Leo Cray v. United States

• Decision Date: 31 May 1904
• Docket Number: No. 301,301
• Parties: LEO W. McCRAY, Plffs. in Err. , v. UNITED STATES
• Court: U.S. Supreme Court

195 U.S. 27

24 S.Ct. 769

49 L.Ed. 78

LEO W. McCRAY, Plffs. in Err.,

v UNITED STATES.

No. 301.

Argued December 2, 1903.

Decided May 31, 1904.

The United States sued McCray for a statutory penalty of $50, alleging that, being a licensed retail dealer in oleomargarine, he had, in violation of the acts of Congress, knowingly purchased for resale a fifty-pound package of oleomargarine, artificially colored to look like butter, to which there was affixed internal revenue stamps at the rate of 4/1 of a cent a pound, upon which the law required stamps at the rate of 10 cents per pound. The answer of McCray, whilst admitting the purchase of the package stamped as alleged, set up two defenses.

First. It was averred that the oleomargarine in question was made by a duly licensed manufacturer, the Ohio Butterine Company, from a formula used by it in making a high grade oleomargarine composed of 'the following ingredients and none other, in these proportions; oleo oil, 20 pounds; natural lard, 30 pounds; creamery butter, 50 pounds; milk and cream, 30 pounds; common salt, 7 pounds.' It was asserted that whilst it was true that the oleomargarine made from the ingredients in question was of a yellow color, that this result was not caused by artificial coloration, but was solely occasioned by the fact that the butter, which was bought in open market, and used in making the oleomargarine, had a deep yellow color imparted to it (the butter) by a substance knows as Wells-Richardson's improved butter color. This preparation, it was averred, was not injurious to health, and was constantly used in the United States in the manufacture of butter made from pure milk or cream, for the purpose of imparting to it a deep yellow color. Averring that a yellow color produced in oleomargarine by the employment of butter, as an ingredient, which was artificially colored, did not amount to an artificial coloration of the oleomargarine within the meaning of the statute, it was asserted that the tax of 1/4 of a cent per pound was a compliance with the law.

Second. If the act of Congress impoing the tax, when rightly construed, required stamps at the rate of 10 cents per pound upon oleomargarine, colored as described in the first defense, the act levying such tax was charged to be repugnant to the Constitution of the United States. As a foundation for this defense the answer contained the following averments:

Whilst butter made from pure milk and cream in the spring season was of a deep yellow color, such butter when made at all other seasons was of a pale yellow; that the taste of consumers of butter in the United States required all butter to possess the deep color naturally belongint to butter made in the spring season, and hence it had come to pass that substantially all butter manufactured for sale in the United States, not made in the spring season, and not naturally of a deep yellow, was colored artificially so as to cause it to have the deep yellow of spring butter. It was alleged that this deep yellow coloration of natural butter was universally produced by the use of either Wells-Richardson's compound or some other coloring ingredient, which did not change the taste of the butter, none of which were injurious to health. Oleomargarine, it was alleged, derived its chief value as an article of food as a substitute for butter, and that growing out of the taste of the consumers, unless the olemargarine which was naturally white could be colored yellow, to present the appearance of butter artificially colored, there was no demand for it, and its manufacture and sale would be commercially impossible. It was then averred that to impose upon the colored oleomargarine a tax of 10 cents per pound would burden it with such a charge as to render it impossible to make and sell it in competition with butter, and therefore the result of imposing a tax of 10 cents a pound on oleomargarine when artificially colored would destroy the oleomargarine industry. From these averments it was charged that if the law imposed the tax of 10 cents upon the oleomargarine in question, the statute was repug- nant to the Constitution, because it deprived the defendant of his property without due process of law; because the levy of such a burden was beyond the constitutional power of Congress, since it was an unwarranted interference by Congress 'with the police powers reserved to the several states and to the people of the United States by the Constitution of the United States;' and further, that said acts of Congress were repugnant to the Constitution, since they finally lodged in an executive officer the power to determine what constituted artificial coloration of oleomargarine, and therefore invested such officer with judicial authority; and, finally, because the attempt by Congress to levy a tax at the rate of 10 cents a pound arbitrarily discriminated against oleomargarine in favor of butter, to the extent of destroying the oleomargarine industry for the benefit of the butter industry, and was, therefore, violative of 'those fundamental principles of equality and justice which are inherent in the Constitution of the United States.'

The government demurred to the answer on the ground that it stated no defense. The demurrer was sustained, and McCray electing to plead no further, the court found the facts alleged in the petition to be true, and adjudged that the government recover 'the sum of $50 as a penalty and costs.' Because of the questions arising under the Constitution, the case was then brought directly to this court.

Messrs. Miller Outcalt, Charles E. Prior, William D. Guthrie, Francis J. Kearful, Delavan B. Cole, and Charles C. Carnahan for plaintiff in error.

[Argument of Counsel from pages 30-37 intentionally omitted]

Page 37

Solicitor General Hoyt for defendant in error.

Statement by Mr. Justice White:

[Argument of Counsel from pages 37-43 intentionally omitted]

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Mr. Justice White, after making the foregoing statement, delivered the opinion of the court:

As the controversy in every aspect involves the acts of Congress concerning the taxation of oleomargarine, a summary of those acts becomes essential.

The original act was passed in 1886. (24 Stat. at L. 209, chap. 840, U. S. Comp. Stat. 1901, p. 2228.) The 1st section provided:

'That for the purposes of this act the word 'butter' shall be understood to mean the food product usually known as butter, and which is made exclusively from milk or cream, or both, with or without common salt, and with or without additional coloring matter.'

The 2d thus defined oleomargarine:

'That for the purposes of this act certain manufactured substances, certain extracts, and certain mixtures and compounds, including such mixtures and compounds with butter, shall be known and designated as 'oleomargarine,' namely: All substances heretofore known as oleomargarine, oleo, oleomargarine oil, butterine, lardine, suine, and neutral; all mixtures and compounds of oleomargarine, oleo, olemargarine oil, butterine, lardine, suine, and neutral; all lard extracts and tallow extracts; and all mixtures and compounds of tallow, beef fat, suet, lard, lard oil, vegetable oil, and annotto, and other coloring matter; intestinal fat and offal fat made in imitation of semblance of butter, or, when so made, calculated or intended to be sold as butter or for butter.'

The 3d, 4th, 5th, 6th, and 7th sections imposed

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a license on manufacturers and dealers in oleomargarine, and contained many requirements controlling the packing, marketing, and supervision of the manufacture and sale of the taxed article. The 8th section provided as follows:

'That upon oleomargarine which shall be manufactured and sold, or removed for consumption or use, there shall be assessed and collected a tax of two cents per pound, to be paid by the manufacturer thereof; . . . The tax levied by this section shall be represented by coupon stamps, and the provisions of existing laws governing the engraving, issue, sale, accountability, effacement, and destruction of stamps relating to tobacco and snuff, as far as applicable, are hereby made to apply to stamps provided for by this section.'

The other provisions of the statute, not necessary to be noticed, contained many regulations looking to the enforcement and collection of the licenses and taxes which the act imposed. In 1902 further provisions were made on the subject, and the act of 1886 was, in many respects, expressly amended. (32 Stat. at L. 193, chap. 784.) The title of the act is——

'An Act to Make Oleomargarine and Other Imitation Dairy Products Subject to the Laws of Any State er Territory or the District of Columbia into Which They Are Transported, and to Change the Tax on Oleomargarine, and to Impose a Tax, Provide for the Inspection, and Regulate the Manufacture and Sale of Certain Dairy Products, and to Amend an Act Entitled 'An Act Defining Butter, Also Imposing a Tax Upon and Regulating the Manufacture, Sale, Importation, and Exportation of Oleomargarine,' Approved August 2, 1886.'

The 1st section provides that all——'oleomargarine, butterine, imitation, process, renovated, or adulterated butter, or imitation cheese, or any substance in the semblance of butter or cheese, not the usual product of the dairy, and not made exclusively of pure and unadulterated milk or cream, transported into any state or territory

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or the District of Columbia, and remaining therein for use, consumption, sale, or storage therein, shall, upon the arrival within the limits of such state or territory or the District of Columbia, be subject to the operation and effect of the laws of such state or territory or the District of Columbia . . . to the same extent and in the same manner as though such article or substances had been produced in such state or territory or the District of Columbia, and shall not be exempt therefrom by reason of being introduced therein in original packages or otherwise.'

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