Peony Park v. O'MALLEY, 15266-15274.

• Decision Date: 24 June 1955
• Docket Number: No. 15266-15274.,15266-15274.
• Citation: 223 F.2d 668
• Parties: PEONY PARK, Inc., Appellant, v. George W. O'MALLEY, Collector of Internal Revenue, Appellee. Geraldine L. WEBBER, Appellant, v. George W. O'MALLEY, Collector of Internal Revenue, Appellee. Glen WEBBER and Arthur F. Schmidt, Appellants, v. George W. O'MALLEY, Collector of Internal Revenue, Appellee. Blanche E. KING and Harry H. King, Appellants, v. George W. O'MALLEY, Collector of Internal Revenue, and D. V. Gordon, Director of Internal Revenue, Appellees. PAULEY LUMBER COMPANY, Appellant, v. George W. O'MALLEY, Collector of Internal Revenue, and D. V. Gordon, Director of Internal Revenue, Appellees. V. C. SLOAN and E. H. Sheffert, Appellants, v. UNITED STATES of America and George W. O'Malley, Former Collector of Internal Revenue for the District of Nebraska, Appellees. Robert L. FERGUSON, Richard D. Ferguson, Roberta Ferguson, William L. Ferguson, and Robert J. Ferguson, d/b/a King's Ballroom, Appellants, v. UNITED STATES of America, Appellee. Frank SCHAMP, Robert Schamp and Richard Schamp d/b/a East Hills Club, Appellants, v. UNITED STATES of America, Appellee. HOWELLS VOLUNTEER FIRE DEPARTMENT, a Corporation, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

223 F.2d 668 (1955)

PEONY PARK, Inc., Appellant, v. George W. O'MALLEY, Collector of Internal Revenue, Appellee.

Geraldine L. WEBBER, Appellant, v. George W. O'MALLEY, Collector of Internal Revenue, Appellee.

Glen WEBBER and Arthur F. Schmidt, Appellants, v. George W. O'MALLEY, Collector of Internal Revenue, Appellee.

Blanche E. KING and Harry H. King, Appellants, v. George W. O'MALLEY, Collector of Internal Revenue, and D. V. Gordon, Director of Internal Revenue, Appellees.

PAULEY LUMBER COMPANY, Appellant, v. George W. O'MALLEY, Collector of Internal Revenue, and D. V. Gordon, Director of Internal Revenue, Appellees.

V. C. SLOAN and E. H. Sheffert, Appellants, v. UNITED STATES of America and George W. O'Malley, Former Collector of Internal Revenue for the District of Nebraska, Appellees.

Robert L. FERGUSON, Richard D. Ferguson, Roberta Ferguson, William L. Ferguson, and Robert J. Ferguson, d/b/a King's Ballroom, Appellants, v. UNITED STATES of America, Appellee.

Frank SCHAMP, Robert Schamp and Richard Schamp d/b/a East Hills Club, Appellants, v. UNITED STATES of America, Appellee.

HOWELLS VOLUNTEER FIRE DEPARTMENT, a Corporation, Appellant, v. UNITED STATES of America, Appellee.

Nos. 15266-15274.

United States Court of Appeals Eighth Circuit.

June 24, 1955.

William J. Hotz, Omaha, Neb. (William J. Hotz, Jr., Omaha, Neb., was with him on the brief), for appellants.

Harry Marselli, Sp. Asst. to the Atty. Gen. (H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack, Robert N. Anderson, and George F. Lynch, Sp. Assts. to the Atty. Gen., and Donald R. Ross, U. S. Atty., Omaha, Neb., were on the brief), for appellees.

Before SANBORN, JOHNSEN, and VAN OOSTERHOUT, Circuit Judges.

VAN OOSTERHOUT, Circuit Judge.

The appellants, hereinafter called the taxpayers, have appealed from final judgments of the District Court, memorandum opinion reported in 121 F.Supp. 690, dismissing their petitions for refund of cabaret taxes assessed pursuant to § 1700 (e) (1), Title 26, U.S.C. 1946 Edition,¹ and paid. These appeals which involve common questions of law were consolidated by stipulation.

Each taxpayer operated a dance hall. Admission fees were collected from all patrons entering the dance halls, and tax on such admissions was paid pursuant to 26 U.S.C., § 1700 (a). Music for the dancers was furnished by a band. Tables, booths, and chairs were provided for the convenience of the dancers, and soft drinks, light refreshments, cigarettes, and other incidentals, including beer at some of the places, could be purchased for the usual prices of such articles. The Commissioner assessed and collected a cabaret tax upon such merchandise sold for the period from September 1, 1948, to November 1, 1951. Claims for refund were filed. The conditions precedent prescribed by 26 U.S.C. § 3772, had been complied with. The trial court had jurisdiction. 28 U.S.C. § 1340.

This court in Birmingham v. Geer, 8 Cir., 185 F.2d 82, certiorari denied 340 U.S. 951, 71 S.Ct. 571, 95 L.Ed. 686, had occasion to consider the applicability of the cabaret tax under the identical statute here involved and upon a factual situation strikingly similar to the facts in our present cases. The District Court in Geer v. Birmingham, D.C.N.D.Iowa, 88 F.Supp. 189, in an excellent and exhaustive opinion, very fully reviewed the legislative history of § 1700(e) (1) and reached the conclusion that dance halls charging admission and paying admission tax were not liable for a cabaret tax on incidental refreshments sold. In reviewing the Geer case, this court followed the reasoning of Avalon Amusement Corp. v. United States, 7 Cir., 165 F.2d 653, and held that the dance hall operator was taxable under § 1700 (e) (1) upon refreshments and incidentals sold to dancing patrons, although the prices of the items sold were not increased by reason of the entertainment furnished, and conceding that an admission tax had been paid on the gate admission collected. All questions pertaining to the applicability of the cabaret tax under circumstances such as are involved in these cases were carefully and fully considered by us in the Geer case, supra. Under the principle of stare decisis our decision in the Geer case fixes the rule to be followed in this circuit on the construction of § 1700(e) prior to the 1951 amendment thereto, unless there are cogent reasons for holding that the former construction was erroneous.

The taxpayers contend that this court in the Geer case failed to consider the case of Wilmette Park District v. Campbell, 338 U.S. 411, 70 S.Ct. 195, 94 L.Ed. 205. The district court in the Geer case cited the Wilmette Park case, at page 215 of 88 F.Supp. Thus it would appear that this court was fully advised as to the Wilmette Park case at the time of its decision in the Geer case. The Wilmette Park case does not support the taxpayers' position as the applicability of the cabaret tax statute was in no way involved. The court's holding was that an admission charge to a municipal bathing beach was subject to tax under § 1700(a) (1). The taxpayers rely upon a footnote at page 415 of 338 U.S., 70 S.Ct. at page 197, which in reciting various tax restrictions states, "Section 1700(e) imposes a tax of 5 per cent on amounts paid for admission, refreshment, service, or merchandise, `at any roof garden, cabaret, or other similar place furnishing a public performance for profit'; in such cases no tax may be imposed under § 1700(a)." It would appear that the court in the Wilmette Park case was by said statement only intending to refer to that part of § 1700(e) (1) which states, "No tax shall be applicable under subsection (a) (1) on account of an amount paid with respect to which tax is imposed under this subsection." There has been no attempt made in the cases we are now considering to impose a cabaret tax on the amount paid for admission at the gate. The tax on the gate admission was fully settled by payment of admission tax thereon. The taxpayers' liability for admission taxes is not involved in the present cases. We find nothing in the Wilmette Park decision which conflicts with our holding in the Geer case.

The taxpayers strenuously contend that section 404 of the Revenue Act of 1951,² 65 Stat. 452, is to be applied retroactively, that this amendment is a clarifying amendment and, as such, is to be considered as part of the original Act. Under the Act as amended there would be no cabaret tax due. The Commissioner recognizes that this is the effect of the amendment as to future transactions, as no cabaret taxes have been collected from dance halls such as those involved here for any period subsequent to November 1, 1951, which is the effective date of the amendment.

The trial court held that since the 1951 amendment was passed to avoid the construction placed on § 1700(e) by the Geer case, it could not be considered as a declaration of existing law and that it was intended to and did effectuate a change. We agree with the trial court.

The question of whether a statute operates retroactively or prospectively only is one of legislative intent. Amendatory acts are ordinarily prospective in their operation and will be so construed unless a contrary legislative intent, either express or implied, is clearly shown. Courts have evolved a strict rule of construction against retroactive application of a statute. 82 C.J.S., Statutes, § 432, p. 1005; 50 Am.Juris. 494, Statutes, § 478; Brewster v. Gage, 280 U.S. 327, 50 S.Ct. 115, 74 L.Ed. 457; Fullerton-Krueger Lumber Co. v. Northern Pacific R. Co., 266 U.S. 435, 45 S.Ct. 143, 69 L.Ed. 367; Girard Inv. Co. v. Commissioner, 3 Cir., 122 F.2d 843; Hassett v. Welch, 303 U.S. 303, 58 S.Ct. 559, 82 L.Ed. 858; Mogis v. Lyman Richey Sand & Gravel Corp., 8 Cir., 189 F.2d 130. In 2 Sutherland, Statutory Construction (3rd Ed.), § 3004, at p. 225, it is stated:

"The usual purpose of a special interpretive statute is to correct a judicial interpretation of a prior law which the legislature determines to be inaccurate. Where such statutes are given any effect, the effect is prospective only." Both the House³ and the Senate⁴ Reports on the 1951 amendment show that Congress was fully aware of the interpretation placed on cabaret taxes by the Avalon and the Geer cases, and that it was its desire to amend the statute to avoid the construction placed on the original statute by the courts. It seems clear that Congress knew that it was changing the former law as interpreted by the courts. There is nothing in the amendment or in its legislative history to warrant any inference that Congress intended the change to be retroactive. On the contrary subsection (b) of the amendment specifically provides that the amendment "shall be applicable only with respect to periods after November 1, 1951 * * *." We have examined the cases cited by the taxpayers. The cases furnish no support for their contentions. In Jordan v. Roche, 228 U.S. 436, 33 S.Ct. 573, 57 L.Ed. 908, the court found that bay rum was taxable under the original statute. Subsequent to a circuit court decision holding otherwise, Congress amended the statute to make clear that bay rum was taxable. It was urged that this amendment constituted a declaration by Congress that bay rum was not subject to tax under the original statute. In rejecting this conclusion the Supreme Court said, 228 U.S. at page 446, 33 S.Ct. at page 576:

"* * * The law was not the declaration of a new policy, but a more explicit expression of the purpose of the prior law, made necessary by the judicial construction of that law."

In the Jordan case the Supreme Court disagreed with the prior circuit court decisions which induced the amendment. In the present cases the amendment was intended to change the law as interpreted by the Courts of Appeals of this Circuit and of the Seventh Circuit. There has been no Supreme Court determination that the interpretations made in the Geer and Avalon cases are erroneous. Consequently, in our...