Miller v. Standard Nut Margarine Co. of Florida

• Citation: 49 F.2d 79
• Decision Date: 22 April 1931
• Docket Number: No. 6049.,6049.
• Parties: MILLER, Collector of Internal Revenue, v. STANDARD NUT MARGARINE CO. OF FLORIDA.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

49 F.2d 79 (1931)

MILLER, Collector of Internal Revenue, v. STANDARD NUT MARGARINE CO. OF FLORIDA.

No. 6049.

Circuit Court of Appeals, Fifth Circuit.

April 22, 1931.

Harrison F. McConnell, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C., Raymond F. Brown, Sp. Atty., Bureau of Internal Revenue, of Miami, Fla., and W. P. Hughes, U. S. Atty., of Jacksonville, Fla. (Harrison F. McConnell, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C., Raymond F. Brown, Sp. Atty., Bureau of Internal Revenue, of Miami, Fla., W. P. Hughes, U. S. Atty., of Jacksonville, Fla., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., on the brief), for appellant.

George N. Murdock, of Chicago, Ill., A. Y. Milam and Robt. R. Milam, both of Jacksonville, Fla., and E. T. McIlvaine, of Miami, Fla. (Geo. N. Murdock, of Chicago, Ill., A. Y. Milam and Robt. R. Milam, both of Jacksonville, Fla., and E. T. McIlvaine, of Miami, Fla., on the brief), for appellee.

Before FOSTER, HUTCHESON, and WALKER, Circuit Judges.

WALKER, Circuit Judge.

This is an appeal from a final decree rendered in a suit brought by the appellee, the Standard Nut Margarine Company of Florida, a corporation, against the appellant, individually and as collector of internal revenue for the district of Florida, under which the appellant was perpetually restrained and enjoined "from collecting or attempting to collect, directly or indirectly, from the plaintiff (the appellee), or any dealer selling plaintiff's product Southern Nut Product, any pretended tax or imposition purporting to be levied or assessed against the plaintiff or said dealers under the Oleomargarine Act of August 2, 1886, as amended (26 USCA §§ 194, 207, 541 et seq.), on account of the manufacture and sale of the said Southern Nut Product referred to in the petition herein and manufactured by plaintiff." The allegations of appellee's petition or bill filed December 26, 1926, show as follows, the parties being herein referred to by their designation in the court below: Plaintiff is engaged, and has been engaged for more than two years, in the manufacture and sale in interstate commerce of a nut product known as "Southern Nut Product," manufactured and sold under its own distinctive name, said name not being in imitation of the distinctive name of any other product; said name is accompanied on the same label and brand with the name of the place where it is manufactured or produced; and said product contains no added poisonous or deleterious ingredients. Southern Nut Product is a mixture or compound consisting of cocoanut oil, peanut oil, salt, water, and harmless coloring matter, manufactured and sold for cooking, baking, and seasoning purposes. Southern Nut Product is packed and sold only in one-pound cartons, a sample of which was attached to the bill, and plaintiff sells and ships it to a great number of firms and persons located in many states of the United States outside of the state of Florida. Prior to plaintiff engaging in the manufacture and sale of said Southern Nut Product, an action at law had been brought against one Page, as collector of internal revenue for the district of Rhode Island, for the purpose of recovering from said collector the amount of taxes paid under protest by the Higgins Manufacturing Company on a product manufactured and sold by that company known as Nut-Z-All, which product was manufactured in the same way and of the same ingredients as Southern Nut Product is manufactured by plaintiff. After hearing the evidence submitted on behalf of both the plaintiff and the defendant in that case, it was held by the court that said product Nut-Z-All was not made in imitation or semblance of butter or intended to be sold as butter or for butter, and hence under the law was not oleomargarine and not taxable as oleomargarine. As a result of that decision the then Commissioner of Internal Revenue, with the approval of the then Secretary of the Treasury of the United States, published and promulgated Treasury Decision 3590, which was the text of the above-mentioned decision, and further informed all concerned that Nut-Z-All had been held by the court not to be oleomargarine and not taxable as oleomargarine. On August 20, 1924, the then Deputy Commissioner of Internal Revenue, in the reply to an inquiry made to the then Commissioner of Internal Revenue by the Institute of Margarine Manufacturers, an association of oleomargarine manufacturers, as to the taxability of said product Nut-Z-All, stated: "The product `Nut-Z-All' was held by this office taxable as oleomargarine, but the decision was contested in the case of Higgins Manufacturing Co. v. Page (D. C.) 297 F. 644, wherein this product was held by the court to be not made in imitation or semblance of butter and not taxable as oleomargarine. The court, having held the product to be not taxable as oleomargarine, the fact that retailers advertise and sell it as butter, or as a substitute for butter, would not render them or the manufacturers liable under the internal revenue law." Notwithstanding the above-mentioned decision in the case of Higgins Manufacturing Co. v. Page, the issuance of Treasury Decision 3590 based thereon, and the above-quoted statement contained in the reply to the inquiry of the Institute of Margarine Manufacturers, all of which were given extensive publicity throughout the trade, the then Commissioner of Internal Revenue, with the approval of the then Secretary of the Treasury, endeavored by Treasury Decision 4006, dated April 1, 1927, again to declare products similar to Nut-Z-All taxable as oleomargarine, if colored to look like butter.

In July, 1927, the said Higgins Manufacturing Company filed in the District Court of the United States for the District of Rhode Island a petition for a temporary injunction against Frank A. Page, as collector of internal revenue for the district of Rhode Island, asking the court to restrain the said collector of internal revenue from collecting a tax on Nut-Z-All and similar products as on oleomargarine. The injunction so prayed for was granted on July 18, 1927, and at the time of granting said injunction the court rendered an opinion which is reported in Higgins Manufacturing Co. v. Page (D. C.) 20 F.(2d) 948. In July, 1927, the Baltimore Butterine Company, of Baltimore, Md., petitioned the Supreme Court of the District of Columbia for a temporary and permanent injunction against the then Commissioner and Deputy Commissioner of Internal Revenue to restrain them from endeavoring to enforce said Treasury Decision 4006 against its nut product Nu-ine, which was identical in content and appearance with plaintiff's Southern Nut Product, and which was in content and appearance identical with Nut-Z-All. After hearing and due consideration, that court granted a temporary injunction and rendered an unreported opinion, which stated:

"I agree with the reasoning of the decision of Judge Lowell of the District Court of Rhode Island in Higgins Manufacturing Co. v. Page; that is one of the cases to which the Supreme Court referred in Dodge v. Brady, 240 U. S. 122, 36 S. Ct. 277, 60 L. Ed. 560, of extraordinary and exceptional circumstances.

"The bill alleges that the substance `Nuine' involved in this case is the same as `Nut-Z-All' which Judge Brown of the District Court held not subject to taxation under the oleomargarine act. Yet in spite of this judicial holding the defendant has attempted by a regulation to make all substances like to that involved in this suit taxable under the act. It is clear that the defendant by means of a mere regulation cannot enlarge the provisions of the act, and such a regulation cannot be enforced. There would be no end to litigation if the defendant should persist in levying a tax after the courts have held the tax invalid, and the injury to the plaintiff would be irreparable and the amount inascertainable."

On December 16, 1927, that court made said injunction permanent. In December, 1927, the United States District Court for the District of Rhode Island made permanent the temporary injunction theretofore granted against said Page as collector of internal revenue for the district of Rhode Island. No appeals were taken from any of the above-mentioned decrees. The plaintiff engaged in the manufacture of its product, Southern Nut Product, after the above-mentioned decisions had been rendered. Before engaging in the manufacture of its said product, plaintiff made inquiry of the defendant and in reply to that inquiry received from the defendant a letter which contained the following: "The Standard Nut Margarine Company has the same privilege of making a compound of the kind in question without taxpaying same as oleomargarine as is being enjoyed by those manufacturers who obtained favorable decisions from the courts."

Prior to the institution of this suit, the defendant threatened to collect a tax of 10 cents per pound upon plaintiff's Southern Nut Product, as upon the manufacture of artificially colored oleomargarine. In doing so, he acted in pursuance of a letter addressed to him by R. M. Estes, Deputy Commissioner of Internal Revenue, which, after stating that plaintiff "manufactures a so-called colored cooking compound under the name of `Southern Nut Product' which is held to be taxable as colored oleomargarine," and that plaintiff had been assessed the sum of $5,000, which covers the tax on 50,000 pounds of Southern Nut Product estimated to have been produced during the month of January, 1929, stated: "All wholesale and retail dealers in `Southern Nut Products' and other so-called cooking compounds found on the market in your district should be reported for assessment on subsequent lists unless they hold special tax stamps permitting them to sell colored oleomargarine." In the manufacture and sale by plaintiff of Southern Nut Product, the net profit derived is approximately 3 cents per pound, and...