as follows. The Legislature, by Ch. 854 of the Acts of 1974, provided, inter alia, that after July 1, 1974, no producer or refiner of petroleum products shall open a retail service station in ⁵⁵⁶ Maryland and operate it with company personnel or a subsidiary company. In Ch. 608 of Acts of 1975, the Legislature went further and required that after July 1, 1975, no producer or refiner of petroleum products shall operate any retail service station in Maryland with company personnel or a subsidiary company, regardless of when the station may have been opened, and that all stations must be operated by retail service station dealers. Pursuant to the statute and regulations thereunder, the July 1, 1975, deadline for producers or refiners to divest themselves of company-operated retail service stations was extended to July 13,1979.

These provisions, commonly referred to as the "Divestiture Law,” are codified in Maryland Code (1957, 1979 Repl. Vol., 1980 Cum. Supp.), Art. 56, § 157E (b), (c), (g), (h) and (i). In 1974 and 1975, several producers and refiners challenged, inter alia, the constitutionality of the Divestiture Law on the grounds that it violated the Due Process clauses of the Fourteenth Amendment and the Maryland Declaration of Rights, that it discriminated against and unduly burdened interstate commerce in violation of the Commerce Clause, Art. 1, § 8, of the United States Constitution, that it constituted a taking of property without just compensation in violation of the Fifth Amendment and Art. Ill, § 40, of the Maryland Constitution, that it denied producers and refiners the equal protection of the laws in violation of the Fourteenth Amendment and the Maryland Declaration of Rights, that it constituted an unlawful delegation of legislative authority to the Comptroller in violation of Art. 8 of the Maryland Declaration of Rights, and that the terms "producer” and "refiner” were unconstitutionally vague.

This Court rejected all of these contentions and upheld the constitutionality of the Divestiture Law with respect to these grounds in Governor v. Exxon Corp., 279 Md. 410 , 370 A.2d 1102 , 372 A.2d 237 (1977). On appeal to the United States Supreme Court, the producers and refiners limited their constitutional attack upon the Divestiture Law to Fourteenth Amendment Due Process and Commerce Clause grounds. The Supreme Court, rejecting their contentions, affirmed the judgment of this Court. Exxon Corp. v. ⁵⁵⁷ Governor, 437 U.S. 117 , 98 S. Ct. 2207 , 15 L. Ed. 2d 91 (1978).

In 1979, after the decisions in the Exxon case, the Maryland Legislature amended the Divestiture Law in two respects. By Ch. 368 of the Acts of 1979, Code (1957, 1979 Repl. Vol.), Art. 56, § 157E (i), the Legislature exempted from the Divestiture Law gasoline service station facilities which were both owned and operated, on January 1,1979, by an agricultural cooperative association which met certain criteria. 1 By Ch. 659 of the Acts of 1979, codified as Art. 56, § 157E (c) (2), the Legislature exempted from the divestiture requirement a retail service station in operation on January 1, 1979, that was operated by a subsidiary of a petroleum producer or refiner as of January 1, 1979, on a year to year basis as long as the subsidiary’s gross revenues from petroleum products sold in Maryland are less than two percent of the subsidiary’s gross revenues from all retail operations in Maryland. This exemption, commonly referred to as the "mass merchandiser exemption,” did not permit the qualifying subsidiary to open new service stations but only to continue operating those already existing. 2 ⁵⁵⁸ On September 27, 1979, Cities Service Company, a producer and refiner of petroleum products, filed in the Circuit Court of Baltimore City a bill of complaint for declaratory and injunctive relief against the Governor, Attorney General and Comptroller of Maryland. 3 Cities Service claimed that the agricultural cooperative and mass merchandiser exemptions, added in 1979 to the Divestiture Law, rendered the entire Divestiture Law unconstitutional under the Equal Protection Clause of the Fourteenth Amendment and the similar equal protection guarantee in Article 24 of the Maryland Declaration of Rights. 4 Cities Service contended that the distinctions made between the different classes of producers and refiners, permitting only very limited types of producers and refiners to operate retail service stations, had ⁵⁵⁹ no rational basis and were thus unconstitutionally discriminatory.

The plaintiff sought a declaration that the Divestiture Law and regulations thereunder were unconstitutional under the equal protection guarantees of the federal and state constitutions, a temporary injunction restraining the defendants from enforcing the law and regulations against Cities Service during the pendency of the action, and a permanent injunction against the enforcement of the law and regulations. The day after the filing of Cities Service’s bill of complaint, the Circuit Court issued a temporary injunction, permitting Cities Service to continue operating its existing company-operated retail gasoline stations in Maryland but not allowing Cities Service to open new company-operated stations or to convert existing dealer-operated stations to company operations. The temporary injunction, pursuant to a subsequent court order, was extended until October 21, 1979. Shortly after filing its bill of complaint, Cities Service filed an amended bill of complaint, alleging that the mass merchandiser exemption "by legislative intent and by practical effect, exempts from the provisions of Section (c) of the divestiture law only those retail outlets operated by Mobil Corporation through its Montgomery Ward subsidiary.” It was further alleged that the agricultural cooperative exemption "by legislative intent and by practical effect, exempts from the provisions of the entire divestiture law only those retail outlets operated by Southern States Coop., Inc.” Therefore, it was contended, the mass merchandiser and agricultural cooperative exemptions constituted "special laws” prohibited by Art. Ill, § 33, of the Maryland Constitution.

The plaintiff asked that the entire Divestiture Law be declared invalid and its enforcement enjoined, on the basis of Art. Ill, § 33, as well as the equal protection guarantees of the federal and state constitutions. On October 2, 1979, Charles T. Gladstone, Jr., a retail service station dealer operating a "Citgo” service station which was owned by Cities Service and which sold Cities Service’s brand of gasoline, filed a motion to intervene as a ⁵⁶⁰ matter of right under Maryland Rule 208 a. Mr. Gladstone sought intervention as a defendant, representing a class of all certified Maryland retail service station dealers, to oppose the plaintiff’s bill of complaint. Mr. Gladstone also filed a second motion for permissive intervention, in his individual capacity, pursuant to Rule 208 b.

On October 8,1979, one week prior to the trial, the Tesoro Petroleum Corporation and its wholly-owned subsidiary, Tesoro Gasoline Marketing Company, filed a motion to intervene as parties plaintiff, first as a matter of right under Rule 208 a and, alternatively, on a permissive basis under Rule 208 b. An affidavit by the president of Tesoro Gasoline Marketing Company alleged that Tesoro Marketing has no gross revenues from retail operations unrelated to the sale of petroleum products, and that, therefore, it could not qualify under the mass merchandiser exemption. The affidavit, however, further alleged that, under a master-sublease and contract with Lucky Stores, Inc., Tesoro Marketing operates retail service stations in connection with discount department stores operated by Lucky Stores. It was stated that one of these discount department stores is located in Maryland and two others in Maryland were in the process of being opened.

Tesoro Petroleum claimed that under the Divestiture Law, it would have to cease operating these retail outlets through its subsidiary Tesoro Marketing after October 31,1979, the date on which an extension granted by the Maryland Comptroller expired. Tesoro Petroleum contended that Montgomery Ward stores and those operated by Lucky Stores, Inc., were comparable commercial operations, and that both Tesoro Petroleum and Mobil Corp., are "refiners of petroleum products which have subsidiaries operating retail service stations in Maryland with salaried employees on the premises of discount department stores.” Tesoro’s position was that the distinction drawn by the statute between these two types of operations was arbitrary, capricious and in furtherance of no legitimate state interest. The trial court denied Mr. Gladstone’s motion for intervention of right as the representative of all retail service station dealers. The court found that the interests of the ⁵⁶¹ dealers coincided with the interests of the Governor, Comptroller and Attorney General, that thoue present defendants could adequately represent the dealers’ interests, and that there was no showing that the class of all retail service station dealers would be bound by a judgment entered in the case.

The trial court, however, granted Mr. Gladstone’s second motion for permissive intervention as a defendant. With regard to the motion for intervention by the two Tesoro companies, the trial court denied the motion as untimely under all of the circumstances but allowed Tesoro to submit an amicus curiae brief. 5 The trial of the case began on October 15, 1979, and continued until October 19,1979, with - mcrous witnesses and exhibits. Among other things, the evidence showed that service station facilities of both Montgomery Ward and Southern States Cooperative were practically identical, physically, to those of any other retail gasoline outlet, that they were accessible from mayor roads, that they were price competitive and that they provided services substantially similar to those of other smrvice [stations. Testimony also disclosed that Montgomery/ Ward was the only company to apply to the Comptroller and receive an exemption under the mass merchandiser exemption, and that Southern States Cooperative was the only agricultural cooperative to file for and receive an exemption under the agricultural cooperative exemption.

In addition, officials of both Montgomery Ward and Southern States Cooperative explained the nature of their retail businesses and the role played by retail gasoline sales. Montgomery Ward officials stated that the company began selling gasoline at its retail stores as a convenience for its automotive parts and repair customers, that when it plans ⁵⁶² new stores, which are mainly in shopping centers, the retailing of gasoline is one of the last considerations, that Montgomery Ward’s policy concerning gasoline sales did not change when it became a subsidiary of Mobil Corp., that Mobil has had no involvement in the retail gasoline operations of Montgomery Ward, and that Mobil does not supply gasoline to Montgomery Ward. One of the Montgomery Ward officials further testified that the company’s profits from the sale of gasoline were marginal, that consideration had been given to discontinuing the sale of gasoline, and that Montgomery Ward was interested in the enactment of the mass merchandiser exemption because of its "investments in pumps and facilities, tanks, overhead and everything.” An expert witness presented by the defendants, a professor of marketing at the University of Illinois, testified concerning the dangers to retail gasoline marketing caused by stations operated by producers or refiners, and he further testified that agricultural cooperative and mass merchandiser retail gasoline operations do not present these dangers or have the same anticompetitive effects. Under questioning by the court, the defendants’ expert also testified that because of the January 1,1979, qualifying dates in the agricultural cooperative and mass marketing exemptions, the only company which could come within the agricultural cooperative by exemption was Southern States Cooperative, Inc., and the only company which could come within the mass merchandiser exemption was Montgomery Ward.

The expert witness acknowledged that if a competitor of Montgomery Ward, such as Sears Roebuck and Co. or J.C. Penney, became a subsidiary of a producer or refiner of petroleum products, it could not qualify under the exemption because it would not have been such a subsidiary as of January 1,1979. Another witness for the defendants, an official in the office of the Comptroller of Maryland, agreed that, to the best of his knowledge, Montgomery Ward was the only entity which could qualify under the mass merchandiser exemption. ⁵⁶³ At the conclusion of the trial, on October 19,1979, the trial court issued an order consisting of findings of fact, a declaratory judgment and an injunction pending appeal. With respect to the purpose and scope of the 1979 amendments to the Divestiture Law, the court found "[t]hat the amendments to the Maryland Divestiture Law as originally passed were enacted for the sole benefit of Southern States Coop., Inc. and Montgomery Ward and that there is no evidence that anyone else could have complied with them originally or can presently comply with them or in the future will be able to comply with them.” The trial court also found that the primary purpose of Cities Service was the retail sale of gasoline, whereas this was not true with regard to Southern States Cooperative or Montgomery Ward. As to the latter two, the court found "[t]hat Southern States Coop., Inc. has, as its primary purpose in locating its stores and in its merchandising; the servicing and supplying of the farmer community with products needed by farmers and, as a minor adjunct to that business, the sale of gasoline at retail.

That Montgomery Ward has, as its primary purpose in locating its stores and in marketing, the mass merchandising of a host of commodities at retail to the general public and, as a minor adjunct thereto, the sale of gasoline at retail to the general public.” The court further found that the 1979 amendments represented no deviation from the primary purpose of the Divestiture Law and that they had "a rational relationship to the objective of the Maryland Divestiture Law of preserving competition and fairness within the Maryland retail gasoline marketing industry.” In light of the "rational basis” finding, the trial court concluded that the Divestiture Law as amended in 1979 did not violate Cities Service’s right to equal protection of the laws. However, the court did conclude that the 1979 amend ⁵⁶⁴ ments were special laws prohibited by Art. Ill, § 33, of the Maryland Constitution. The court declared invalid the 1979 amendments in their entirety, ordering that they be "stricken from” the Divestiture Law. Nevertheless, the court held that the Legislature, if it had known of the invalidity, would have intended that the original Divestiture Law continue in effect without the amendments.

Therefore, the court concluded that the 1979 amendments were severable from the remainder of the Divestiture Law. Under the trial court’s declaratory judgment, neither Cities Service nor Southern States Cooperative nor Montgomery Ward would have been entitled to continue operating their retail service stations in Maryland. Because it found irreparable injury, however, the trial court issued an injunction permitting all three companies to operate their existing Maryland retail service stations until the issuance of this Court’s mandate in the case. Five days after the trial and judgment in the case, Southern States Cooperative filed motions to intervene and for a rehearing or partial new trial; ten days after the trial and judgment, Montgomery Ward filed similar motions.

The trial court denied the motions finding that the movants knew of the litigation prior to trial and, with full knowledge that the 1979 amendments might be invalidated, decided then not to intervene. Cities Service, the defendant state officials, and the defendant Gladstone all took appeals from the court’s judgment of October 19,1979. Gladstone, in addition, appealed from the denial of his motion to intervene of right as the representative of all Maryland retail service station dealers. Southern States Cooperative and Montgomery Ward filed orders of appeal, stating that the appeals were from the orders denying intervention and from the October 19th judgment.

Tesoro Petroleum Corporation and Tesoro Gasoline Marketing Company did not appeal from the order denying their motion to intervene, although they have filed an amicus curiae brief in this Court dealing with all of the substantive issues in the case. Prior to any proceedings in the Court of Special Appeals, all appellants filed petitions in ⁵⁶⁵ this Court for a writ of certiorari. Because of the importance of the constitutional issues, we granted all of the petitions. Although all parties are dissatisfied with the judgment of the Circuit Court of Baltimore City, their complaints obviously vary somewhat.

The Governor, Attorney General and Comptroller argue that the trial court erred in concluding that the 1979 exemptions were invalid special laws under Art. Ill, § 33, of the Maryland Constitution; instead, the state defendants maintain that the 1979 amendments are in all respects constitutional. The defendant Gladstone, while agreeing with the position of the state officials on the constitutional questions, chiefly complains of the denial of his motion to intervene as of right. Cities Service primarily contends that the court erred in holding that the 1979 amendments were severable from the remainder of the Divestiture Law. Rather, in its view, principles of statutory construction required that the entire Divestiture Law be declared unconstitutional because of the invalid 1979 amendments.

Montgomery Ward, like the state defendants and Gladstone, urges that the trial court’s invalidation of the 1979 amendments be reversed; alternatively, Montgomery Ward argues that if this holding of the trial court is not reversed, "the case should be remanded so that Montgomery Ward will not be prejudiced by the decision in this case without having had its day in court.” Southern States Cooperative’s initial position is that the 1979 agricultural cooperative exemption is not an invalid special law. Southern States then makes several alternate arguments. If the agricultural cooperative amendment is held to be an invalid special law, Southern States contends that the amendment should not be invalidated in its entirety but should be held severable, so that only the January 1, 1979, limitations would be stricken. As another alternative, if the 1979 agricultural cooperative exemption is deemed unconstitutional, Southern States suggests that the entire Divestiture Law ought to be invalidated.

As a final alternative, Southern States, like Montgomery Ward, seeks a remand, the grant of its motion to intervene and a new trial. ⁵⁶⁶ (1) Preliminarily, the matter of the 1979 agricultural cooperative exemption can be briefly disposed of. During the pendency of this appeal, the Legislature passed and the Governor signed into law Ch. 867 of the Acts of 1980, which took effect June 1,1980. This Act repealed the "grandfather clauses” from the agricultural cooperative exemption by deleting the January 1, 1979, qualifying dates. 6 Thus, the exemption broadly applies to the premises of all certified agricultural cooperative associations furnishing farm supplies, farm business services or bulk distribution of motor vehicle fuel to farms. No party has suggested that this broad exemption for agricultural cooperatives is a "special Law” within the meaning of Art. Ill, § 33, of the Maryland Constitution, or gives rise to an invalid classification under the Equal Protection Clause of the Fourteenth Amendment or under Article 24 of the Maryland Declaration of Rights.

Consequently, the issues in this litigation concerning the validity of the old 1979 agricultural cooperative exemption are essentially moot. Upon remand, the declaratory judgment should be modified by deleting any legal findings and conclusions regarding the 1979 agricultural cooperative exemption. ⁵⁶⁷ (2) Art. Ill, § 33, of the Maryland Constitution provides, among other things, that the General Assembly "shall pass no special Law, for any case, for which provision has been made, by an existing General Law.....” As the wording makes clear, a statute is not prohibited by the restriction unless two conditions are met: (1) it must be a "special” law; (2) there must be no provision for the matter in an existing general law. It is said that a prohibited special law under § 33 is "a law for a special case” or for a "particular case” or for "individual cases.” See, e.g., Reyes v. Prince George’s County, 281 Md. 279, 305 , 380 A.2d 12 (1977); Potomac Sand & Gravel v. Governor, 266 Md. 358, 378 , 293 A.2d 241 , cert. denied, 409 U.S. 1040 , 33 S. Ct. 525 , 34 L. Ed. 2d 490 (1972); Jones v. House of Reformation, 176 Md. 43, 55 , 3 A.2d 728 (1939); Norris v. Baltimore, 172 Md. 667, 682 , 192 A. 531 (1937); Baltimore City v. Starr Church, 106 Md. 281, 289 , 67 A. 261 (1907); McGrath v. State, 46 Md. 631 (1877). However, this definition, although often repeated, is not particularly helpful in applying § 33.

More useful, perhaps, is the concept set forth in Prince George’s Co. v. B. & O. R. Co., 113 Md. 179, 183 , 77 A. 433 (1910), and other cases, that "[a] special law is one that relates to particular persons or things of a class, as distinguished from a general law which applies to all persons or things of a class.” See Littleton v. Hagerstown, 150 Md. 163, 176 , 132 A. 773 (1926) ("each of the exemptions made by said act is obnoxious to said constitutional inhibition ... unless it operates upon all within a class”); Grossfield v. Baughman, 148 Md. 330, 339 , 129 A. 370 (1925) (statute held not to be a special law as "the act affects all of a distinct class within a defined territorial unit”); M. & C.C. of Balto. v. U. Rwys. & E. Co., 126 Md. 39, 48 , 94 A. 378 (1915). This definition, however, also provides no mechanical rule for deciding cases, as it depends upon a determination of what constitutes the "class.” Thus, legislation aimed at a single named entity was upheld under § 33 because the ⁵⁶⁸ entity "constituted a class of itself, and similar conditions did not exist with any other company within the territory to which this statute was applicable.” M. & C.C. of Balto. v. U. Rwys. & E. Co., supra, 126 Md. at 48-49 . Consequently, in applying § 33 to determine whether an enactment affects less than an entire class and is, therefore, a "special law,” this Court has looked to the purpose of the constitutional prohibition. Very early, in Montague, Ex’r v. State, 54 Md. 481, 490 (1880), the Court pointed out that the object of the constitutional prohibition "was to prevent or restrict the passage of special, or what are more commonly called private Acts, for the relief of particular named parties, or providing for individual cases.

In former times, as is well known and as the statute books disclose, Acts were frequently passed for the relief of named individuals, such as sureties upon official bonds, sheriffs, clerks, registers, collectors and other public officers, releasing them sometimes absolutely, and sometimes conditionally from their debts and obligations to the State. The particular provision now invoked was aimed against the abuses growing out of such legislation, and its object was to restrain the passage of such Acts, and to prevent the release of debts and obligations in particular cases, and in favor of particular individuals unless recommended by the Governor or the Treasury officials. But the clause in the Act of