United States v. West Texas Cottonoil Co.

• Decision Date: 12 July 1946
• Docket Number: No. 11533.,11533.
• Citation: 155 F.2d 463
• Parties: UNITED STATES v. WEST TEXAS COTTONOIL CO.
• Court: U.S. Court of Appeals — Fifth Circuit

155 F.2d 463 (1946)

UNITED STATES v. WEST TEXAS COTTONOIL CO.

No. 11533.

Circuit Court of Appeals, Fifth Circuit.

May 21, 1946.

Rehearing Denied July 12, 1946.

Mary Connor Myers, Atty., Office of Solicitor, Department of Agriculture, of Washington, D. C., Brian S. Odem, U. S. Atty., and James K. Smith, Asst. U. S. Atty., both of Houston, Tex., for appellant.

John C. White and Milton K. Eckert, both of Washington, D. C., and Earl G. Stearns, of Houston, Tex., for appellee.

Before HUTCHESON, HOLMES, and LEE, Circuit Judges.

HUTCHESON, Circuit Judge.

The suit was for marketing penalties imposed by the Agricultural Adjustment Act of 1938¹ in respect of excess cotton disposed of in 1939 to the Government of France. The defenses were (1) that the cotton was not marketed but was requisitioned and hence was not subject to penalty; (2) that if it was marketed, the marketing took place in a foreign country outside of the jurisdiction of the United States and beyond the reach of its laws, and, therefore, was not subject to penalty.

The district judge, agreeing with the first defense that the cotton was not marketed within the meaning of the statute, gave judgment for the defendant on that ground.

Appealing on an agreed statement,² the United States is here insisting that the judgment was wrong and must be reversed. We agree.

While the cotton was in form requisitioned by the French Government, it was in fact bought by it under arrangements by which that government established a buying monopoly, not only as to cotton then on hand but as to cotton later imported. What occurred was not an involuntary sale under process where a person unwilling to sell was forced to do so. There was merely a complete mobilization for war of the resources of France and the heading up into one buyer of the many buyers theretofore available. In the same way afterwards in this country the United States became the greatest of single buyers. The fact that the price was initially set by GIRC and that it used the power of government to bring the cotton out for sale in no sense changed the controlling fact that the sale was for a price agreed to and accepted by the seller, and that in substance the transaction represents a voluntary transfer for a price agreed upon and not an involuntary and compelled one.

If, however, we could agree with appellee that the sale was a forced one, was involuntary and not voluntary, we could not agree that it would fall outside of the statute. The language of the statute is very broad. As originally enacted, it declared: "`Market' * * * means to dispose of by sale, barter, or exchange," 7 U.S.C.A. § 1301(b) (6) (A). Blackstone defines a sale to be "a transmutation of property from one man to another in consideration of some price", 2 Blackstone, 246. "A sale in the ordinary sense of the word is a transfer of property for a fixed price in money or its equivalent." Five Per Cent Cases (State of Iowa v. McFarland), 110 U.S. 471, at page 478, 4 S.Ct. 210, 28 L.Ed. 198, 200. A sale is no less a sale because it is made pursuant to a requisition.<sup>3</sup> In issuing regulations pursuant to the authority granted in the Act, the Secretary of Agriculture defined "sale" as meaning "any transfer of title to cotton by a producer to another by any means other than barter or exchange."<sup>4</sup> The 1940 Amendment of the Act did not, except by adding gifts, change, it merely clarified, the meaning of the word "market" as used in the original act. As amended, the definition reads: "`Market' in the case of * * * cotton * * * means to dispose of, in raw or processed form, by voluntary or involuntary sale, barter, or exchange, or by gift inter vivos."⁵ The report of the Senate Committee explaining the amendatory legislation shows that what was in question was not whether the act covered cotton sold to governments but whether "the term market as now used applies to a judicial or involuntary sale." Further, as appears from the report of the committee, the amendatory legislation was not, except by adding the words "gift inter vivos," intended to change or add to the original meaning. The intent was merely to more clearly declare it. The Secretary of Agriculture so understood the amendment and in subsequent regulations the only change he made in his definition of the word "sale" was to add the words "or by gift inter vivos."

Appellant's second defense that the sale took place in France and therefore beyond the reach of the marketing law entirely misapprehends the nature and effect of the law. It subjects the owner of the cotton to the penalty when the cotton is sold by it. Here the cotton was voluntarily sent abroad by the defendant to be sold. The price offered by the French Government was accepted and received by it here, and in addition defendant accepted and received from the United States an export subsidy on the same cotton. It is fantastic to say that the imposition of the penalty in this case gives extra territorial effect to the law. The penalty is not imposed in France, it is imposed in the United States on the owner of the cotton, a domestic corporation, which voluntarily sent its cotton abroad to be sold, and voluntarily here accepted and received the price for which it was sold. American Banana Co. v. United Fruit Co., 213 U.S. 347, 29 S.Ct. 511, 53 L.Ed. 826, 16 Ann.Cas. 1047, as its facts show, was an entirely different case from this. Indeed, the reasoning of the opinion makes it clear that the penalty here imposed falls in the United States on the seller here and is collectible.

Appellee presents a third defense, that the penalty as to the cotton in question constitutes a burden or duty laid upon exports in violation of the provisions of Art. 1, Sec. 9, Clause 5 of the Constitution, that "No Tax or Duty shall be laid on Articles exported from any State." If appellee were right in its claim that the penalty is a tax or duty on exportation, it would, of course, be right in its claim that such penalty cannot be laid. But upon no reasonable view can it be claimed that the excess cotton penalty is a tax on exportation. A penalty imposed on the marketing of excess cotton, it has for its object not the prevention or burdening of exporting, but the prevention of raising for market, and marketing, cotton in excess of the allotment. As to cotton, a great portion of it, whether sold on this or the other side of the water, moves in export trade. If the penalty is a tax or duty on exports, it is just as much a burden on the immense amount of it sold on this side for movement export as on the smaller part of it exported first and then sold on foreign markets. In suits under and in the decisions⁶ sustaining the act, no one has put forward the revolutionary contention now made. It may not be doubted that it was intended to have the penalty apply to all cotton whether sold for export or import, or whether sold in the United States or abroad. The act in terms makes provision for the purchaser collecting the penalty when the sale is made in the United States, and it is quite clear that unless the act had intended to reach all cotton equally, no matter where or when sold, it would have been quite abortive. It has been specifically held that the penalty is not a tax.⁷ Besides the...