Simmons v. United States

• Decision Date: 17 October 1962
• Docket Number: No. 18826.,18826.
• Citation: 308 F.2d 938
• Parties: Wilson SIMMONS, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

308 F.2d 938 (1962)

Wilson SIMMONS, Appellant, v. UNITED STATES of America, Appellee.

No. 18826.

United States Court of Appeals Fifth Circuit.

October 17, 1962.

Thomas R. Ward, Roland J. Mestayer, Jr., Meridian, Miss., for appellant.

Abbott M. Sellers, Acting Asst. Atty. Gen., Lee A. Jackson, Atty., Dept. of Justice, Louis F. Oberdorfer, Asst. Atty. Gen., Carolyn R. Just, Morton K. Rothschild, Attys., Dept. of Justice, Washington, D. C., Thomas R. Ethridge, U. S. Atty., Oxford, Miss., Hosea M. Ray, U. S. Atty., for appellee.

Before CAMERON and JONES, Circuit Judges, and DeVANE, District Judge.

CAMERON, Circuit Judge.

This is a suit by appellant, hereinafter referred to as plaintiff, to recover Federal manufacturer's excise taxes imposed upon him by the Internal Revenue Service for the year 1950 in the amount of $439.32¹ plus interest. Jurisdiction is invoked under the provisions of 28 U.S.C. § 1291.

Plaintiff is a resident of West Point, Clay County, Mississippi; is now and was during the year 1950 engaged in business under the registered trade name of B & M Company as a dealer in bamboo cane fishing poles. Plaintiff began this business in 1946 and has continued in it ever since. The bamboo poles were obtained from suppliers, some in the United States and some in other countries, particularly in Japan. At the beginning of his operation plaintiff employed only one or two persons on a part-time basis. Today his business employs approximately thirty persons on a full-time basis.

When plaintiff began this business in 1946, his operation consisted entirely of handling cane poles, which were sorted, selected, straightened and varnished. In the year 1950, observing that a market for inexpensive cane poles which were cut into sections and fitted with metal ferrules was available to him, he added this line of poles to his business. The purpose of the cutting of the poles is solely to make them more portable. There is no provision made on the poles for attachment of a reel.² They are regarded by the trade as cane fishing poles limited to the same use as are the poles which are not cut and fitted with ferrules.

At the time plaintiff entered into this additional activity, he consulted some of his competitors and his accountant in an effort to determine whether he should collect manufacturer's excise tax on these jointed poles. He was advised by his accountant and by one of his competitors who had employed counsel to confer with Mr. Walter A. Scott, Jr., the head of the Excise Sales Tax Division at Jackson, Mississippi, that he was not liable for excise taxes on this type of poles. Following this advice, he made no report of the quantity of jointed poles sold by him prior to 1958, when this matter was brought to a head by the Internal Revenue Department, as will be further outlined infra.

The manufacturer's excise tax was not at that time and is not today imposed on solid cane poles even if they are straightened, scraped and varnished. The Internal Revenue Department seeks only to collect taxes upon poles that are cut and fitted with ferrules in such a manner as they may be reunited into a solid bamboo cane pole.

When the suit was filed to recover the tax paid for the year 1950, plaintiff demanded a jury trial of the question as to whether the jointed bamboo fishing poles were in fact "fishing rods" within the meaning of § 3406(a) (1) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 3406(a) (1)³ and, therefore, subject to the manufacturer's excise tax. This demand was honored by the court and the case was tried to a jury. At the conclusion of the trial, the District Judge decided that no factual issue that could be submitted to a jury was presented and took the case away from the jury and disposed of it himself by granting a motion of counsel for the Government for a judgment in its favor. This action on the part of the court constitutes the first assignment of error.

The learned trial judge realized that he was, in directing the jury to find for the appellee, proceeding in a field where there was no decisive precedent:

"The Court: This is about an entirely new aspect of the tax law. * * * I cannot say that I am at all confident that my disposition of the questions that have been raised will even approach being correct. In fact, I feel as if I might have reached top dead center. * * *

"Gentlemen, it is my opinion that Congress did not delegate to laymen the responsibility for interpreting an Act of Congress, wherein the words `fishing rod\' was used. * * *

"It is further my view that Commerce Pacific v. United States of America in 9 Cir. 278 F.2d 651 is the most persuasive authority for this Court on the basic question of what this article in controversy is. I hold as a fact, and I find that, in my view, it is uncontradicted that this article in question is, within the contemplation of the statute levying the tax, a fishing rod and therefore taxable * * *."

The legal effect of the court's ruling is that, as a matter of law, Congress intended to include bamboo fishing poles such as plaintiff sold in the manufacturer's excise tax levied upon a large number of manufactured articles, typical of which are: "* * * football helmets, harness and goals, basketball goals and uniforms, golf bags and clubs, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fishing rods and reels, billiard and pool tables, chess and checkerboards and pieces, dice, * * *," etc.

In our opinion the court erred in holding that cane fishing poles such as appellant sold were included in the phrase "fishing rods and reels," or the subsequent phrase "fishing rods, creels, reels . . ." as a matter of law; and that, at least, reasonable minds might have differed as to whether the article before the court was a rod tested by what Congress meant by the words it used. We feel that the argument advanced by the Government before us as to the effect of Commerce-Pacific v. United States of America, 9 Cir., 1960, 287 F.2d 651, is spurious and that it doubtless had a great effect on the lower court in leading it to the conclusion which was reached.

What the Ninth Circuit said in its decision of Commerce-Pacific, Inc. is limited to the facts before the District Court whose decision it was sitting in judgment upon, reported in 175 F.Supp. 227, and to the issues presented to it by that appeal. The poles involved in that case were thus described by the District Judge (175 F.Supp. 228): "These articles come in from two to four sections that can be fitted together. Each section has string wrapped around the bamboo near the end not so here presumably for support purposes. At the end of the smallest section a metal loop is attached, where fishing line is to be tied or run through. The bamboo is treated with lacquer." Emphasis added.

The attitude of perplexity under which the District Judge labored is illustrated by his statement (175 F.Supp. p. 229): "When you come to the distinction between a fishing pole and a fishing rod, you run into a brick wall. Just when a pole becomes a rod or when a rod reverts to a pole to me appears to be an insoluble question."

Commenting on a case relied upon by appellant, the Judge then stated: "The Customs Court view was expressed in National Carloading Corporation v. United States, 36 Customs Court Reports 309 * * *. The Customs Court decided that for purposes of the Tariff Act of 1930, bamboo poles, with a single fitted joint and string wrapped around the bamboo for support, were not `fishing rods' but were `fishing tackle' * * *."⁴ The critical conclusion of fact reached by the District Court is set forth in these words (175 F.Supp. 229):

"At least the plaintiff has not overcome its burden of proving by a preponderance of the evidence that the articles involved were not `fishing rods\'. The rulings of the Commissioner of Internal Revenue are presumptively correct and I feel the evidence does not justify their disturbance." Emphasis added.

The District Court then went on (ib.) to hold, as an additional reason for its decision, that the burden was upon the taxpayer to show that he had not passed the tax on to the purchaser and that (page 230) the substantial evidence required to overcome the natural presumption that a tax was passed on was not introduced by the plaintiff. Again, the evidence was not sufficient to sustain the burden of proof — a very important consideration since, under 26 U.S.C.A. § 6416, such proof is a condition precedent to recovery.

The correctness of these two holdings of fact was all that was before the Ninth Circuit and that court was engaged solely in trying the correctness of those two findings. The legal effect of its holding was that the lower court's findings as to the facts were not clearly erroneous. What the Ninth Circuit held, interpreted in the light of what was before it, therefore, does not tend to support the action of the trial court here and not militate against the position of the appellant before us.

As to the second point decided by the District Court in that case, it is stipulated in the case before us that the appellant did not charge the tax or pass it on to the purchaser, and that the reason for this was in part that he relied in good faith upon the assurance of the ranking revenue officials readily available to him that, in their opinion, he was not liable for the collection of the tax.

And we are not called upon, as was the Ninth Circuit, to test the accuracy of the fact-findings, because in the case before us the jury, the fact-finders, were not permitted to pass upon the vital question which the district court, as fact-finder in Commerce-Pacific, decided against the taxpayer.

The lower court here held that there was no evidence sufficient to warrant submission of the case to the jury, and that alone is the question presented to us.

The appellant put on the stand two witnesses who were...