Masonite Corp. v. Fly

Citation194 F.2d 257
Decision Date15 February 1952
Docket NumberNo. 13780.,13780.
PartiesMASONITE CORP. v. FLY, Collector of Internal Revenue.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Denton Gibbes, Laurel, Miss., for appellant.

Carolyn R. Just, Robert N. Anderson, Fred E. Youngman, Special Assts. to Atty. Gen., Ellis N. Slack, Acting Asst. Atty. Gen., Theron Lamar Caudle, Asst. Atty. Gen., Joseph E. Brown, U. S. Atty., Jackson, Miss., for appellee.

Before JOSEPH C. HUTCHESON, Chief Judge, and BORAH and RIVES, Circuit Judges.

JOSEPH C. HUTCHESON, Chief Judge.

The suit was for the refund of the 3 per cent tax assessed against plaintiff as for transportation under the purported authority of Subsec. (a), Sec. 3475, Title 26 U.S.C.A.1 and Treasury Regulation 113,2 and paid by it under protest.

The claim in general was that the operation, in respect of which the tax was assessed, was not transportation as that term is used in the taxing statute and defined in the regulations.

In particular it was: that, as conclusively shown by the pleaded facts, none of the fifty-three individuals engaged in loading the wood were transporters of property as defined in the act and the applicable regulation; and that the sums paid them for moving the wood, stacked on plaintiff's premises, short distances, the longest 1100 feet, onto plaintiff's railway cars, for delivery to plaintiff's mill, were not paid for transportation "to persons engaged in the business of transporting property for hire", as set out in the statute and defined in the regulation.

Defendant moved to dismiss the complaint on the ground that the facts pleaded did not warrant the recovery sought, there was a judgment against plaintiff on the motion, and an appeal to this court.3

Reversing the judgment for trial on the merits, this court there said in part: "The existence of tax liability under the provisions of Sec. 3475 of the Internal Revenue Code, 26 U.S.C.A. § 3475, levying a tax on the transportation of property, depends upon whether the transaction in question in any case is `transportation' within the terms of the statute. This is generally a question of fact to be determined in the light of the applicable statute and regulations, and only in the clearest case should be determined upon the pleadings alone. The allegations of the complaint in the present case do not establish liability to the transportation tax as a matter of law. The defendant can not admit each of the allegations of the complaint, together with any reasonable inference flowing from their establishment, and defeat recovery of the tax alleged to have been illegally exacted."

When the case again came on for hearing, it was on stipulated facts. This time the appeal is from a judgment against plaintiff, not on the pleadings but on the stipulated facts, and appellant is here insisting: (1) that those facts are in substance identical with the facts4 as pleaded, and the judgment is inconsistent with our earlier opinion; and (2) that, that opinion wholly aside, the judgment is without support in law.

Appellee denies that our former opinion concludes the case and insists that the judgment was right and must be affirmed.

We do not think so. On the contrary, we find ourselves in agreement with appellant on both of its contentions. Upon a comparison of the pleading of plaintiff, of which, on the first appeal, we said "defendant can not admit each of the allegations of the complaint, together with any reasonable inference flowing from their establishment, and defeat recovery", with the admissions of the stipulation on which the judgment appealed from rests, we are of the opinion that the judgment is in conflict with our previously expressed views.

Our former opinion aside, however, we think that to exact a tax from plaintiff under these facts is to run directly counter to the fundamental principles of taxation inherent in our system and a part of our common law heritage, that the levying of taxes is the exclusive function of the Legislative branch and that the Executive may not exact taxes from the citizen except where the proposed exaction finds clear support in the taxing law.

While the apostasy recently put forward by many persons, both in and out of the Executive and Judicial branches of the government, and practiced by some in them: that this view of the law is outmoded; that, while law making is theoretically for the Legislative, this is so only in broad outlines; that, in the last analysis, it is for the boards and commissions the new instruments of public power,5 and for the courts6 to extend and stretch taxing statutes so that their meshes will cover all caught in the collector's net, has sapped at the foundations of the principle, it has not yet undermined it. Until it does, the determination of the content and stretch of taxing statutes will remain with the Legislative branch, and the rule in Heydon's case7 will still control in the construction and application of statutes, taxing as well as others. Particularly, until it does, will the controlling rule for the interpretation of taxing statutes continue to be that set out in 51 Am.Jur., "Taxation", Sec. 310, Language of Statute. This is:

"The intention of the legislature with respect to tax statutes must, as in the case of statutes generally, be ascertained from the language of the act. As has been frequently pointed out, a tax cannot be imposed without clear and express language for that purpose. * * *"

"The literal meaning of the words employed in tax statutes is most important, and the general rule requiring adherence to the letter in construing statutes applies with peculiar strictness to tax laws. Crooks v. Harrelson, 282 U.S. 55, 51 S.Ct. 49, 75 L.Ed. 156.

See also 27 Am.Jur., "Income Taxes", Sec. 10: "The provisions of an income tax statute are not to be extended by implication beyond the clear import of the language used, U. S. v. Merriam, 263 U.S. 179, 44 S.Ct. 69, 68 L.Ed. 240, and in case of doubt are to be construed against the government and in favor of the taxpayer. McFeely v. Commissioner, 296 U.S. 102 56 S.Ct. 54, 80 L.Ed. 83 * * *." see also Crooks v. Harrelson, supra, and Helvering v. Griffiths, 318 U.S. 371, 63 S.Ct. 636, 87 L.Ed. 843.

Construing the statute, invoked as the basis for the action here, with these rules in mind, it is clear, we think, that the stretch and sweep of the act invoked and applied below does not include the moneys paid here. It does not include them because moneys paid by an employer to employees for work done on his premises, consisting of loading, at so much a unit, wood stored or stacked there are not paid for transportation within the act merely because the person employed "to remove the wood from the stacks on the yard, load it on a truck, remove it to the wood car, and load the wood on the car" owns or has the use of a truck.

Had the congress intended the statute to have the reach claimed for it by appellees, the act would not have used the qualifying words limiting transportation "to persons engaged in the business, etc.", the words on which appellant so strongly and so correctly relies. The act would have used the word "transportation", a word which, unqualified, is of wide reach and varied application.

The reason the word was not so broadly used is not far...

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17 cases
  • Acker v. Commissioner of Internal Revenue
    • United States
    • U.S. Court of Appeals — Sixth Circuit
    • September 3, 1958
    ...of the District Court, 6 Cir., 13 F.2d 1022, certiorari denied, 1926, 273 U.S. 721, 47 S.Ct. 111, 71 L.Ed. 858; Masonite Corp. v. Fly, 5 Cir., 1952, 194 F.2d 257, 260; Helvering v. Rebsamen Motors, Inc., 8 Cir., 1942, 128 F.2d 584, Especially is this so where, as in the case at bar, the pen......
  • Kovacs v. Comm'r of Internal Revenue
    • United States
    • U.S. Tax Court
    • February 24, 1993
    ...tax statutes. Crooks v. Harrelson, 282 U.S. 55, 61 (1930); United States v. Merriam, 263 U.S. 179, 187–188 (1923); Masonite Corp. v. Fly, 194 F.2d 257, 260–261 (5th Cir.1952). “[T]he words of statutes—including revenue acts—should be interpreted where possible in their ordinary, everyday se......
  • In Re Statmaster Corporation
    • United States
    • U.S. District Court — Southern District of Florida
    • May 27, 1971
    ...by implication is not favored. The Court of Appeal for the Fifth Circuit has emphasized this fundamental maxim. Masonite Corp. v. Fly, 194 F.2d 257, 260-261 (5th Cir. 1952). It is true, as pointed out by Murtagh in the article cited, that the maxim forbidding extension of a tax by implicati......
  • Cramer v. Comm'r of Internal Revenue
    • United States
    • U.S. Tax Court
    • September 22, 1993
    ...used. Crooks v. Harrelson, 282 U.S. 55, 61 (1930); United States v. Merriam, 263 U.S. 179, 187–188 (1923); Masonite Corp. v. Fly, 194 F.2d 257, 260–261 (5th Cir.1952). Further, “where a statute is clear on its face, we would require unequivocal evidence of legislative purpose before constru......
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