Butler v. United States

• Decision Date: 13 July 1935
• Docket Number: No. 3018.,3018.
• Citation: 78 F.2d 1
• Parties: BUTLER et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — First Circuit

78 F.2d 1 (1935)

BUTLER et al. v. UNITED STATES.^*

No. 3018.

Circuit Court of Appeals, First Circuit.

July 13, 1935.

Edward R. Hale and Bennett Sanderson, both of Boston, Mass., for appellants.

Robert N. Anderson, Sp. Asst. to Atty. Gen., and Prew Savoy, Department of Agriculture, of Washington, D. C. (Frank J. Wideman, Asst. Atty. Gen., Sewall Key and J. Louis Monarch, Sp. Assts. to Atty. Gen., Seth Thomas, Department of Agriculture, of Washington, D. C., and Francis J. W. Ford, U. S. Atty., and J. Duke Smith, Sp. Asst. to U. S. Atty., both of Boston, Mass., on the brief), for the United States.

Malcolm Donald, of Boston, Mass. (Edward E. Elder and Herrick, Smith, Donald & Farley, all of Boston, Mass., of counsel), amici curiæ.

Charles B. Rugg, Thomas N. Perkins, and Ropes, Gray, Boyden & Perkins, all of Boston, Mass., amici curiæ.

James S. Y. Ivins, of Washington, D. C. (Brewster, Ivins & Phillips, of Washington, D. C., of counsel), amici curiæ.

Before BINGHAM and WILSON, Circuit Judges, and MORRIS, District Judge.

WILSON, Circuit Judge.

This is an appeal from a decree of the District Court of Massachusetts in the conduct of receivership proceedings against the Hoosac Mills Corporation, a Massachusetts corporation. The United States filed a claim with the receivers for processing and floor taxes levied under sections 9 and 16 of the Agricultural Adjustment Act, chapter 25, tit. 1, 48 Stat. 31, as amended, 7 USCA §§ 609, 616 (hereinafter referred to as the act), amounting in the aggregate to $81,694.28, of which $44,057.64 represented processing taxes and interest and $37,636.64 represented floor taxes and interest.

The receivers in their report to the District Court recommended that the claims for these taxes be disallowed. The District Court, however, found that the claims were valid, and entered a decree ordering the claims to be paid.

The receivers appealed from the decree and filed numerous assignments of error, which may be grouped under three heads:

(1) The taxes imposed are not warranted under the Federal Constitution, in that they were imposed for the unlawful purpose of regulating and restricting the production of cotton in the several states, which is an unwarranted interference with matters solely within the control of the respective states and is violative of the powers reserved to the states under the Tenth Amendment, and therefore does not constitute an exercise of any authority or power of taxation granted to Congress under section 8 of article 1 of the Constitution.

(2) The delegation of the power under sections 8 and 9 of the act (7 USCA §§ 608, 609) to the Secretary of Agriculture to determine by agreement with the producers which of the basic commodities enumerated under section 11 of the act, as amended (7 USCA § 611), shall be restricted as to production, to what extent the acreage devoted to the production of any of such basic commodities shall be limited to bring about the result sought to be gained by the act, to determine when rental or benefit payments shall be made and the amount, and the investing of power in the Secretary to determine when and what competing commodities should be taxed and to what extent, and to determine when such processing tax shall become effective or shall cease to be imposed, is an unwarranted delegation of the legislative power granted exclusively to Congress.

(3) That the processing and floor taxes imposed are direct taxes and are not apportioned as required under section 8 of article 1 of the Constitution, or, if excise taxes, are not uniform throughout the United States, and are therefore not authorized under the Constitution.

We are not unmindful of the rule of construction that a presumption exists as to the validity of an act of Congress, or that, if an act is susceptible of two interpretations, that should be accepted which will uphold its validity. It is clearly apparent, however, from the provisions of the act, that the main purpose of Congress in its enactment was not to raise revenue, but to control and regulate the production of what is termed the basic products of agriculture, in order to establish and maintain a balance between the production and consumption of such commodities, which Congress realized could not in any event be accomplished by compulsory regulation of the production of agricultural products, and it sought to avoid the objection that it was interfering with matters solely within the control of the states themselves by making the restriction of production voluntary, by basing the act on the power of Congress to regulate interstate commerce, on its power to tax to provide for the general welfare of the United States, and by declaring that, in the acute economic emergency that exists, transactions in agricultural commodities have become affected with a public interest.

Title 1 of the act (section 1 7 USCA § 601) opens with the following:

"Declaration of emergency

"The present acute economic emergency being in part the consequence of a severe and increasing disparity between the prices of agricultural and other commodities, which disparity has largely destroyed the purchasing power of farmers for industrial products, has broken down the orderly exchange of commodities, and has seriously impaired the agricultural assets supporting the national credit structure, it is hereby declared that these conditions in the basic industry of agriculture have affected transactions in agricultural commodities with a national public interest, have burdened and obstructed the normal currents of commerce in such commodities, and render imperative the immediate enactment of title I of this Act this chapter."

According to recent pronouncements of the Supreme Court, however, such a declaration grants no new powers to Congress, nor does a declaration by Congress that, under certain conditions, the industry of agriculture is affected with a public interest or burdens and obstructs the normal flow of commerce necessarily give to Congress the absolute power to control or regulate it by legislation.

The assignments of error are based on the provisions of the following sections:

"Sec. 2. It is hereby declared to be the policy of Congress —

"(1) To establish and maintain such balance between the production and consumption of agricultural commodities, and such marketing conditions therefor, as will reestablish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period. The base period in the case of all agricultural commodities except tobacco shall be the prewar period, August 1909 — July 1914. In the case of tobacco, the base period shall be the postwar period, August 1919 — July 1929.

"(2) To approach such equality of purchasing power by gradual correction of the present inequalities therein at as rapid a rate as is deemed feasible in view of the current consumptive demand in domestic and foreign markets.

"(3) To protect the consumers' interest by readjusting farm production at such level as will not increase the percentage of the consumers' retail expenditures for agricultural commodities, or products derived therefrom, which is returned to the farmer, above the percentage which was returned to the farmer in the prewar period, August 1909 — July 1914." 7 USCA § 602.

"Sec. 8. In order to effectuate the declared policy, the Secretary of Agriculture shall have power —

"(1) To provide for reduction in the acreage or reduction in the production for market, or both, of any basic agricultural commodity, through agreements with producers or by other voluntary methods, and to provide for rental or benefit payments in connection therewith or upon that part of the production of any basic agricultural commodity required for domestic consumption, in such amounts as the Secretary deems fair and reasonable, to be paid out of any moneys available for such payments. * * * Under regulations of the Secretary of Agriculture requiring adequate facilities for the storage of any non-perishable agricultural commodity on the farm, inspection and measurement of any such commodity so stored, and the locking and sealing thereof, and such other regulations as may be prescribed by the Secretary of Agriculture for the protection of such commodity and for the marketing thereof, a reasonable percentage of any benefit payment may be advanced on any such commodity so stored. In any such case, such deduction may be made from the amount of the benefit payment as the Secretary of Agriculture determines will reasonably compensate for the cost of inspection and sealing, but no deduction may be made for interest." 7 USCA § 608 (1).

"Sec. 9. (a) To obtain revenue for extraordinary expenses incurred by reason of the national economic emergency, there shall be levied processing taxes as hereinafter provided. When the Secretary of Agriculture determines that rental or benefit payments are to be made with respect to any basic agricultural commodity, he shall proclaim such determination, and a processing tax shall be in effect with respect to such commodity from the beginning of the marketing year therefor next following the date of such proclamation. * * * The processing tax shall be levied, assessed, and collected upon the first domestic processing of the commodity, whether of domestic production or imported, and shall be paid by the processor. The rate of tax shall conform to the requirements of subsection (b). Such rate shall be determined by the Secretary of Agriculture as of the date the tax first takes effect, and the rate so determined shall, at such intervals as the Secretary finds necessary to effectuate the declared policy, be adjusted by him to conform to such requirements. The processing tax shall terminate at the end of the marketing year current at the time the Secretary proclaims that rental or benefit...