87 F.2d 773 (5th Cir. 1937), 8175, Anniston Mfg. Co. v. Davis

• Citation: 87 F.2d 773
• Party Name: ANNISTON MFG. CO. v. DAVIS, Collector of Internal Revenue. LINCOLN MILLS OF ALABAMA v. SAME.
• Case Date: January 08, 1937
• Court: United States Courts of Appeals, U.S. Court of Appeals — Fifth Circuit

Page 773

87 F.2d 773 (5th Cir. 1937)

ANNISTON MFG. CO.

v.

DAVIS, Collector of Internal Revenue.

LINCOLN MILLS OF ALABAMA

v.

SAME.

Nos. 8175, 8186.

United States Court of Appeals, Fifth Circuit.

January 8, 1937

Page 774

Sutherland, Tuttle & Brennan, of Washington, D.C. (W. A. Sutherland and Joseph B. Brennan, both of Washington, D.C., on the brief), for appellant.

John M. Slaton, of Atlanta, Ga., amicus curiae for appellant.

M. H. Eustace, Sp. Asst. to the Atty. Gen., and Jim C. Smith, U.S. Atty., of Birmingham, Ala., for appellee.

No. 8186:

Frank E. Spain and H. H. Grooms, both of Birmingham, Ala., for appellant.

W. W. Bankhead, of Jasper, Ala., amicus curiae for appellant.

M. H. Eustace, Sp. Asst. to the Atty. Gen., and Jim C. Smith, U.S. Atty., of Birmingham, Ala., for appellee.

Before FOSTER, HUTCHESON, and HOLMES, Circuit Judges.

HUTCHESON, Circuit Judge.

Actions against the collector for refunds of cotton processing and floor stock taxes, paid by appellants under the 1933 Agricultural Adjustment Act; ¹ these suits were brought before and heard on demurrers after the enactment of the Revenue Act of June 22, 1936. ² This act adopted and purportedly made adequate provision as to amounts collected under the Agricultural Adjustment Act for the administrative and judicial enforcement of the principle given authoritative sanction in United States v. Jefferson Electric Co., 291 U.S. 386, 54 S.Ct. 443, 78 L.Ed. 859, that refunds of taxes illegally collected might properly be limited to those as to which the taxpayer could show that he bore the burden of the tax; that is, that the tax was really exacted from him, and not through him from others

The act in question makes comprehensive provisions to attain the end desired, that sums collected and paid out by the government as taxes under congressional sanction, to carry out a plan esteemed to be for the general welfare, should not be paid back to those who were merely conduits through which the stream of public contributions to the plan were poured into the Treasury. These are the controlling provisions of the act as they are adequately summed up in the government's brief:

'Sec. 644, provides that no refund shall be made or allowed, in pursuance of court

Page 775

decisions or otherwise, of any amount paid as tax under the Agricultural Adjustment Act unless the claimant establishes to the satisfaction of the Commissioner or to the satisfaction of the trial court or Board, that he has borne the burden of such amount, or that he had repaid unconditionally such amount to his vendee who bore the burden thereof.

'Section 645 provides that no refund shall be made or allowed of any amount paid as tax under the Agricultural Adjustment Act unless after the enactment of this Act and prior to July 1, 1937, a claim for refund has been filed by such person in accordance with regulations prescribed by the Commissioner with the approval of the Secretary. All evidence relied upon in support of such claim shall be clearly set forth under oath.'

'Section 646 provides that notwithstanding any other provision of law, no suit or proceeding, whether brought before or after the date of enactment of this Act, shall be brought or maintained in any court for the recovery * * * of * * * any amount paid by or collected from any person as tax (except processing tax, as defined herein) under the Agricultural Adjustment Act (a) before the expiration of eighteen months from the date of filing a claim therefor under this title unless the Commissioner renders a decision thereon within that time, or (b) after the expiration of two years from the date of mailing by registered mail by the Commissioner to the claimant a notice of disallowance of that part of the claim to which such suit or proceeding relates. This condition does not apply to amounts defined as processing tax by Section 913.'

'Section 647 confers jurisdiction upon the District Courts concurrent with the Court of Claims of all cases regardless of the amount involved, except suits for refund of amounts paid as processing tax, if they would otherwise have had jurisdiction except for the amount in controversy.'

'Subsection (a) of section 648 provides that notwithstanding any other provision of law no suit or proceeding for the recovery of any amount paid as processing tax, as defined by section 913, whether brought before or after the date of enactment of the Act, shall be brought or maintained in any court except as provided in that section. Subsection (b) establishes in the Treasury Department a Board of Review, consisting of nine members designated by the Secretary of the Treasury, which is given exclusive jurisdiction to review the allowance or disallowance by the Commissioner of claims for refund of amounts paid as processing tax. Subsections (c) and (d) provide for the filing of petitions with the Board of Review, and for a full hearing, after notice, upon the merits of the taxpayer's claim. Proceedings before the Board of Review are open to the public, are to be conducted in accordance with such rules of practice, (other than rules of evidence) as the Board may prescribe, and are to be conducted with the rules of evidence applicable in the courts of equity of the District of Columbia. The Chairman is authorized to divide the Board into divisions (subsection (b) and the hearing may be held before a division (subsection (d). By subsection (e) the Board and its divisions are required to make written findings of fact and a decision in each case. The findings and decision of a division become the findings and decision of the Board unless within thirty days the Chairman orders such findings and decision reviewed by the Board. Subsection (g) provides for review by the Circuit Court of Appeals and the Court of Appeals for the District of Columbia for errors of law upon petition of the taxpayer or the Commissioner. Further review by the Supreme Court upon certiorari is also authorized.'

'Section 649 creates certain presumptions intended to simplify the proof required under Section 644 to establish the extent to which the claimant has borne the burden of the tax sought to be recovered. Under subsection (a) a showing that the 'average margin' (as defined by the Act) per unit of commodity processed was lower during the tax period than it was during stated periods before and after the tax period creates a prima facie presumption that the claimant bore the burden of the tax, while a showing that the average margin during the tax period was not lower is made prima facie proof that the claimant did not bear the burden. By subsection (e) either the claimant or the Commissioner is permitted to rebut the presumption created by subsection (a) by showing the extent to which the claimant shifted the burden to others. The section further indicates certain matters which may be proved to overcome the presumption.'

'Section 652 provides that no Collector of Internal Revenue or Customs, or internal revenue or customs officer or employee, shall be in any way liable to any person

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for any act done by him in the assessment or collection of any amount as tax under the Agricultural Adjustment Act or for the recovery of any amount so collected and paid into the Treasury in performance of his official duties under the provisions of such Act, or if such Collector or officer acted under the direction of the Secretary or other proper officer of the Government.'

Thus it appears that as to processing taxes the consent of the United States to be sued in the District Court is completely withdrawn. Such court review as is provided for as to these is in the Circuit Court of Appeals and the Supreme Court for errors of law. As to other tax refund claims still suable in the District Court new and different prerequisites to suit are provided.

Neither of the appellants alleged conformity with the act; indeed, both, setting it at naught, undertook to sue in spite of it. Responding to appellee's motions to dismiss for want of jurisdiction, and his demurrers to their petitions, that they stated no cause of action, each took the position that the act was without effect as to causes of action accrued and suits begun against the collector before its passage.

This position was supported by rather feebly urging that the act did not purport to, it did not, affect claims already accrued, and already in suit, and by urging firmly and with confidence that, if it did, it would be in violation of the due process clause of the Fifth Amendment, as depriving them of their vested right to sue the collector for wrongs done them by him. The District Judge thought the Jefferson Electric Co. Case controlling. He sustained defendant's demurrers, and, plaintiffs declining to plead further, dismissed their actions. Both plaintiffs are here vigorously attacking his rulings and orders.

The arguments orally and in the briefs took wide range, but they all were concerned with, they came down at last to, the power of the Congress to subject plaintiffs' claims to the refund provisions of the June 1936 act. For it too plainly appeared to be contested, indeed, it was in effect conceded, that that act was intended to, and, if valid, did, prevent the maintenance of the suits plaintiffs had brought.

It is not claimed here, as indeed it could not be, that the act was not effective to withdraw the consent of the United States to be claimed against and sued, and therefore all right to maintain a suit against it for refunds, except under and in strict accordance with the conditions the act prescribes. Smallwood v. Gallardo, 275 U.S. 56, 48 S.Ct. 23, 72 L.Ed. 152; Tucker v. Alexander, 275 U.S. 228, 48 S.Ct. 45, 72 L.Ed. 253; United States v. Clarke, 8 Pet. 436, 8 L.Ed. 1001; Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434; Dismuke v. United States, 297 U.S. 167, 56 S.Ct. 400, 80 L.Ed. 561; ...