Spreckels Sugar Refining Company v. Penrose Clain

• Decision Date: 23 February 1904
• Docket Number: No. 103,103
• Citation: 192 U.S. 397,48 L.Ed. 496,24 S.Ct. 376
• Parties: SPRECKELS SUGAR REFINING COMPANY, Plff. in Err. , v. PENROSE A. McCLAIN, Collector of Internal Revenue for the First District of Pennsylvania
• Court: U.S. Supreme Court

192 U.S. 397

24 S.Ct. 376

48 L.Ed. 496

SPRECKELS SUGAR REFINING COMPANY, Plff. in Err.,

v PENROSE A. McCLAIN, Collector of Internal Revenue for the First District of Pennsylvania.

No. 103.

Argued December 3, 1903.

Decided February 23, 1904.

The plaintiff in error, who was the plaintiff below, is a sugar refining company, incorporated under the statutes of Pennsylvania for the purpose 'of refining sugar, which will involve the buying of the raw material therefor, and selling the manufactured products, and of doing whatever else should be incidental to the said business of refining.'

The defendant is the collector of internal revenue for the first district of that commonwealth.

The plaintiff seeks by two separate actions to recover certain sums paid by it under protest to the defendant as collector, and which it is alleged were unlawfully exacted by that officer under the 27th section of the act of June 13th, 1898, entitled 'An Act to Provide Ways and Means to Meet War Expenditures, and for Other Purposes;' by which act a tax was imposed upon the gross annual receipts, in excess of a named sum, of every person, firm, corporation, or company carrying on or doing the business of refining sugar,—the amount of the tax to be determined by the returns of business required by the statute. 30 Stat. at L. 448, 464, chap. 448, U. S. Comp. Stat. 1901, p. 2306.

By agreement of the parties, the issues in the two causes were consolidated and tried as one cause.

It is conceded that before bringing the actions the plaintiff did all that was required in order to maintain a suit against the collector, and that the payments made by it to that officer were not voluntary.

The record contains a summary of the returns made by the plaintiff, covering its entire gross receipts from June 14th, 1898, to August 1st, 1900, under these heads: Period Covered by Return; Indebtedness Due Before June 14th, 1898; Amounts Received from Interest, Rent, and Wharfage, and Stevedoring; Sugar Sold Since June 14th, 1898; Gross Receipts; Amount of Tax Paid; and Dates of Payment.'

The plaintiff contended that for the purposes of the tax in question certain things were included, as being part of its gross annual receipts arising from business, which could not properly have been so included, and that no tax could legally have been exacted on account of them. The government insisted that no taxes had been exacted which the law did not require to be paid.

In its statement of demand the plaintiff alleges that no part of its receipts from other sources than the business of refining sugar was taxable under the provisions of the act; that no tax upon receipts was payable or collectible before the end of the year from the date of the passage of the act; that the administration of the act makes arbitrary, unjust, and illegal discrimination founded on a pretended difference between the business of manufacturing and of refining sugar, between the plaintiff and other persons, firms, corporations, and companies carrying on and doing the business of refining sugar; and that all the provisions of the act subjecting the plaintiff to pay the tax in question were in violation of the Constitution of the United States, and void.

That statement also shows that upon appeal to the commissioner of internal revenue, it urged the following reasons why the sums it had paid should be refunded: That the act, so far as it assumed to subject corporations or companies carrying on or doing business of refining sugar to pay a special excise tax, was unconstitutional and void; that the tax was a direct tax, which had not been apportioned among the several states as required by the Constitution, was not uniform throughout the United States, and was invalid; that the plaintiff was, and at all times had been, engaged in the business of manufacturing, and not in that of refining, sugar; that it refines sugar only incidentally in the process of manufacture, and is, therefore, not liable for the payment of the tax; that by the provisions of the act the tax was payable annually at the end of each year; and the collection thereof monthly or for periods less than a year and prior to the expiration of the year was illegal, unauthorized, and void; and that the tax was assessed upon, and collected from, gross receipts that included receipts outside of those coming from the business of refining sugar; that such gross receipts included receipts from sales of sugar made prior to the passage of the act, from interest on loans and indebtedness, from dividends upon stock owned by the plaintiff in other sugar refining companies, from wharfage collected by it upon wharves owned by it, and from receipts from other sources.

One of the contentions of the plaintiff was that, apart from its constitutionality, the act of 1898, properly construed, did not embrace the claims here in dispute, and therefore did not authorize the defendant to demand and collect the taxes here in question.

The cause was determined in the circuit court upon an agreed special verdict of a jury. Some of the positions taken by the plaintiff were sustained while others were overruled. Judgment was rendered in favor of the plaintiff for $1,056.82, the aggregate of the sums paid (with interest thereon) by way of tax upon receipts on business done before the passage of the act, and for stevedoring. 109 Fed. 76. The plaintiff prosecuted a writ of error to the circuit court of appeals, which sustained the judgment, except in one particular, namely, in requiring the plaintiff to pay the tax in question otherwise than annually. 51 C. C. A. 201, 113 Fed. 244. And the case is here upon writ of error sued out by the plaintiff.

It may be stated that both courts below formally sustained the constitutionality of the act of 1898, remitting that question to this court for full consideration and determination.

Mr. John G. Johnson for plaintiff in error.

[Argument of Counsel from pages 400-402 intentionally omitted] Solicitor General Hoyt for defendant in error.

[Argument of Counsel from pages 402-405 intentionally omitted] Mr. Justice Harlan delivered the opinion of the court:

We are met at the threshold of this case with a question of jurisdiction raised by the government, which contends that under the existing statutes the judgment of the circuit court of appeals cannot be reviewed by this court, at the instance of the plaintiff, as of right.

By the 5th section of the judiciary act of March 3d, 1891, appeals or writs of error may be taken from the district courts or from the existing circuit courts direct to this court in certain specified cases, among which is 'any case that involves the construction or application of the Constitution of the United States,' and, 'any case in which the constitutionality of any law of the United States . . . is drawn in question.' § 5.

By the 6th section of the same act it is provided that the circuit courts of appeals 'shall exercise appellate jurisdiction to review, by appeal or by writ of error [the] final decision in the district court and the existing circuit courts in all cases other than those provided for in the preceding section of this act, unless otherwise provided by law, and the judgments or de- crees of the circuit courts of appeals shall be final in all cases in which the jurisdiction is dependent entirely upon the opposite parties to the suit or controversy being aliens and citizens of the United States or citizens of different states; also, in all cases arising under the patent laws, under the revenue laws, and under the criminal laws, and in admiralty cases, excepting that in every subject within its appellate jurisdiction the circuit court of appeals at any time may certify to the Supreme Court of the United States any question or propositions of law concerning which it desires the instruction of that court for its proper decision. And thereupon the Supreme Court may either give its instruction on the questions and propositions certified to it, which shall be binding upon the circuit courts of appeals in such case, or it may require that the whole record and cause may be sent up to it for its consideration, and thereupon shall decide the whole matter in controversy in the same manner as if it had been brought there for review by writ of error or appeal, and excepting also that in any such case as is hereinbefore made final in the circuit court of appeals it shall be competent for the Supreme Court to require, by certiorari or otherwise, any such case to be certified to the Supreme Court for its review and determination, with the same power and authority in the case as if it had been carried by appeal or writ of error to the Supreme Court. In all cases not hereinbefore, in this section, made final, there shall be of right an appeal or writ of error or review of the case by the Supreme Court of the United States where the matter in controversy shall exceed one thousand dollars besides costs.' 26 Stat. at L. 826, chap. 517 (U. S. Comp. Stat. 1901, pp. 549, 550).

This suit was cognizable by the circuit court under the judiciary act of 1887-88, as one arising under both the Constitution and the laws of the United States. 25 Stat. at L. 433, chap. 866, U. S. Comp. Stat. 1901, p. 508. It arose under the Constitution, because the plaintiff's cause of action, as disclosed in its statement of demand, has its sanction in that instrument, if it be true, as alleged, that the act of 1898, under which the defendant proceeded when collecting the taxes in question, is repugnant to the Constitution. And it arose under the laws of the United States because it arose under a statute providing for internal revenue. By § 629, subdivision 4, of the Revised Statutes (U. S. Comp. Stat. 1901, p. 503), the circuit courts, without regard to the citizenship of the parties, may take original cognizance of suits arising under a law of that character. That provision has not been superseded by the judiciary act...