Moon v. Freeman

• Decision Date: 25 May 1967
• Docket Number: No. 21008.,21008.
• Citation: 379 F.2d 382
• Parties: Shirley MOON, Appellant, v. Orville FREEMAN, Secretary of Agriculture et al., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

379 F.2d 382 (1967)

Shirley MOON, Appellant, v. Orville FREEMAN, Secretary of Agriculture et al., Appellees.

No. 21008.

United States Court of Appeals Ninth Circuit.

May 25, 1967.

Wesley Nuxoll, Savage & Nuxoll, Colfax, Wash., Francis Conklin, S. J., Spokane, Wash., for appellant.

John W. Douglas, Asst. Atty. Gen., Carl Eardley, Morton Hollander, Attys., Dept. of Justice, Washington, D. C., Smithmoore P. Myers, U. S. Atty., Spokane, Wash., Neil Brooks, Asst. Gen. Counsel, Robert Bor, Atty., Dept. of Agriculture, Washington, D. C., for appellees.

Before KOELSCH, DUNIWAY and ELY, Circuit Judges.

DUNIWAY, Circuit Judge:

Appellant seeks review of a decision of the District Court denying return of $168.52 that he was required to pay to the Secretary of Agriculture's agent, Commodity Credit Corporation (CCC), for the purchase of export marketing certificates. The jurisdiction of the District Court was based upon 28 U.S.C. §§ 1337, 1346(a) (2); and 15 U.S.C. § 714b(c). Jurisdiction here is based upon 28 U.S.C. § 1291.

Originally, appellant brought an action in the District Court for the Eastern District of Washington seeking injunctive and monetary relief against enforcement of the portions of the Agricultural Adjustment Act of 1938, as amended, 52 Stat. 31 et seq. (1938), 7 U.S.C. § 1281 et seq. (1964), and regulations enforcing the Act, which required purchase of the export certificates. The theory of that action, as here, was that the charge for the certificates constituted a tax or duty on exports prohibited by Art. I, § 9, Cl. 5, of the Constitution of the United States.¹

Because the original action sought injunctive relief it was heard before a three-judge panel of the District Court pursuant to 28 U.S.C. § 2282. The panel dismissed the injunctive action holding that appellant's only claim was that the export certificate requirement was a tax and that even if the panel agreed, it could not enjoin operation of a taxing statute. See Int.Rev.Code of 1954, § 7421(a), 26 U.S.C. § 7421(a). The case was remanded to the District Court for trial of the monetary claim.² Upon remand the issue was submitted to the district judge upon the existing pretrial order, stipulations of fact, and the briefs. The trial judge granted appellees' motion for summary judgment and denied appellant's. This appeal followed.

The trial judge's reasoning was that the purchase of the export certificates required under the Act was part of a scheme to regulate foreign and domestic commerce in wheat and was not a tax; therefore, Art. I, § 9, Cl. 5, was held to have no application to the program. We affirm. In doing so we have chosen to set out our reasoning at some length since a similar export certificate requirement is a feature of the current Act,³ and doubts about the constitutionality of a program so important to the economy should be promptly put to rest.

The constitutional significance of the purchase of export certificates required of appellant cannot be fully understood without some knowledge of the history, purposes and operation of the wheat marketing allocation program for the 1964-65 marketing year.⁴ The wheat marketing allocation program for 1964-65 is embodied in the Agricultural Act of 1964, 78 Stat. 173, at 178-183, amending the Agricultural Adjustment Act of 1938, 52 Stat. 31, and the Agricultural Act of 1949, 63 Stat. 1051, and in the regulations promulgated by the Secretary of Agriculture pursuant to the Act, 7 CFR §§ 777.2-778.12. The overall program was a continuation of the federal government's efforts to regulate farm production and marketing in order to guarantee an annual income for farmers on a parity with that of other segments of the economy.⁵

The 1964-65 wheat acreage controls and marketing quotas were in name voluntary. The Food and Agriculture Act of 1962, 76 Stat. 605, 626-631, had provided for mandatory acreage controls and marketing quotas, provided that at least two-thirds of the wheat producers voting in referendum favored the controls. However, over a third of those voting did not favor the controls proposed. The Secretary, therefore, determined that mandatory wheat marketing quotas would not be in effect for the 1964-65 marketing year.⁶

In light of this situation President Johnson recommended to the Congress a voluntary production and marketing program to take place of the rejected quotas. The need for this program was based upon estimates that without some supplementary program wheat producers would receive "between $500 million and $700 million less in 1964 than they did in 1963."⁷ In his message to Congress the President asked for a program which would raise the income of wheat farmers, avoid increases in budgetary costs, maintain the price of wheat at a level which would not increase the price of bread to the consumer, and enable the United States to discharge its responsibilities and realize the benefits under international wheat agreements.⁸ The congressional response, after detailed hearings and debate,⁹ was Title II of the Agricultural Act of 1964, 78 Stat. 178.

Under the terms of the Act wheat farmers who chose to submit to the Secretary's acreage controls became eligible for domestic and export wheat marketing certificates.¹⁰ The quantity of each variety of certificate in circulation and the number that each cooperating farmer was to receive was determined by a rather complicated formula,¹¹ the substance of which is: The Secretary first estimated how much wheat in the relevant crop year would be sold for processing into food products for domestic consumption and how much would be exported in the form of wheat or wheat products. Then he determined the percentage of the total amount of this wheat that would have to receive certificate support in order to meet the price and income objectives of the Act.¹²

The cooperating farmer then received a quantity of certificates based on the projected yield of his acreage allotment, the Secretary issuing domestic certificates for the portion of the approved crop that he estimated was bound for domestic use, and export certificates for the portion that he estimated would go into export. In the year here involved the Secretary estimated that 90 per cent of the wheat which would be marketed should be certificate-supported and that half would go to domestic consumption and half to export. Cooperating farmers therefore were issued domestic certificates on 45 per cent of their approved yield and export certificates on 45 per cent. The certificates were issued at one per bushel of projected yield, and a face value was set on each variety of certificate. The Secretary decided, in line with the broad guidelines of the Act,¹³ that domestic certificates should have a value of 70¢ and export certificates 25¢. The farmers received their subsidy by selling these certificates to the Secretary's agent, CCC, or to those required to purchase the certificates under the Act. Those required to purchase certificates could buy directly from a cooperating producer or from CCC.

The purchase requirements of the Act were contained in section 202(16), which provided that: "During any marketing year for which a wheat marketing allocation program is in effect, (i) all persons engaged in the processing of wheat into food products shall, prior to marketing any such food product or removing such food product for sale or consumption, acquire domestic marketing certificates equivalent to the number of bushels of wheat contained in such product and (ii) all persons exporting wheat shall, prior to such export, acquire export marketing certificates equivalent to the number of bushels so exported. In order to expand international trade in wheat and wheat flour and promote equitable and stable prices therefor the Commodity Credit Corporation shall, upon the exportation from the United States of any wheat or wheat flour, make a refund to the exporter or allow him a credit against the amount payable by him for marketing certificates, in such amount as the Secretary determines will make United States wheat and wheat flour generally competitive in the world market, avoid disruption of world market prices, and fulfill the international obligations of the United States. * * * Marketing certificates shall be valid to cover only sales or removals for sale or consumption or exportations made during the marketing year with respect to which they are issued, and after being once used to cover a sale or removal for sale or consumption or export * * * shall be void * * *."

Several important features of the program should be noted. First, the number of marketing certificates is limited once the Secretary determines the extent of subsidization needed to meet the price and income objectives of the Act. The Secretary is not authorized simply to print certificates to provide funds for subsidy, nor is he authorized arbitrarily to set the face value of the certificates, although the Act allows necessary discretion for the initial determinations. Finally, the certificates are voided on use; and, thus, the exclusive relationship to the price and income objectives of the Act cannot be destroyed by continued buying and selling of certificates. In general, what the marketing side of the program established was the setting of wheat prices by requiring the purchase of a fixed number of marketing certificates at a fixed face value. The exact price of wheat of course was determined by the interplay between this program and the free market.

The export certificate portion of the marketing program provided for an adjustment of the certificate price after export so that exports would be encouraged, but the basic purchase requirement remained so that exporters could not undercut wheat prices established by treaty.¹⁴ Refunds on export certificates varied from day to day, depending on the international price of wheat. The record indicates that on numerous occasions the Commodity Credit Corporation actually paid...