Louisville Provision Co. v. Glenn
| Decision Date | 11 February 1937 |
| Docket Number | No. 1073,1076.,1074,1073 |
| Citation | 18 F. Supp. 423 |
| Parties | LOUISVILLE PROVISION CO. et al. v. GLENN et al. EMMART PACKING CO. v. SAME. KLARER PROVISION CO. v. SAME. |
| Court | U.S. District Court — Western District of Kentucky |
Woodward, Dawson & Hobson, Steinfeld & Steinfeld, Crawford, Middleton, Milner & Seelbach, William W. Crawford, George W. Norton, Jr., W. F. Baumeister, and Ben F. Washer, all of Louisville, Ky., Sparks & Sparks, of Greenville, Ky., and Wilson & Harbison, of Lexington, Ky., for plaintiffs.
Robert H. Jackson, Asst. Atty. Gen., Andrew D. Sharpe and Thomas G. Carney, Sp. Assts. to the Atty. Gen., and Bunk Gardner, U. S. Atty., and G. Oldham Clarke, Asst. U. S. Atty., both of Louisville, Ky., for defendants.
The three above styled causes relate to the same subject matter, and for that reason this opinion is applicable to all of them, although not consolidated.
The first suit (equity No. 1073) is instituted by six corporations engaged in the business of buying hogs, cattle, and other livestock; in slaughtering, converting, and packing them into food products, and selling after manufacturing. The defendant Selden R. Glenn is the duly appointed and qualified collector of internal revenue for the District of Kentucky; defendant Bunk Gardner is United States attorney for the Western District of Kentucky; and defendant Mac Swinford is United States attorney for the Eastern District of Kentucky.
It is alleged that the plaintiffs have a common interest in the constitutional questions, and the jurisdictional amount is alleged.
The plaintiffs were all processors of hogs and taxpayers under the Agricultural Adjustment Act (Public No. 10, 73d Congress, approved May 10, 1933 48 Stat. 31, see 7 U.S.C.A. § 601 et seq.), which was declared void by the Supreme Court in United States v. William M. Butler et al., 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477, 102 A.L.R. 914. Each of the plaintiffs alleges it was liable to, but did not pay, processing taxes to the collector of internal revenue after the following months:
Louisville Provision Company December, 1934
Field Packing Company, Owensboro January, 1935
Field Packing Company, Bowling
Green February, 1935
Henry Fischer Packing Company, February, 1935
Eckert Packing Company, February, 1935
Munns Bros., Inc. March, 1935
Pennyroyal Packing Company, April, 1935
They allege they paid into the Treasury of the United States through the collector's office, on account of processing taxes, the following sums:
Louisville Provision Company, $213,899.22
Field Packing Company, 118,041.98
Henry Fischer Packing Company, 240,075.18
Eckert Packing Company, 113,079.31
Munns Bros., Inc., 64,946.58
Pennyroyal Packing Company, 24,067.15
It is then alleged that each of the plaintiffs has pending in the Court of Claims suit against the United States for recovery of the respective amounts stated above. It is alleged that about the month of July, 1935, each of the plaintiffs restrained the collector in an action in this court, and thereafter made no further payment of processing taxes into the Treasury of the United States.
Plaintiffs allege that after several of the District Courts, prior to August 24, 1935, held the Agricultural Adjustment Act unconstitutional, the President approved an amendment thereto (section 21, 7 U.S.C.A. § 623) for the purpose of preventing recovery of processing taxes should the law be held unconstitutional by the Supreme Court, which the court so held January 6, 1936. They allege that there was returned to each of the plaintiffs the amount paid into court to cover said taxes, and, in cases where bonds were executed, same were discharged and exonerated in due time after the act was declared unconstitutional.
They also allege that on June 22, 1936, new provisions were enacted in lieu of section 21, specifically repealing provisions thereof applicable to the refund of processing taxes, which are contained in sections 902 to 904 of the act (7 U.S.C.A. §§ 644-646). They state the necessary and inevitable effect, deliberately intended, is to restrict the right of processing taxpayers to the recovery of a much less sum than exacted of them as processors, and also to make the proof of the right to recover difficult, if not impossible, and to postpone the right of recovery so long as to amount to a practical denial thereof. They allege section 910 (7 U.S.C.A. § 652) undertakes to destroy all right of action against the collector for recovery of such taxes, although Congress well knew hundreds of such suits were then pending.
Plaintiffs allege the enactment of sections 501 to 506, or "Tax on Unjust Enrichment," of the Revenue Act of 1936 (26 U. S.C.A. §§ 345 to 345e), was for the deliberate purpose of preventing the recovery of processing taxes by compelling them and others similarly situated to pay, under the guise of taxation, sums which under the protection of the court they had refused to pay as processing taxes under the provisions of the AAA, and to discourage prosecution of suits for the recovery of such taxes, and for the purpose of recapturing any sums which might be recovered.
Section 501 of said act is, in part, as follows:
Plaintiffs allege that subsection (j) of section 501 (26 U.S.C.A. § 345j) defines the term "Federal excise tax" as used in the act, and, though broad enough to cover other excise taxes, the real purpose of the act was to nullify all rights and benefits which inured to taxpayers from judicial condemnation of the processing tax.
Plaintiffs allege that with the exception of Louisville Provision Company, Henry Fischer Packing Company, and Eckert Packing Company, each of them keeps its books and makes its income tax returns upon a fiscal year basis, ending on October 1st, and hence for 1935 plaintiffs operating on a calendar year basis were required by the terms of the act to make a return and pay the tax shown to be due by such return on September 15, 1936, but the Commissioner of Internal Revenue extended the time for making such return and paying said tax for the calendar year 1935, and for any fiscal year ended in 1935 to December 15, 1936, at which time they were required to file return and pay the taxes due for the taxable year ended in 1935, and that, for the taxable year immediately succeeding the one for which the first return is required, plaintiffs Louisville Provision Company, Henry Fischer Packing Company, and Eckert Packing Company will be required to file and pay the taxes shown due on January 15, 1937, and the other plaintiffs on March 15, 1937.
Plaintiffs allege that the Revenue Act of 1936, in so far as it imposes the so-called "Unjust Enrichment Tax," is unconstitutional for the following reasons:
(1) It is entirely retroactive and applies solely to transactions had and to earnings of business conducted and completed before the passage of the act, and the tax is such radical departure from the method of income taxation or other character of taxation theretofore practiced by the government, and so foreign and unknown in the imposition of taxes, that plaintiffs could not have anticipated its enactment, and to make said tax apply retroactively is to deprive them of their property without due process of law in violation of the Fifth Amendment.
(2) That the imposition is not a good-faith exercise of the taxing power of Congress for the purpose of raising revenue, but for the sole purpose of recovering substantially all of that part of the processing taxes imposed upon these plaintiffs and others in like circumstances, which they did not pay, and to recapture from them substantially all of any sums they may recover as a refund, and that such attempt to circumvent the unconstitutionality of the processing taxes is an arbitrary and capricious exercise of the taxing power for the sole purpose of enabling the national government to secure substantially the full benefit of the processing taxes, even though declared unconstitutional and to deny to these plaintiffs any benefit which would result from recovery or from being relieved of paying the taxes which had not been paid at the time the act was declared unconstitutional.
(3) The act is arbitrarily capricious and violative of the Fifth Amendment because it lays a tax on the past income of the plaintiffs and those similarly situated, at a confiscatory rate, solely because the income so arbitrarily taxed is...
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