Franklin Process Co. v. Hoosac Mills Corporation

Decision Date19 October 1934
Docket NumberNo. 3926.,3926.
Citation8 F. Supp. 552
PartiesFRANKLIN PROCESS CO. v. HOOSAC MILLS CORPORATION.
CourtU.S. District Court — District of Massachusetts

John W. Lowrance and Edward R. Hale, both of Boston, Mass., for receivers.

William M. Butler and James A. McDonough, both of Boston, Mass., receivers pro se.

Phillips Ketchum, of Boston, Mass., for New England Trust Co.

Fisher Abramson, of New Bedford, Mass., for First Nat. Bank of New Bedford, a creditor.

BREWSTER, District Judge.

The receivers of the Hoosac Mills Corporation have presented to this court a report on a claim of the United States for $81,694.28, representing a balance due on the processing and floor stock taxes assessed pursuant to sections 9 and 16 of the Act of May 12, 1933 (7 USCA §§ 609, 616), known as the Agricultural Adjustment Act. The receivers recommended that this claim be disallowed, and ask that the report be approved.

The report brings into question the validity of the tax. The matter was heard on evidence submitted by the government, oral arguments, and briefs. The evidence was largely received over the objections of the receivers, and so far as it or the arguments of both parties relate to the occasion for, the expediency of, or the results, beneficial or otherwise, of the Agricultural Adjustment Act, they must be disregarded, except as they tend to disclose the factual grounds upon which Congress proceeded in its declaration of an emergency and of a legislative policy, and the Secretary of Agriculture proceeded in executing that policy. It can here be said, as was stated by Chief Justice Hughes in Home Building & Loan Association v. Blaisdell, 290 U. S. 398, at page 444, 54 S. Ct. 231, 242, 78 L. Ed. 413, 88 A. L. R. 1481, that "the declarations of the existence of this emergency by the Legislature * * * cannot be regarded as a subterfuge or as lacking in adequate basis. * * * The finding of the Legislature * * * has support in the facts of which we take judicial notice."

The facts controlling upon the issues presented may be briefly stated as follows:

On July 14, 1933, with the approval of the President, the Secretary of Agriculture promulgated a regulation which in part provided as follows:

"I do hereby ascertain and prescribe that for the purposes of said Act the first marketing year for cotton shall begin August 1, 1933.

"I do hereby determine as of August 1, 1933, that the processing tax on the first domestic processing of cotton shall be at the rate of 4.2 cents per pound of lint cotton, net weight, which rate equals the difference between the current average farm price for cotton and the fair exchange value of cotton, which price and value, both as defined in said Act, have been ascertained by me from available statistics of the Department of Agriculture."

The prescribed marketing year was consistent with the cotton year recognized by the Department of Agriculture, the Department of Commerce, private agencies in the United States and foreign countries, as well as by earlier congressional act. The rate of the tax was based upon reports and statistics gathered by the Department of Agriculture in accordance with the established practices from which were computed averages (1) of farm prices of cotton during the period August, 1909-July, 1914 (12.4 cents per pound), and (2) of the farm prices of cotton on June 15, 1933 (8.7 cents per pound), and also an index of prices paid by farmers for commodities which they bought (103 per cent.). Thus from the available statistics in the Department of Agriculture, the Secretary of Agriculture ascertained the "current average farm price" and "the fair exchange value" of the commodity involved. He determined the rate at which the processing and floor stock tax was to be levied, and thereupon proceeded to fix the rate of taxes at 4.2 cents per pound.

The Hoosac Mills Corporation is a processor of cotton, and had, or the receivers had, filed returns showing liability for the processing tax under section 9 of the Agricultural Adjustment Act for August, September, and October, 1933, and showing the floor stock tax for August, 1933. There is no dispute regarding the amount of the balance due on account of this tax liability.

The question whether the claim for these taxes can be recognized as a valid claim turns upon the constitutionality of title 1 of the Agricultural Adjustment Act (section 1 et seq. 7 USCA § 601 et seq.). The act, in part, is entitled, "AN ACT To relieve the existing national economic emergency by increasing agricultural purchasing power, to raise revenue for extraordinary expenses incurred by reason of such emergency." The title contains a declaration of emergency and a declaration of legislative policy which are set forth in the following language:

"Title I — Agricultural Adjustment.

"Declaration of Emergency

"That 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.

"Declaration of Policy

"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 re-establish 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 §§ 601, 602.

For present purposes, the following summary of the provision of the act may be deemed adequate:

Part 2 of the title confers upon the Secretary of Agriculture, "in order to effectuate the declared policy," power to provide for crop reduction and benefit payments with respect to basic agricultural commodities through "agreements with producers or by other voluntary methods" (section 8 (1), 7 USCA § 608 (1).

To enter into marketing agreements with persons or associations "engaged in the handling, in the current of interstate or foreign commerce of any agricultural commodity or product thereof" (section 8 (2), 7 USCA § 608 (2); and to issue licenses to persons or associations so engaged (section 8 (3, 4), 7 USCA § 608 (3, 4), the licenses being subject to terms and conditions, compatible with statutes, which might be necessary to eliminate unfair practices or charges which tended to prevent the effectuation of the declared policy.

The act further provides that in order "to obtain revenue for extraordinary expenses incurred by reason of the national economic emergency, there shall be levied processing taxes" as provided in the act (section 9 (a), 7 USCA § 609 (a). When the Secretary of Agriculture determines that benefit payments are to be made, he shall proclaim such determination and a processing tax shall be in effect from the beginning of the next marketing year. The tax is levied on the first domestic processing of the commodity and is to be paid by the producer. The rate of the tax is fixed by the Secretary of Agriculture, but it must conform to the requirements of subsection (b) of section 9, and is to be determined as of the effective date of the tax. The rate must be adjusted from time to time to conform to the requirements of the statute at such intervals as the Secretary may deem necessary to effectuate the declared policy (section 9 (a), 7 USCA § 609 (a).

Subsection (b) of section 9 (7 USCA § 609 (b) is in the following terms:

"(b) The processing tax shall be at such rate as equals the difference between the current average farm price for the commodity and the fair exchange value of the commodity; except that if the Secretary has reason to believe that the tax at such rate will cause such reduction in the quantity of the commodity or products thereof domestically consumed as to result in the accumulation of surplus stocks of the commodity or products thereof or in the depression of the farm price of the commodity, then he shall cause an appropriate investigation to be made and afford due notice and opportunity for hearing to interested parties. If thereupon the Secretary finds that such result will occur, then the processing tax shall be at such rate as will prevent such accumulation of surplus stocks and depression of the farm price of the commodity. * * *"

Subsection c of section 9 (7 USCA § 609 (c) provides that for the purposes of the title the fair exchange value of a commodity shall be the price therefor that will give the commodity the same purchasing power, with respect to articles farmers buy, as such commodity had during the base period, namely, August, 1909-July,...

To continue reading

Request your trial
10 cases
  • Rieder v. Rogan
    • United States
    • U.S. District Court — Southern District of California
    • October 28, 1935
    ...Cas. 1917B, 713; United States v. Doremus (1919) 249 U. S. 86, 39 S. Ct. 214, 63 L. Ed. 493. See, also, Franklin Process Co. v. Hoosac Mills Corporation (D. C. Mass. 1934) 8 F. Supp. 552. By section 21 (a) of the act, added by the amendment of August 24, 1935, § 30 (7 USCA § 623 (a), it is ......
  • United States v. Seven Oaks Dairy Co.
    • United States
    • U.S. District Court — District of Massachusetts
    • May 17, 1935
    ...of Agriculture. The question of the constitutionality of the enactment was considered in the case of Franklin Process Co. v. Hoosac Mills Corporation (D. C.) 8 F. Supp. 552. In that case the conclusion was reached that, while Congress had approached the limits of its power to regulate matte......
  • Butler v. United States
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • July 13, 1935
    ...to vest legislative power in the Secretary. It is not difficult to understand, after studying the act, why the District Court (8 F. Supp. 552, 559) concluded that "It must * * * be conceded that legislative functions are conferred upon administrative officers by the act," or that "The Agric......
  • United States v. Butler
    • United States
    • United States Supreme Court
    • January 6, 1936
    ...'basic agricultural commodities,' to which the act is to apply. Others have been added by later legislation. 3 Franklin Process Co. v. Hoosac Mills Corp. (D.C.) 8 F.Supp. 552. 4 Butler et al. v. United States (C.C.A.) 78 F.(2d) 1. 5 Public No. 320, 74th Congress, 1st Sess. (7 U.S.C.A. § 602......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT