Lugo v. Suazo

• Decision Date: 07 June 1932
• Docket Number: No. 2619.,2619.
• Citation: 59 F.2d 386
• Parties: LUGO v. SUAZO.
• Court: U.S. Court of Appeals — First Circuit

59 F.2d 386 (1932)

LUGO v. SUAZO.

No. 2619.

Circuit Court of Appeals, First Circuit.

June 7, 1932.

Major Fred W. Llewellyn, of Washington, D. C. (Col. William Cattron Rigby and Gen. Blanton Winship, both of Washington, D. C., and James R. Beverley, Atty. Gen., on the brief), for appellant.

Leonard Wheeler, Jr., of Boston, Mass. (Goodwin, Procter & Hoar, of Boston, Mass., and Juan B. Soto, of San Juan, Puerto Rico, on the brief), for appellee.

Before BINGHAM, WILSON, and MORTON, Circuit Judges.

BINGHAM, Circuit Judge.

The principal question in this case is whether the Puerto Rican Act of 1928 (No. 19) regulating the sale of foreign coffee can be supported as a valid inspection law or is to be regarded as imposing an internal revenue tax discriminating against foreign coffee after it has been brought into the island for sale, in violation of section 3 of the Organic Act of Puerto Rico, as amended (48 USCA §§ 741, 741a, 745).

The act of 1928 requires all persons dealing in foreign coffee (coffee not grown and harvested in Puerto Rico) to obtain licenses and pay license fees of $80 per year for wholesale dealers, $20 a year for retail dealers, and like sums for their agents; to attach stamps to containers of foreign coffee at the rate of 2 cents per pound; and to keep books containing entries of all their dealings, including where the coffee comes from and where it is to go, and attach to each book a stamp of fifty cents. The title of the act reads: "To regulate the sale of foreign coffee, whether pure or mixed with Porto Rican coffee, and to provide funds to defray the expenses of such regulation, and for other purposes."

Section 23 of the act provides:

"Section 23. — The entire proceeds of the sale of the seals or stamps, and of the licenses and fines provided for in this Act, shall be covered into the Insular Treasury and shall constitute a special fund which shall be known as `Coffee Protection Fund,' which shall be devoted to defraying the expenses occasioned by the enforcement of the laws for the protection of Porto Rican coffee and for inspecting and guaranteeing the origin thereof."

Although by the title of the act the funds raised are to defray the expenses of regulating the sale of foreign coffee, section 23 states that the entire proceeds derived from the sale of stamps, licenses, and fines shall be covered into the Insular Treasury and be known as "Coffee protection fund," which "shall be devoted to defraying the expenses occasioned by the enforcement of the laws for the protection of Porto Rican coffee and for inspecting and guaranteeing the origin thereof." It is thus apparent, if the language of section 23 is to be given its plain meaning, that the fees collected under the act of 1928 are to be devoted entirely to defraying expenses occasioned in the enforcement of laws for the protection, inspection, and guaranteeing the origin of Puerto Rican coffee; and that, if any effect can be given to the title of the act of 1928 wherein it says, "and to provide funds to defray the expenses of such regulation," such purpose was but an incident of the main purpose stated in section 23.

At the time the act of 1928 was enacted there was and still is in existence in Puerto Rico Act No. 22, of June 5, 1925, entitled "An Act to amend `An Act to guarantee the origin of Porto Rican coffee', approved November 23, 1917, and for other purposes." That act of 1925 related to coffee produced entirely in Puerto Rico and provided that straps or stamps of the value of 3 cents should be attached to containers of such coffee holding from twenty-five to one hundred pounds, and straps or stamps of the value of 5 cents to containers of such coffee holding from one to two hundred pounds; and the proceeds derived from the sale of the straps or stamps provided for under the act were to be "devoted to the payment of such expenses as may arise by reason of the application of this Act." The act of 1925 is undoubtedly the law the enforcement of which was contemplated by section 23 providing for the expenditure of the funds raised under the act of 1928.

In Foote & Co. v. Maryland, 232 U. S. 494, 34 S. Ct. 377, 379, 58 L. Ed. 698, the Supreme Court had under consideration the validity of an oyster inspection law which provided "for an inspection fee of 1 cent per bushel to be `levied to help pay the salary of the inspectors and the other expenses of the State Fishery Force.'" Besides inspection the Fishery Force had other duties imposed upon it by the act. "That organization * * * was supplied with men and boats, and required to patrol, day and night, the waters of Chesapeake bay to prevent unlicensed boats from taking oysters and all boats from improper tonging or dredging, and to see that shells and culls * * * were returned to the natural beds, — provisions intended for the preservation of the supply rather than determining the merchantable quality of oysters offered for sale," showing that "inspection, policing, and business expenses * * * were to be paid for out of inspection fees." In speaking of this matter the court said:

"As the act itself makes a clear distinction between inspection expenses `and other expenses,' the question at once arises as to whether the state did not provide for the collection of more than was `absolutely necessary for executing its inspection laws,' thereby rendering the statute void because it included the cost of `something beyond legitimate inspection to determine quality and condition.' Brimmer v. Rebman, 138 U. S. 83, 11 S. Ct. 213, 34 L. Ed. 862, 3 Inters. Com. Rep. 485."

In discussing the question whether the fees authorized by the act were more than necessary for executing its inspection provisions, the court laid down two preliminary propositions which were in substance as follows: (1) That where the Legislature in a so-called inspection act fixes the fees to cover the expense of inspection and provides that the same shall be devoted to that purpose, the presumption is that the fees fixed are reasonable and the burden of showing them unreasonable is upon him who asserts the invalidity of the act; but (2) where the Legislature in such an act directs the inspection fees there provided for shall be devoted to defraying "other expenses" as well as those for the inspection provided for in the act, the presumption is that the fees fixed are unreasonable, and the burden is on him who affirms the validity of the act.

In that case the statute then before the court was the re-enactment of an old law levying the same charge of one cent per bushel for inspection and the other expenses of the state fishery force. Under the operations of the old law, it appeared that the revenue produced by it was $40,000, one-third of which was sufficient to pay the salaries of the inspectors, the other two-thirds being used to pay the "other expenses of the Fishery Force." It did not, however, appear what revenue was produced under the operation of the new statute, but the court held that in the light of the operation of the previous act the failure to show that the amount collected under the new, would not be more than was necessary for the expenses of inpection proper, the present statute was void as imposing an undue burden or tax on interstate commerce. See, also, Foote & Co. v. Clagett, 116 Md. 228, 81 A. 511. The difference between that case and the one here in question (if the act of 1928 can be called an inspection law) is that in that case the "other expenses" required to be paid out of the inspection fees arose out of duties imposed by the inspection act itself and not out of duties imposed by a different act (in this case the act of 1925), which is a difference in form only and not in substance.

Applying the principle laid down in the Foote Case, the fund raised by the act of 1928 is presumptively more than is necessary to defray the expenses of its enforcement and is in the nature of a tax, for the act provides that the fund shall be used to pay other expenses than those of inspection, and the government introduced no evidence showing that the fund was not in fact more than was reasonably necessary for inspection.

Our attention, however, is called to certain matters from which it may be inferred that the sum derived from the collection of these fees was in fact more than was reasonably necessary to cover the enforcement of the act of 1928. It appears from Act No. 4 of the Legislature of Puerto Rico of April 9, 1930, that on that date, the act of 1928 having been in force a year and three months, of the funds then raised thereunder there was in existence and on hand "a present balance" and it was anticipated that by June 30, 1930, there would then be an additional or "resulting balance," and that the Legislature of Puerto Rico in the Act of April 9, 1930, appropriated "the present balance and the resulting balance," not for expenses incurred in the enforcement of the act of 1928, but "for the promotion of agriculture and of rural education in the coffee zones of the island, through the establishment of experimental and demonstration farms; and for the promotion of agriculture in cooperation with the Agrarian Units under the Department of Agriculture and Labor; and with the Second...