Red Star Yeast & Products Co. v. La Budde

• Decision Date: 13 April 1936
• Docket Number: No. 5654.,5654.
• Citation: 83 F.2d 394
• Parties: RED STAR YEAST & PRODUCTS CO. v. LA BUDDE.
• Court: U.S. Court of Appeals — Seventh Circuit

83 F.2d 394 (1936)

RED STAR YEAST & PRODUCTS CO. v. LA BUDDE.

No. 5654.

Circuit Court of Appeals, Seventh Circuit.

April 13, 1936.

Benjamin Poss and Joseph P. Brazy, both of Milwaukee, Wis., for appellant.

Frank J. Wideman, Asst. Atty. Gen., Sewall Key and Frederic G. Rita, Sp. Assts. to Atty. Gen., and B. J. Husting, U. S. Atty., and L. Hugo Keller, Asst. U. S. Atty., both of Milwaukee, Wis., for appellee.

Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.

EVANS, Circuit Judge.

Appellant brought this suit to enjoin appellee, the Collector of Internal Revenue, from attempting to assess and collect excise taxes on yeast by it manufactured and sold, or from imposing a lien for said tax upon its property. It also asked the court to find and enter a declaratory decree that yeast by it sold was not subject to the tax imposed by section 603¹ of the Revenue Act of 1932 (26 U.S.C.A. § 1420 et seq. note), which imposes an excise tax upon cosmetics, etc.

Appellant asserts its belief to be that, unless restrained, appellee will assess the tax and resort to remedies provided by law to enforce its payment, and the amount will be so large that payment can only be made through a liquidation of its assets.

The court issued a temporary restraining order. Thereafter, it vacated this order and denied an application for a temporary injunction. The present appeal is from the refusal to grant the temporary injunction.

Appellee's answer raised the defense presented by section 3224 (26 U.S.C.A. § 1543),² which prohibits the bringing of a suit to restrain the assessment or collection of any tax. It also asserted that the Commissioner had ruled that some yeast sold by appellant was subject to a tax under section 603, but no tax had as yet been assessed. It further answered that the purpose for which the yeast, upon which the tax, if assessed, would be levied, was manufactured and sold by appellant, as declared in the public radio advertisement, was for cosmetic use. It denied that the tax would be so large as to interfere with the conduct of appellant's business.

Affidavits were filed in support of the pleadings which dealt with the subject of advertising and the use of yeast for facials. Appellant argued that many articles, such as lemons, milk, flax, oatmeal, eggs, vinegar, honey, olive oil, etc., were extensively advertised and used to a certain extent, as cosmetics. On the other hand there were copies of advertisements showing that appellant's yeast was extensively sold for facials. In addition there appears in the record numerous articles extolling the benefits of yeast facials, not marked as advertisements, which were taken from newspapers.

The ruling of the District Court must be sustained on any of several grounds.

(a) In order to justify the issuance of a temporary injunction, there must be a showing of a threatened injury. The injury must be real, not imaginary. 14 R.C.L. page 354. Ordinarily, it must be of irreparable character, for which a money award would be inadequate. In the instant case, the Government has not yet assessed any tax against the taxpayer. Should such a tax be assessed and an attempted enforcement greatly prejudice the appellant in the conduct of its business, pendente lite, the court may again be appealed to. It will always be open to hear any application which may be addressed to it. Temporary injunctions differ in their finality from the final or permanent injunctions. Denial of an application for a temporary injunction does not prevent another application by the same party in the same suit, if new facts warrant it. In a suit for either injunction, however, the party seeking the relief must make a fact showing that the threatened injury is imminent.

It is unnecessary to consider the effect of the statute which permits a court to grant declaratory decrees, because the section, which authorizes suits for a declaratory decree (28 U.S.C.A. § 400), expressly excepts suits involving Federal taxes.

(b) Appellant has not brought its case within the rule set forth in Miller v. Standard Nut Margarine Company, 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422; Hill v. Wallace, 259 U.S. 44, 42 S.Ct. 453, 66 L.Ed. 822, so as to avoid the consequences of section 3224,...