Franklin Process Co. v. Hoosac Mills Corporation
Decision Date | 19 October 1934 |
Docket Number | No. 3926.,3926. |
Citation | 8 F. Supp. 552 |
Parties | FRANKLIN PROCESS CO. v. HOOSAC MILLS CORPORATION. |
Court | U.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.
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 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:
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:
"(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:
* * *"
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,...
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