Butler v. Carney

• Decision Date: 02 December 1936
• Docket Number: 6661.,6644,No. 6375,6646,6645,6375
• Citation: 17 F. Supp. 133
• Parties: BUTLER et al. v. CARNEY, and four other cases.
• Court: U.S. District Court — District of Massachusetts

17 F. Supp. 133

BUTLER et al. v. CARNEY, and four other cases.

Nos. 6375, 6646, 6644, 6645, 6661.

District Court, D. Massachusetts.

December 2, 1936.

Edward R. Hale, of Boston, Mass., for plaintiffs in Nos. 6375, 6644, and 6645.

Edward R. Hale and Bennett Sanderson, both of Boston, Mass., for plaintiff in No. 6646.

Fox & Orlov, of Boston, Mass., for plaintiff in No. 6661.

Francis J. W. Ford, U. S. Atty., and Arthur L. Murray, Sp. Asst. to Atty., both of Boston, Mass., Robert H. Jackson, Asst. Atty. Gen., and Andrew D. Sharpe and Arthur P. Curran, Sp. Assts. to Atty. Gen., for defendants.

BREWSTER, District Judge.

These five suits were brought to recover taxes illegally collected under the provisions of the Agricultural Adjustment Act, and the Act as amended, 7 U.S.C.A. § 601 et seq.

The case of William M. Butler et al. v. Carney, No. 6375, was begun by a writ dated April 22, 1935. Both processing taxes and floor stocks taxes are involved. The plaintiffs allege that they have filed claims for the refund of these taxes on the ground that the act imposing them was beyond the powers of Congress under the Constitution of the United States, and that their claims have been rejected by the Commissioner of Internal Revenue. The defendant in this case at first filed an answer, but has been allowed to withdraw his answer and substitute a demurrer.

The three cases brought by the Quissett Mill contain substantially similar allegations. The writs in these suits were dated January 13, 1936. As in the Butler case, both processing taxes and floor stocks taxes are involved.

The case of Hodgman Rubber Co. v. Carney involves floor stocks taxes only. The writ is dated January 10, 1936. The plaintiff's allegations do not differ materialy from those in the other cases.

To each of these declarations the defendant has filed a demurrer on the grounds that this court lacks jurisdiction to hear and determine the controversy and that the facts, as stated therein, fail to set forth a cause of action.

It is the contention of the defendants that the provisions of title 7 of the Revenue Act of 1936 (sections 901-917 7 U.S.C.A. §§ 623 note, 644-659) are applicable to all of these suits and operate both to take away the jurisdiction of this court to hear these cases and to take away the right of the various plaintiffs to any recovery under the facts as set forth in their various declarations. The plaintiffs, on the other hand, contend that if these provisions of the Revenue Act of 1936 are applicable, they are unconstitutional, and of no effect.

In title 7 of the Revenue Act of 1936, provision is made for refunds of amounts collected under the Agricultural Adjustment Act. Section 902 (7 U.S.C.A. § 644) provides:

"Section 902. Conditions on Allowance of Refunds. No refund shall be made or allowed, in pursuance of court decisions or otherwise, of any amount paid by or collected from any claimant as tax under the Agricultural Adjustment Act this chapter, unless the claimant establishes to the satisfaction of the Commissioner in accordance with regulations prescribed by him, with the approval of the Secretary, or to the satisfaction of the trial court, or the Board of Review in cases provided for under section 906 section 648 of this title, as the case may be —

"(a) That he bore the burden of such amount and has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly, (1) through inclusion of such amount by the claimant, or by any person directly or indirectly under his control, or having control over him, or subject to the same common control, in the price of any article with respect to which a tax was imposed under the provisions of such Act this chapter, or in the price of any article processed from any commodity with respect to which a tax was imposed under such Act this chapter, or in any charge or fee for services or processing; (2) through reduction of the price paid for any such commodity; or (3) in any manner whatsoever; and that no understanding or agreement, written or oral, exists whereby he may be relieved of the burden of such amount, be reimbursed therefor, or may shift the burden thereof; or

"(b) That he has repaid unconditionally such amount to his vendee (1) who bore the burden thereof, (2) who has not been relieved thereof nor reimbursed therefor, nor shifted such burden, directly or indirectly, and (3) who is not entitled to receive any reimbursement therefor from any other source, or to be relieved of such burden in any manner whatsoever."

Section 903 (7 U.S.C.A. § 645), dealing with the filing of claims, provides:

"Section 903. Filing of Claims. No refund shall be made or allowed of any amount paid by or collected from any person as tax under the Agricultural Adjustment Act this chapter unless, after the enactment of this Act June 22, 1936, 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."

Section 904 (7 U.S.C.A. § 646) provides limitations upon the time of bringing suit:

"Section 904. Statute of Limitations. Notwithstanding any other provision of law, no suit or proceeding, whether brought before or after the date of enactment of this Act June 22, 1936, shall be brought or maintained in any court for the recovery, recoupment, set-off, refund, or credit of, or counterclaim for, any amount paid by or collected from any person as tax (except processing tax, as defined herein) under the Agricultural Adjustment Act this chapter. (a) before the expiration of eighteen months from the date of filing a claim therefor under this title section 645 of this title, unless the Commissioner renders a decision thereon within that time, or."

Section 906 (7 U.S.C.A. § 648) provides a special administrative remedy for the recovery of amounts paid as processing taxes. This section has no application to the recovery of amounts paid as floor stocks taxes.

"Section 906. Procedure on Claims for Refunds of Processing Taxes (a) Notwithstanding any other provision of law, no suit or proceeding, whether brought before or after the date of the enactment of this Act June 22, 1936, shall be brought or maintained in any court for the refund of any amount paid or collected as processing tax, as defined herein in section 655 of this title, under the Agricultural Adjustment Act this chapter, except as provided in this section."

The Commissioner is given three years in which to act upon such claims after they have been filed. A Board of Review is created, to consist of nine persons, to be officers or employees of the Treasury Department, designated to act by the Secretary of the Treasury. The Commissioner's allowance or disallowance of any claim is to be final, unless within three months the claimant files a petition with this Board of Review requesting a hearing on the merits of his claim, in whole or in part. The claimant is then allowed to appeal to the appropriate Circuit Court of Appeals, which is given exclusive jurisdiction to modify the decision of the Board of Review, if it is found to be not in accordance with law. Provision is made for taking any extra evidence before the Board of Review, if this becomes necessary.

Section 910 (7 U.S.C.A. § 652) abolishes the liability of Collectors under all circumstances:

"Section 910. Liability of Collectors. No collector of internal revenue or customs, or internal revenue or customs officer or employee, shall be in any way liable to any person for any act done by him in the assessment or collection of any amount as tax under the Agricultural Adjustment Act this chapter, or for the recovery of any money exacted by or paid to him 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."

So far as refunds of processing taxes are concerned, there is no doubt that the words of section 906 (7 U.S.C.A. § 648) apply to all applications for refunds, whether pending before the courts at the time of the passage of the act or not. The statute expressly so states. In addition there is a prohibition against "maintaining" any suit or proceeding. It has been held that such language includes suits already begun at the time of the passage of the act. Smallwood v. Gallardo, 275 U.S. 56, 48 S. Ct. 23, 72 L.Ed. 152. As to the recovery of amounts paid as floor stocks taxes, there is more difficulty. The language of section 902 (7 U.S.C.A. § 644) does not differ, in this particular, materially from that used in section 21 (d) (1) of the Agricultural Adjustment Act, as amended (7 U.S.C.A. § 623 (d) (1). It has been held that the latter statute has no application to suits begun before its passage. Wilkes Barre Lace Mfg. Co. v. Mundy (D.C.) 13 F.Supp. 870. Section 21 (d) of the Agricultural Adjustment Act (7 U.S.C.A. § 623 (d), moreover, is now expressly repealed by section 901 of the Revenue Act of 1936 (7 U.S.C.A. § 623 note). The same considerations are perhaps applicable to section 903 (7 U.S.C.A. § 645) relative to the filing of claims. Section 904 (7 U.S.C.A. § 646), however, provides that no suit or proceeding, whether begun before or after the passage of the act, may be begun or maintained "before the expiration of eighteen months from the date of filing a claim therefor under section 645 of this title." The effect of this language would appear to be to cut off any proceedings pending at the time of the passage of the act.

It is necessary to decide, therefore, whether any violation of the Constitution of the United States is involved in the statutes quoted above. In the first place, the plaintiffs contend that the effect of section 910 (7 U.S.C.A. § 652), quoted above, is to deprive them of a common-law right against the collector of internal revenue, and that consequently they...