Larabee Flour Mills Co. v. Nee

• Decision Date: 03 October 1935
• Docket Number: 2733,2765,No. 2725,2754,2771.,2766,2738,2730,2734,2739,2741-2752,2762,2755,2725
• Citation: 12 F. Supp. 395
• Parties: LARABEE FLOUR MILLS CO. v. NEE, and twenty-three other cases.
• Court: U.S. District Court — Western District of Missouri

12 F. Supp. 395

LARABEE FLOUR MILLS CO. v. NEE, and twenty-three other cases.^*

Nos. 2725, 2730, 2733, 2734, 2738, 2739, 2741-2752, 2754, 2755, 2762, 2765, 2766, 2771.

District Court, W. D. Missouri, W. D.

October 3, 1935.

COPYRIGHT MATERIAL OMITTED

McCune, Caldwell & Downing, of Kansas City, Mo., for plaintiff in No. 2725.

A. Z. Patterson and D. C. Chastain, both of Kansas City, Mo., for plaintiff in No. 2730.

Cecil H. Haas, of Kansas City, Mo., for plaintiffs in Nos. 2733 and 2734.

Philip L. Levi, of Kansas City, Mo., for plaintiff in No. 2738.

E. S. McAnany, of Kansas City, Kan., for plaintiff in No. 2739.

Mann, Mann & Miller, of Springfield, Mo., for plaintiff in No. 2741.

McReynolds & Flanigan, of Carthage, Mo., for plaintiffs in Nos. 2742, 2746, 2748, and 2749.

Glen A. Wisdom, of Kansas City, Mo., for plaintiffs in Nos. 2743-2745 and 2762.

Hunt C. Moore, A. F. Smith, and George T. Aughinbaugh, all of Kansas City, Mo., for plaintiff in No. 2747.

Mercer Arnold, of Joplin, Mo., for plaintiff in No. 2750.

David S. Alper and Max A. Patten, Jr., both of Joplin, Mo., for plaintiff in No. 2751.

Burrus & Burrus, of Independence, Mo., for plaintiff in No. 2752.

Elias Berell and W. I. Farmer, both of Kansas City, Mo., for plaintiff in No. 2754.

Charles M. Grayston, of Joplin, Mo., for plaintiff in No. 2755.

Conrad & Durham, of Kansas City, Mo., for plaintiff in No. 2765.

Matthew H. Galt and Wm. D. Tatlow, both of Springfield, Mo., for plaintiff in No. 2766.

Charles M. Grayston, of Joplin, Mo., for plaintiff in No. 2771.

Maurice M. Milligan, U. S. Atty., and Thomas A. Costolow, Asst. U. S. Atty., both of Kansas City, Mo., for defendant in all cases.

OTIS, District Judge.

Plaintiff's bill in each of these cases alleges that the plaintiff is subject to the processing tax provided for in the Agricultural Adjustment Act (48 Stat. 31, as amended, title 7, U. S. C. § 601 et seq.); that demand has been made by the defendant that it pay the tax; that the provision for the tax in the act is invalid because beyond the constitutional authority of the Congress. The bill prays that the defendant be enjoined from collecting the tax from the plaintiff. It prays also a declaratory judgment that the processing tax provision in the act is unconstitutional.

Hitherto a temporary injunction has been granted in each of these cases. See opinion in Washburn Crosby Co. v. Nee et al. (D. C.) 11 F. Supp. 822.

At the time of the granting of the temporary injunctions in the cases earliest filed, July 31, 1935, it was announced by the court that all the cases then filed and such as might thereafter be filed would be tried on the merits September 10, 1935. Pending motions of the defendant to dismiss, the bills were overruled without prejudice to the renewal of such motions in answers directed to be filed. Answers have been filed in all of the cases.

Shortly before September 10, 1935, the defendant moved for a continuance in each of the cases. It was alleged in the applications for continuance that cases involving similar questions now are pending in the Supreme Court of the United States and that it was desirable that the cases here should be held until the Supreme Court had declared the applicable law. It was set up also in the applications that the defendant could not adequately prepare for trial by September 10. The applications were overruled, but it was announced by the court that on September 10 only the issues of law made by the bills and the motions to dismiss renewed in the answers would be considered, and that in the event the motions to dismiss were overruled, the matter of hearing testimony on such issues of fact as were made by the pleadings would be set down for a later date, possibly for a date subsequent to the decisions of the Supreme Court in similar cases. Accordingly, on September 10 the motions to dismiss were argued and are now for decision. Motions of the defendant to dissolve the temporary injunctions already issued in the cases also were submitted and now are to be ruled.

Questions Stated.

The two prime questions for consideration are these: First, entirely apart from the constitutional questions raised by the bills, do the bills state facts entitling the plaintiffs to the relief in equity they pray? Second, if otherwise the bills do state facts entitling the plaintiffs to relief in equity, is the processing tax provision in the Agricultural Adjustment Act, as amended, constitutional? A third question which was presented when the bills were filed no longer is presented. While the bills pray declaratory judgments that the processing tax provision in the act is unconstitutional, it was conceded by counsel for plaintiffs at the hearing that the August 24, 1935, amendment to the act 7 USCA § 602 et seq. ended any jurisdiction the court otherwise might have had to make such a declaratory judgment as that asked.

Right to Equitable Relief.

1. The chief reliance of the defendant in support of his motions to dismiss is section 3224 of the Revised Statutes (26 USCA § 1543), which reads: "No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court."

If the validity of section 3224 be assumed, and its validity is not challenged in the bills, and if it be given a literal interpretation, it does, of course, preclude the maintenance of any of the suits instituted by the bills here. Each of the suits is "for the purpose of restraining the * * * collection of (a) tax." But the Supreme Court repeatedly has said that section 3224 is not to be interpreted literally.

Section 3224 originally was enacted March 2, 1867 (14 Stat. 475), as an amendment to section 19 of the Act of July 13, 1866 (14 Stat. 98, 152). Before amendment, section 19 of the Act of July 13, 1866, provided: "That no suit shall be maintained in any court for the recovery of any tax alleged to have been erroneously or illegally assessed or collected, until appeal shall have been duly made to the commissioner of internal revenue according to the provisions of law in that regard, and the regulations of the Secretary of the Treasury established in pursuance thereof, and a decision of said commissioner shall be had thereon, unless such suit shall be brought within six months from the time of said decision, or within six months from the time this act takes effect: Provided, That if said decision shall be delayed more than six months from the date of such appeal, then said suit may be brought at any time within twelve months from the date of such appeal."

The amendment of March 2, 1867, added to section 19 the words: "And no suit for the purpose of restraining the assessment or collection of tax shall be maintained in any court."

When the Revised Statutes were compiled, the revisers made slight changes in the verbiage of the amendment and set it up as a section by itself (section 3224 26 USCA § 1543). It is still to be construed, however, in pari materia with section 19 of the Act of 1866. Snyder v. Marks, 109 U. S. 189, 192, 3 S. Ct. 157, 27 L. Ed. 901. Since section 19 in its original form recognized the existence of an adequate remedy at law for the recovery of a tax illegally exacted, the prohibition of the amendment (now section 3224) assumed the existence of such an adequate remedy at law. The section is declaratory only of the limitation upon equity jurisdiction which long before had been recognized and enforced by the courts.

Interpreting section 3224, the Supreme Court said, in Miller v. Nut Margarine Co., 284 U. S. 498, 509, 52 S. Ct. 260, 263, 76 L. Ed. 422: "Independently of, and in cases arising prior to, the enactment of the provision (Act of March 2, 1867, 14 Stat. 475) which became Rev. St. § 3224 26 USCA § 1543, this court, in harmony with the rule generally followed in courts of equity, held that a suit will not lie to restrain the collection of a tax upon the sole ground of its illegality. The principal reason is that, as courts are without authority to apportion or equalize taxes or to make assessments, such suits would enable those liable for taxes in some amount to delay payment or possibly to escape their lawful burden, and so to interfere with and thwart the collection of revenues for the support of the government. And this court likewise recognizes the rule that, in cases where complainant shows that in addition to the illegality of an exaction in the guise of a tax there exist special and extraordinary circumstances sufficient to bring the case within some acknowledged head of equity jurisprudence, a suit may be maintained to enjoin the collector. Dows v. Chicago, 11 Wall. 108, 20 L. Ed. 65; Hannewinkle v. Georgetown, 15 Wall. 547, 21 L. Ed. 231; State Railroad Tax Cases, 92 U. S. 575, 614, 23 L. Ed. 663. Section 3224 is declaratory of the principle first mentioned and is to be construed as near as may be in harmony with it and the reasons upon which it rests. Cumberland Telephone & Telegraph Co. v. Kelly (C. C. A.) 160 F. 316, 321, 15 Ann. Cas. 1210; Baker v. Baker, 13 Cal. 87, 95; Bradley v. People, 8 Colo. 599, 604, 9 P. 783; 2 Sutherland (2d Lewis Ed.) § 454. The section does not refer specifically to the rule applicable to cases involving exceptional circumstances. The general words employed are not sufficient, and it would require specific language undoubtedly disclosing that purpose, to warrant the inference that Congress intended to abrogate that salutary and well-established rule. This court has given effect to section 3224 in a number of cases. Snyder v. Marks, 109 U. S. 189, 191, 3 S. Ct. 157, 27 L. Ed. 901; Dodge v. Osborn, 240 U. S. 118, 121, 36 S. Ct. 275, 60 L. Ed. 557; Dodge v. Brady, 240 U. S. 122, 36 S. Ct. 277, 60 L. Ed. 560. It has never held the rule to be absolute, but has repeatedly indicated that extraordinary and exceptional circumstances render its provisions inapplicable. Hill v. Wallace, 259 U. S. 44, 62, 42 S. Ct. 453, 66 L. Ed. 822; Dodge...