Transcript of Record — Rickert Rice Mills, Inc. v. Fontenot

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TRANSCRIPT OF RECORD

Supreme Court of the United States

Ed | OCTOBER TERM, 1935 “

. No. 578

A.B. DORE, PETITIONER,

| US. |

RUFUS -W. FONTENOT, INDIVIDUALLY AND AS

ACTING UNITED STATES COLLECTOR OF IN-

TERNAL REVENUE FOR THE DISTRICT’ OF

LOUISIANA ;

ON WRIT OF CERTIORARI TO TITE UNITED STATES CIRCUIT COURT

OF APPEALS FOR THE FIFTH CIRCUIT

PETITION FOR CERTIORARI FILED NOVEMBER 11, 1935.

CERTIORARI GRANTED ‘NOVEMBER 25, 1935.

«at eas

SUPREME COURT OF THE UNITED STATES _

OCTOBER TERM, 1935

No. 578

A. B. DORE, PETITIONER,

vs. :

RUFUS W. FONTENOT, INDIVIDUALLY AND AS

ACTING UNITED STATES COLLECTOR OF IN-

TERNAL REVENUE FOR THE DISTRICT OF

LOUISIANA

ON WRIT OF CERTIORARI TO THE UNITED STATES CIRCUIT: COURT

OF APPEALS FOR THE FIFTH CIRCUIT

INDEX

Page

Record from D. C. U. 8., Eastern Louisiana eo ecco sececeserecccccee s,. 1

Captiom ....ccccccereeceeeeeunn mannan nna ee '

J Bill of complaint .....ccccscssccucususeebeeweeuwaeteeneseeses 2

Exhibit “A”—Administrative Rulings Relating to the 1935

Southern Rice Production Adjustment Program.......... 27

Exhibit. “B”"—Gamteeet << csiucususeneuseernnedaseenesss 38

Exhibit “O’—Sectian Dh. «<< icvvcutvenedesiateeiesevessacs 48

ARBWEE 2 nccccccccccccvesccseceseecnben eee se5NeeeaN sess e8 ss 54

Motion to Ghamlen ....ccvsccccsnsucene pets eeebeebenscasens 56

Order consolidating all cases for purpose of trial............... 58

AM édavit of W. M. Mallh .occcececvtccauenpaneeeeetede cist tess 60

Affidavit of Homer L. Bruce...... abe cece cece eeceereereeeseeres ‘ 64

Joint affidavit of L. J. Bartel, R. F. Gould &°J. 3. a 75

D@CTCR oo oa ccccccvccictwaceuemeeaean ee enen aaa ananee aaeaas vt.)

Jupp & DetweEILer (INc.), PRINTERS, WASHINGTON, D. C., DECEMBER 6, 1935.

—7200-C oo

INDEX

. Record from D. C. U. S., Eastern Louisiana—Continued. :

Motion of plaintiff for injunction pending appeal and order de-

NED (5.05.5 eh 09055 OPEN CoN oo UN 5 68 Sa bed ee ch4 Ves 9 sd Ue.

Petition for appeal and order allowing same......... vevenseke

AOTRIIEGE GE GETGED occ cicccvesivveecess Cave etnies ER AVewe

Appeal bond ......... aeea PPETETILITT TTT Tiree eT

EY NE 6000066 660.0150 6 40 09 50 + 00k OEE NAS Cab ee ad ee hess Kaeeue

Clerk’s certificate .......... jenetestecdueeesse Deseessentes ene "

- Original

Proceedings in U. S. C. A., Fifth Circuit...... bceukeces keds 86

Motion for preliminary injunction pending appeal.......... 86

Order denying motion for preliminary injunction pending

GRRE ise OW 00 0:5 BSE Odes SUS ed se OTE COSTES CNET ERS 97

ee rss sh peacdobcoeuedweenesereedenys 98 .

Clerk’s certificate .....:...... .-+.. (omitted in printing).. 100

Order allowing certiorari ........... TET SCTE COTE TTT Tere 101

Page

‘94

UNITED STATES OF AMERICA.

DISTRICT COURT OFTHE UNITED STATES,

EASTERN DISTRICT OF LOUISIANA, NEW.

ORLEANS DIVISION.

No. 322 (In Equity).

A. B. DORE, Doing Business Under the Name of ©

THE DORE RICE MILL,

versus

RUFUS W. FONTENOT, INDIVIDUALLY AND

AS ACTING UNITED STATES COLLECTOR

OF INTERNAL REVENUE FOR THE DIS-

TRICT OF LOUISIANA.

Appearances:

Messrs. John P. Bullington, Homer L. Bruce and

Baker, Botts, Andrews & Wharton, Attorneys

for A. B. Dore, doing business under the name

of The Dore Rice Mill, Plaintiff-Appellant.

Rene A. Viosca, Esq., United States Attorney and

Robert Weinstein, Asst. U. S. Attorney, appear-

ing on behalf of Rufus W. Fontenot, Individual-

ly and as Acting United States Collector of

Internal Revenue for the District of Louisiana,

Defendant-Appellee.

APPEAL from. the District Court of the United States

for the Eastern District of Louisiana, to the

United States Circuit Court of Appeals for the

- Fifth Circuit, returnable within thirty (30) days

_ from the 29th day of October, 1935, at the City

of New Orleans, Louisiana.

TRANSCRIPT OF RECORD.

Pie OF COMPLAINT & EXHIBITS.

; ANNEXED.

Filed Oct. 25, 1935.

In the District Court of the United States, Eastern

District of Louisiana, New Orleans Division.

A. B: Dore, doing business under the name of The

; - Dore Rice Mill.

vs. — No. 322 In Equity..

Rufus. W. Fontenot, Individually and as Acting United

| States Collector of Internal Revenue for the Dis-

trict of Louisiana.

To the Honorable Wayne G. Borah, Judge of the

United States District Court, for. the Eastern: Dis-

trict of Louisiana:

Comes, now A. B. Dore, doing business under the

name of The Dore Rice Mill, hereinafter referred

to. as plaintiff and in the neuter singular, com-

plaining of Rufus W. Fontenot, individually and

as Acting United States Collector of Internal Revenue

for the District of Louisiana, hereinafter called de-

- fendant, and for cause of action shows to the Court as

follows:

1..

Plaintiff is a resident of and domiciled in Crowley,

Acadia Parish, Louisiana. The defendant is a citizen

of the State of Louisiana residing at New Orleans,

‘Louisiana, and is the duly appointed, commissioned,

qualified and Acting United States Collector of In-

ternal Revenue for the State of Louisiana. .

The grounds of jurisdiction of this Court in this

case are that this is a suit arising under the Constitu-

tion of the United States and the laws of the United

States, in of the United States and the laws of: the

United States, in which the matters in controversy

exceed Three Thousand Dollars ($3,000.00), and this

suit is also one in which an injunction is sought against

an official of the United States to prevent him from

unlawfully collecting processing taxes levied by the

United States pursuant to certain acts of Congress,

more fully set out hereinafter, and to have declared in-

valid and unconstitutional said acts of Congress in so

far as they attempt to provide for the levy, assessment

and collection of said processing tax.

Plaintiff is engaged in the business of milling rice

and owns and operates a rice mill at ‘Crowley,

Louisiana. The milling of said rice, which constitutes

processing of said rice under the terms of the Agri-:

cultural Adjustment Act, hereinafter referred to, is

done wholly ‘within said State and is a miatter of

intrastate commerce exclusively, being performed in its

entirety within the limits of said State wherein plain-

tiff’s rice mill is established and operated.

There was adopted: by the 73rd Congress “id ap-

proved on May 12, 1933, an Act, P. L. No. 10, popular-

ly known as the “Agricultural Adjustment Act, but

officially entitled:

“An Act to vibes the existing national Economic

emergency by increasing agricultural: purchasing power,

to raise revenue for extraordinary expenses incurred by

reason,of the emergency, to provide emergency relief

with respect to agricultural indebtedness, to provide for

the orderly liquidation of joint stock land banks, and

for other purposes.”

and said Act with its nina for convenience

hereinafter, will be referred to by its popular title,

namely, the Agricultural Adjustment Act. :

Said Agricultural Adjustment Act has been amended

several times and particularly by an amendment ap-

proved August 24, 1935, which amendment is herein-

after referred to as the Amendment of August 24, 1935.

*”

The policy to be effectuated by th¢ enactment of

said Act, prior to the Amendment of August 24, 1935,

_ was declared by Congress in Section 2 to be as follows:

“Tt is hereby declared to be the policy of Congress—

(1) To establish and maintain such balance be-

- tween, the production and consumption of argicultural

commodities, and such marketing conditions therefor,

as will reestablish prices to farmers at a level that

will give agricultural commodities a purchasing power

with respect to articles that farmers ‘buy, equivalent to

the purchasing power of agricultural congnodities in

the base period. The base period in the case of all

‘agricultural commodities except tobatco shall be the

prewar period, August 1909-July 1914. In the case

of tobacco, the base period shall be the postwar period,

August 1919-July 1929.

(2) To approach such equality ” purchasing power

by gradual correction of the pas inequalities there- .

in at as rapid a rate as is deemed feasible in view of

the current consumptive demand in domestic and

foreign markets.

(3) To protect the consumers’ interest by readjust-

ing farm production at such level as will not increase

the percentage of the consumers’ retail expenditures

for agricultural commodities, or products derived there-

from, which is returned to the farmer, above the per-

centage which was returned to the farmer .n the pre-

war period, August 1909-July 1914.”

By said Amendment of August 24, 1935, Subsection

(1) of said Section 2 was amended by inserting at

the beginning thereof the words

“Through the exercise of the powers conferred upon

the Secretary of Agriculture under this title.”

and Subsections (2) and (3) were stricken out and

the following inserted in lieu thereof:

“(2) To protect the interest of the consumer by

(a) approaching the level of prices which it is de-

clared to be the policy of Congress to establish in

subsection (1) of this section by gradual correction

of the current level at as rapid a rate as the Secretary

_of Agriculture deems to be in the public interest and

feasible in view of the current ~consumptive demand

in domestic and foreign markets, and (b) authorizing

no action under this title which has for its purpose

the maintenance of pricés to farmers above the level

which it, is declared to be the policy of Congress to

establish in subsection (1) of this section.’

Plaintiff alleges that under no provision of the.

Constitution of the United States is the Congress of

the United States authorized to provide for said pro-

cessing taxes for the. purpose of accomplishing any of

said policies above set forth, and the levy, assessment

and collection of said taxes have been provided for in

said Act, not for the purpose of raising revenue, but

for the purpose of accomplishing the things, set out

in said declaration of policy’‘of Congress and for said

‘reasons the levy, assessment and collection of ‘said

taxes are wholly illegal, unlawful and unwarranted

under the Constitution of the United States.

. 6.

Section 8 of said Agricultural Adjustment Act pro-

vides in substance that, in order to effectuate the de-

clared polic,; of the Act, the Secretary of Agriculture

shall have power to provide for a reduction and ad-

justment in the acreage and production for market, or

both, of any basic agricultural commodity, including

rice, through agreements with producers or by other

voluntary methods, and to provide for rental or bene-

fit payments in connection therewith, in such amounts

as the Secretary finds best calculated to effectuate the

declared policy of the Act, to be paid out of the moneys

hereinafter referred to.

Section 9(a) of said Agricultural Adjustment Act

levies the processing taxes th®reinafter provided. It

then provides that when the Secretary of Agriculture

determines that any one or more payments (including

- said rental or benefit payments) authorized to be made

under’ Section 8 of said Act or to be made with

respect to any ic agricultural commodity, he ‘

shall proclaim (sucPh\. determination and a_ pro-

cessing tax shal be in effect with respect to such

commodity from the beginning of the marketing

. year therefor next following Phe date of such proclama-

tion. Said Act, however, ‘provided that with ,respect

to rice the processing tax for the period from April | 1,

1935, to July 31, 1936, should be at the rate of Ic

7 .

per pound of rough rice. “ Under a similar provision of

said Act before being amended by the Amendment of

August 24, 1935, the Secretary. was directed to pro-

claim, dnd did proclaim, before April 1, 1935, that

rental or benefit payments would be made with re-

spect to rice and the processing tax of Ic per pound

of rough rite would be in effect on and after: April

1, 1935.

Section 9(b) of said Agricultural Adjustment Act

provides that the processing tax shall be at such rate

as equals the difference between the current average

farm price for. the commodity and the fair exchange

value of the commodity, as those terms are defined in

the Act, plus such percentage of such difference, not

to exceed 20 per centum, as the Secretary may deter-

mine will result in the collection. in any marketing

. year of an amount of tax equal to (A) the amount

_ of credits or refunds which he estimates will be allowed

during such period with respect to the commodity

and (B) the amount of the tax which he estimates

would have been collected during such period upon all

processings of such commodity exempt from tax be-

cause such processings are done by or for a State or

a political subdivision or an institution thereof, except .

that the processing tax on. rice for the period above

weed should be at the rate of Ic per pound of

rough rice.

Section 12(a) of said Act, prior to the Amendment

of August 24, 1935, appropriated the sum of $100,- ©

000,000.00 to be available to the Secretary of Agri-

culture for administrative expenses under Title 1 of

said Act and for: rental and benefit payments made

with respect to reduction in acreage or reduction in

production for mafket under Part 2 of said Title 1.

Section 12(a) of said Act, after said amendment, ap-

propriated the said sum of $100,000,000.00 to the

Secretary for administrative expenses under Title 1

and for: payments sided to be made under Section ©

, including said rental and benefit payments made

with respect ta adjustment and reduction in acreage

or production for market of basic agricultural com-

modities, including rice.

Sectior i2(b) of said Act, prior to said Amend- =f

“ment of August 24, 1935, provided that, in addi-

‘tion to said $100,000, 000.00, the proceeds derived

from all processing taxes imposed under said. Title

1 wergy appropriated to be available to the Secre-

tary of Agriculture for expansion of markets and re-

_ moval of surplus agficultural products and adminis-

trative expenses, rental and benefit payment ~

refunds on taxes.. Section 12 (b) of said Ac

amendeg by said Amendment -of August 24, 1935, ag

vided that, in addition to said $100,000,000. 00 a further

sum was appropriated to be available to the Secretary

of Agriculture for payments authorized to ey) be made

urider said Section 8, including said-rental and benefit.

_ payments, said sun,_so-appropriated to be equal to the

proceeds derived. from all processing taxes imposed

uggJer said Act.. :

/ ; : a

Acting. pursuant to, the purported authority given

to him under said Agricultural Adjustment Act, the

Secretary of Agriculture. under date of April 18, 1935, ‘a

through R. G. Tugwell, the then acting Secretary of

Agriculture, promulgated certain rulings relating to the .’

1935 Southern Rice Production Adjustment Program,

a copy of which rulings is’ attached hereto as Exhibit A

— a part hereof as: if fully copied herein at ~

Ai yint.. Under said rulings the Secretary of Agri-

culture allotted acreage to be planted in rice and bar-

rels of rice to bé produced, (a barrel being defined as

being. one hundred sixty-two pounds of — rice)

‘in. the ‘States of- Arkansas, Louisiana and. Texas as

follows:

Acres. Barrels.

Arkansas ..... 135,000 1,834,722:

Louisiana .... 364,500 3,898,333

| 142,500 2,010,833

Said rulings provided for a State Committee veils

by the Secretary of Agriculture for each State and

for various forms and applications to be filled out by -

‘those desiring, tg produce rice and to be filed with the

. said State Committee. Said rulings provided: that the

base period for. Texas should. be thé years 1,931 to 1933,

inclusive, and for Arkansas and Louisiana should be

the years 1929 to 1933, inclusive. Said rulings furthe

provided that the said State Committee should- mak ke

an. allotment to.a producer applying to the Secretary

of Agriculture ‘through we State Committee for

_ permission to grow rice during the year 1935, by taking

the average acreage planted by: such producer during

the base period applicable. to him and by. reducing

this result by 20% in Arkansas and in. Louisiana

and by 22% in Texas; and should givé an allot-

ment or permjssion to ‘said producer to plant said

80%—(in the case of Arkansas and Louisiana)

or» 78% -.(in the case of Texas) of ‘the avet-

' age acreage planted by him during said base period.

Said rulings further provided for’ said State. Com-

mittee to allot to each such producer a quota of barrels

of rice that he might produce during the year 1935 by

allotting to him 80% (if iv Arkansas or Louisiana)

or 78% (if in Texas) of tne average number of bar-

rels of rice, raised by him during said base period.

Ifa producer had produced rice during any of the

- years constituting his ‘base period, he was eligible to-

obtain an allotment.and a quota from said State Com-

mittee, and if he should obtain such allotment and

quota, he was then eligible-to execute a contract. with

the Secretary of. Agriculture in the form shown by

Exhibit B attached hereto and made a part hereof for-

_all purposes as if copied in full at this point. . If said

producer exécuted said’ contract and it was accepted

by the Secretary, he was then eligible for the benefit

payments to’be made by the Secretary as provided for

in said, agreement. However, if a. producer had not

produced rice during any of the years constituting” his

base period, he was not eligible to execute said contract

with the Secretary and was not eligible for the benefit

‘payments ‘provided for therein. ’ Likewise, if a producer

did not execute such contract, or if he executed such

contract and it was not accepted: by the Secretary, he

_ was not eligible for the benefit payments ‘as. provided

‘for therein. é

Plainti ££ allagac tha+ eas menaranceins +$aerna- <s

LGidiliii Gi itmro LssGAtL Gai Mi vrevcooiiizé- iaGATS wecic indi

levied under the taxing power of the United States

and for the purpose of raising revenue, P ey were levied

‘for the purpose of raising money with which the Secre--

tary of Agriculture could make rental or bénefit pay-

ments to producers of agricultural products, including

rice, and for the -purpose of controlling, regulat-

ing, and reducing the Amount of acreage that

would ‘be planted to rice And the amount of rice

~ that would be grown, and to accomplish the pur- ~

poses set out.in Section 2 of said Act’ and that the.

Congress of the United States had no authority under:

the Canstitution of the United States to levy said pro-

cessing taxes for said purpose and for said objects. °

, ri & P

8 . .

° & ‘Be P

Section 8 further provides that, in order to

effectuate the declared policy of. the Act, ‘the Sec- ~

retary is empowered to provide for a_ reduction

in acreage-or a reduction in. production of any

basic agricultural commodity through agreements with

producers, and. to ‘provide for rental or benefit pay-.

ments in connection therewith in such’ amounts as

the Secretary deems fair and réasonable, but there. is

n@ standard or measure estabfished or provided i in said

Act*by® which the: said Secretary shall be guided in.

providing for’satd reduction in acreage or production

-or in the amount

and ‘said provisio

of Article 4 of

{ the, rental or. benefit payments,

are wholly invalid and violative

Constitution of ‘the United States

which vests all gfe legislative power in the Congress

of the United “ and is an invalid’ and uncon-.

-stitutional delegation of legislative power by Congress

to the Secretary of Agriculture.

Plaintiff further allegés that the Secretary has made

no findings -whatsoever, and if he has made any such

finditivs, they are wholly insufficient to support his

‘action i in providing said method of reduction of acre-

age and production of rice as above set forth; and his

said regulations: and-provisions concerning said reduc-

tion of acreage and reduction of. production . and

amounts of benefit payments are wholly arbitrary and

unsupported by any findings, or.at least any sufficient -

findings, by the Secretary of Agriculture and -are not

_ authorized by said—Act or the Constitution ~ of the

United States.

rey

9. |

ic. * s . g it e

Section 9(b) of said Act provides that if the Secre-

tary of Agriculture has reason to believe that the pro-

cessing tax levied on any commodity will. cause such —

reduction in the quantity of such production domestic-

ally consumed as to result in the accumulation of sur-

plus stock thereof or in the depreciation of the.farm

price of ‘the commodity, then he ‘shall cause an in-

vestigation to be made on due notice and opportunity

for hearing to interested parties, and if thereupon the

: =

Secretary finds that such result will occur, then the

processing ‘tax:on such commodity shail be at such

rate as will. prevent such accumul gtion of surplus stock

and depreciation of said farm price. Said provision

applies to the processing tax lewied upon rice. Said

provision sets no proper standard by which the: Secre-

tary shall be guided in determinifig the rate of the

processing .tax an rice- or how long said tax of one

cent (Ic) per pound shall remain om rice, gnd the

continuation of said processing tax being dependent )

upon said action by the Secretary, said provision is an

unconstitutional delegation of legislatave power to the °

Secretary of Agriculture in violation of Article 1 of

said Constitution vesting the legislative power in the

Congress, and for said reasons the said Act ih levying |

said processing tax is void and illegal.

10,

In addition to the foregoing reasons, the said “Agri-

cultural Adjustment Act and «its provisions: fof the

levying, assessment and collection of said processjng -’

taxes lipon- rice processed by this plaintiff’ ‘are void,

illegal and ¢in violation of the Constitution of the

United States for the following reasons:

1: They: are an sttempe and effort’ by the United

States to regulate, control and reduce the production of |

certain. agricultural commodities specified in said- Act,

including rice. .The so-called processing taxes im-

posed by said Act are an integral part of the. scheme,

attempt and effort of regulating, controlling and reduc-

ing the production of such commodities, which attempt,

effort and scheme is not within the scope of any of the

powers vested in the’Congress by the Constitution, and

if said power exists as a governmental function,; it is

‘therefore within the powers reserved to the States as

expressly ‘provided by the Tenth’ Amendment to the

Constitution. ~

2.° The so-called processing taxes were not imposed

-under or in conformity with the power vested in the

Congress by, Section 8 of Article 1 of the Cgnstitution

to levy and collect taxes, duties,*imposts and excises,

‘im that they are not imposed to pay the debts or to.

provide for the common defense or the general welfare

_ of the United States, but were imposed for the benefit

‘of a particular class of individuals, namely, the pro-

ducers of the various agricultural corhmodities speci-

‘fied in said Act who conform to the conditions laid

‘down in said Act. ;

3. The said Act and provisions for the levy, assess-

ment and collection of said processing taxes violates

the provisions of the Fifth Amendment to the Cén-

stitution since the so-called processing taxes.constitute :

the deprivation of the property. of one class of citi-

zens; including the plaintiff, mauiely, processors of

said specified commodities, including rice, without |

due process of law, in that such processing taxes

constitute the taking of the property of this class of

citizens, including the plaintiff, not for a public pur-

_ pose but for a‘private purpose, to-wit, the payment of ©

gratuities or bounties or benefit payments to another

class of persons, namely, the producers of the desig-

riated agricultural commodities, including “rice, and

_ particularly since this taking is without just com-

pensation to the plaintiff and said processors. » .

4. Said so-called processing taxes levied. by the--

Act are taxes in name only and not in fact. They

constitute merely an exactment and imposition by

the Government for the purpose, not of raising

revenue for the support of the ‘government, but

of raising the price for farm products and. ad-

justing farm income and for carrying -out the

policy of said Act as. hereinabove set forth and’ forothe

purpose of enabling the government to carpy’ out and

effectuate the said attempt, .effort and scheme of the -

United States as hereinabove set out¢ ) |

, ON

és

. , : mn SNE +4 Pe Ras ii a as AN AR Stites

PALIN NE TLL PELTON LIOR PONE EET PN Be ra a i ae Se Cape -

14.

5: Under the terms of Article 1, Section 1, of the

* Constitution df. the- United States, the. legislative

powers granted to the Federal Government are vested

‘ein the Congress ; whereas, the said Act purports to vest

powers in the Secretary “of Agriculture, who alone is

to determine, at his own discretion and without any

‘definite standard fixed by Congress, the method of °

bringing about a reduction or adjustment in acreage

* and’ production of agricultural commodities; including

rice; to provide for rental or benefit payments in con-

nection: therewith. in sug) amounts as’ the Secretary

may deem fair and reasonable; to determine how: long

~ the said tax of lc per pound upon the processing. of

rice shall remain in effect, and if the Secretary changes

said rate, what rate shall be-fixed. In said respects

the said Act involves an invalid delegation to the

Secretary of Agriculture by Congress of powers vested

exclusively in it by the Constitution and because ot

said things the said Act delegates said legislative

‘powers to the Secretary of Agriculture and said powers

are conferred exclusively on Congress by said Article

1, Section 1; Article 1, Section 8, clause 18; Article

11, Section 1: Article’ l, Section A clause 1; and

Article 1, Section | 9, clause 7 of the Constitution:

6. The said taxes if construed as direct, violate

Article 1, Section 9,’clause 4, and Article # Section 2,

clause 3 of the Constitution,” because not apportioned’

according to population. ; .

7.’ The said taxes are not excise taxes, and are not

uniform throughout the United States as required by,

Article 1, Section 8; clause 1.

8. The said aliiged taxes cannot be levied under

Article'1, Section 8, clause 3, reguldting commerce,

‘because neither the production nor processing of com- -

modities, including the processing of rice done by plain-

tiff, is in interstate commerce and cannot be regulated

‘° 15

by Congress and in $o far as this plaintiff is concerned,

its processing of said rice is not interstate commerce

and cannot be regulatéd by Copgress.

. | .- §t ) se aoe.”

Under the terms, of said Act and orders of the

Secretary of -Agriculture and the Secretary of the

Treasury, the plaintiff is required-to file-returns withe .°

the defendant on or before the 30th day of October,

_ 1935, showing #®e amount’ of rice processed by the

plaintiff during the’ month of September, 1935, and

the amount of said so-called processing tax on ac-

' ‘count of’ said rice processed by the plaintiff during

said month, and plaintiff is. required to’ pay said

amount to ‘the defendant on or before October 30,

1935. The amount of said Processing taxes on account

- of the rice processed b by the plaintiff during sard month

_ . of September is $18,545.65.° The defendant as. said:

Collector of Internal Revenue is charged with the duty

of collecting said tax, and if the plaintiff does not make

said payment on or ‘before October 30, 1935, the said

defendant will assess said tax against the plaintiff ‘and |

will serve upon the plaintiff notice and demand for’ 4

the payment of said tax, and the plaintiff will be al-

lowed ten days from the receipt of such notice and

demand within which to pay said tax. In the event

of failure to pay said tax age said time, the defend- ©

-ant will assess against the plaintiff a penalty equal —

to 5 per centum of the amount of the tax and interest

on the tax at the rate of 1 per centum from the due date

of the tax until‘it is paid; if plaintiff fails to pay said

tax within the ten days after receipt’of said notice and

demand, the defendant will proceed to. collect the tax, »

penalty -and interest by filing a notice of lien upon

all of: plaintiff’s property, and by distraining upon and

selling such of plaintiff’s property as may be necessary |

: in order to realize the amount of said tax, penalties and »

interest. Additional processing taxes for the mor ths sub-

4 ‘ ? ,

sequent to September, 1935, will accrue and will be '

assessed against and collected from plaintiff, just as

the processing tax for the month of September will be,

in the’ manner described, unless the defendant is re-

_ strained and enjoined from assessing and collecting said

taxes. Plaintiff has its rice’mill at the place stated in

paragraph’ 3 hereof with a large invéntory of rough

rice and clean rice, bank accounts and cash on hand.

Repeated levies upon and distraint of its property from.

month to month svill cause plaintiff irreparable injury

and *damage, in that such levies and .distraints: will

impair the valuable‘good-will of its business; will sefi-

_ pusly interfere with, if not prevent, the actual opera-

tions of its plant’ and the sales ‘of its’ prdduct; and

will result in a permanent injury to its business and

good-will. Furthermore the tax, if once paid by

plaintiff, will be irretrievably lost to plaintiff, to its

great and irreparable injury.

12.

Plaintiff further shows that by the Amendment of

August 24, 1935, Section 30, of said amendment added.

a new section to the Agricultural Adjustment Act

designated as Section 21, a copy ‘of which Section 21

is attached hereto and marked Exhibit C. Plaintiff

does ngt have an adequate and complete remedy at

law as to taxes levied and: ‘assessed under said Act "

because of the provisions of Section *21(d) .of said

Agricultural AdjiStment Act. Under Section 21(d).a

poechie # -Wwill not be allowed to the plaintiff for any:

amount*of the tax paid by-plaintiff unless it shall be

_established that the plaintiff has not directly or. in-

directly included such amount in the: price of the ricé¢

with respect: to which it-was imposed ,or passed on any

part of any such amount to the vendee, or included. any

part of such amount in the charge’ ‘or fee for processing,

and that the price paid. by the plaintiff for rough rice

was not reduced by any part of such amount.

Plaintiff states that it .is an impossibility to prove

Or attempt to prove what portion, if any, of the pro-

cessing taxes paid by ft has been either deducted fron?

he purchase price of rough rice or added to the sell-

“mg price of clean rice for the following reasons:

v e ” be

Riceunillers buy rough rice at the sain price,

“a price that is established by the competitive .bidding

of the many rice millers. Rough rice is bought in large

- quantities and kept on an average of several months

before the clean rice made from it is sold, and because

of said facts the miller has no way of definitely know-

ing at the time of the purchase of rough rice whether

he will make a profit or loss gp the milling and selling

‘of rice. A major factor in determining the market

price of rough rice is the market price.of clean rice

at the time the rough rice is bought but there is no

assurance, however, that the market price for clean rice

will be. the same at the time-the miller actually ‘sells

the clean ricé milled from the rough rice.

The miller who buys rough rice’ must pay, the

market price as established under these conditions,

and has no ‘power to fix or.mak¢ the market price

himself. Having no power to make prices, he cannot

‘ arbitrarily depress the market price of rice in order

to pass the processing tax back to the producer.

Likewise, the miller sells the clean rice in com-

petition with many other rice millers, and also in com-

petition wrth many other food products, such as wheat,

potatoes, beans and other food products, that can be

substituted for rice. ‘Under such circumstarfces, if the -

price of clean rice is pushed too high, consumers

will shift to other’ products with the .result that

the demand for rice will decline ‘until the price

of rice falls to where people will buv it instead

of other competitive commodities. Under these

circumstances the rice .miller cannot fix or make

—_ wa ~— -

eee

- . Polish, bran and hulls aré sold g

18°

the. price for clean rice, and cannot arbitrarily increase

the price of clean rice in order to pass the processing

tax on to the purchaser of. clean rice.

in addition, rough rice when ‘gia produces many

grades of rice and products thereof. It produces extra

fancy head rice, fancy head rice, head rice, second

head rice, screenings, brewers, polish, bran, and hulls,

all of which commodities have varying values, extra

fancy rice being the most valuable and the other " erades

being of less value in the order above set forth. - xtra

‘fancy, fancy, head and second head rice are generally

sold for human consumption as rice. Screenings are

sold to some extent for direct consumptvon by. human

beings. Brewers and screenings are & very low priced

commodity and are used in geneyal by breweries.

nerally: for stock

feed. Some of such products, partfeularly brewers,

polish, bran and hulls are sold practically always for ~

a less price per pound than is paid ‘for the rough rice

per pound. There is no definite proportion by which

the price paid: for rough rice can be allocated in any

way to these different grades of rice, so that it is im-

‘possible to~tell with any degree “of accuracy yhow

much the rice and rice products that have iin pro-

duced from any particular lot of rough rice have cgst,

making it impossible to tell what amount of the pro-

cessing tax. if any, has been passed on to the pur-

chaser of these articles.

Furthermore, the processing tax is levied upon >the

first processing ‘of the’ rough rice and mustbe paid

by the end of the calendar month following the month

in which,the processing occurred. On the other hand,

when a lot of rough rice has been processed in ahy

month, some of the grades may be sold immediatel

whereas some of the other grades produced from sai

rice may be kept for several months before being sold, \

and it is thus impossible to tell how much has been \_~

NN ee

received for the clean rice and its products that are

produced from any ‘month’s processing, afnd it is .im-

possible to tell how much, if any, of safd processing

tax has been passed on to the ‘purchaser of said clean

rice. | |

Indeed, it is eee even to pen whether,

_ for any,given month, the mill.operations have resulted =

in a gain or loss and it is only at the end of the

_ season that a gain or loss for the season can be de-

termined.

In addition, in the’ cost of rough rice:~processed

during any month, there is an additional item

of the cost of the milling of such rice. The,

cost of milling rice depends upon many factors so

that it is impossible to determine what has actually .

been the cost of milling any particular lot’ of rice..

“There are many varieties of rice, some of which have

longer grains than others. Different processes of

milling must be used for each different kind and

variety of rice, and where the plaintiff. and other

millers: have on hand varied and sundry varieties

and kinds of rice it is necessary in the operation of the

-mill to change quickly: from one kind of rice to an-

other as the milling of one lot of rice is completed and

the milling of another ‘kind begun. In addition, lots

of rice of the same variety’ will vary the.one from the

other due to the varying amounts of moisture in the

rice, varying conditions under which the rice was

harvested, and many other factors, which m@kes it

necessary to vary the operation of the rice mill in ‘many

respects, as between lots of:rice. In addition, the out-

put of a mill ine barrels per day varies because of all

these factors very considerably. Under all the cir-

cumstances, it is impossible for a mill to determine

the cost to it of the milling of any particular lot of

rice, which cost .must necessarily enter into a deter-

. 20

mination of whether in selling the clean rice it has

- included any part, or what part, of the processing tax

in the price for which it sells its clean rice and rice

products.

In addition, owing to the —s nature of the rice

business and the customary manner of selling rice

that prevails in the rice industry, it is impossible for

- the plaintiff and other rice millers to determine the

cost of any particular rice that has gone into the

clean rice that is covered by any particular sale. The -

clean ‘rice that is obtained from any particular lot

of rough rice is not sold in the trade by itself alone.

At the beginning of the season plaintiff and other

rice mills know approximately the different kinds of

4ice that they will have during the season. In the

early part of the season and as the season progresses,

plaintiff and other millers make ‘up samples of rice

of the kind that they have determined they will be

able to -supply dugjng the season. Owing to the

varied character of clean rice out-turn from roygh

rice, these samples are made up of mixtures of differ-

ent kinds of-rice. It has been found impossible to

make up such samples entirely of one kind of rice

from one lot of rough rice as it'is impossible to match

in any appreciable quantity a sample of one lot of clean

rice with another lot of clean rice. Clean rice is sold

on these samples and when an-order is obfained

for a given amount of clean rice of a certain

sample, the plaintiff and other rice millers then

find what different lots of clean rice they have

on hand which by mixing will produce the sam-

_ ples upon which the sale has been made. As a result,

when a sale of clean rice is made, the order is filled -

by.a mixture of clean rice which is made up from

many different lots of clean rice. These different

lots of clean rice have been milled from different lots

of rough rice for which different prices have been

paid. As a result the rice that goes into a clean

rice sale has come from many differentsources and has

been milled under many different conditions and it is

impossible to tell exactly the cost of such clean rice

under the circumstances. In addition, part of the

clean rice obtained from a lot of rough. rice may be

carried for many months and mixed on different sales

with innumeftble combinations of other lots of clean

rice so that it is)impossible to trace through the history

of rice processed during any month to determine what

price was obtained for it, whether it was sold at a

profit or a loss, and what part, if any, of the process-

ing tax has been passed on to the purchaser.

Furthermore, there is no way in which the cost of

a lot of rough rice can be allocated between the various

grades of rice and the various rice products produced

from such lot except by speculation for the use of

arbitraries. .

In short, it is impossible to determine, statistically

or otherwise, where the ultimate burden of the pro-

cessing tax falls—how much of it is paid by the con-

sumer, how much by the producer, or how much by

the processor.

In -view of the above facts, the purported remedy:

given by Section 21(d) of said Agricultural Adjust-

ment Act is wholly inadequate and is in fact.a statu-

tory denial of any legal remedy at all.

13.

In addition, the conditions imposed upon the right

of the plaintiff to recover taxes paid by it must,

under Section 21(d) be established to the satisfaction

of the Commissioner: of Internal Revenue, and no

provision is made for judicial review. The transcript

of the hearing before the Commissioner of Internal

22°

Revenue is the sole record of the case on appeal to the

Courts. The effect of such section is therefore to

limit the function of the judicial review to the deter- .

mination of whether there was any evidence submitted

to the Commissioner of Internal Revenue tending to

support the findings of the Commission. Said Section

21(d) therefore deprives the plaintiff of its property

without due process of law in violation of the Fifth

Amendment to the Constitution. $u ‘oa

° 14.

Under said Section 21(d) of said Agricultural

“Adjustment Act, if. the _processing tax has been either

passed on or passed back by the plaintiff, then the

plaintiff cannot maintain any action to recover the

tax, if it is ultimately determined to be invalid, either

for its own account or for the account of the persons

to whom the processing tax: has been thus passed on |

or passed back by the plaintiff; nor can the persons

to whom the processing tax has been thus. passed on

or passed back maintain such an action on their own

account, but all right of action by anyone to recover

the tax, if it has been passed on or passed back,

has been wholly taken away by. said amendments to

said ‘Agricultural Adjustment Act. Moreover, Section

21(a) of said Act and: Section 405 of the Revenue

-Act of 1935 deprive the Courts of power té render

declaratory’ judgmhents with respect to such Nalleged

taxes. By reason of the impossibilities of proof here-

inabove referred to, the practical effect of said Act

will be to deny taxpayers and the plaintiff all means

of securing a judicial decision as to the constitutional-

ity of the processing taxes, unless the Court grants

the relief herein sought.

15.

Plaintiff further shows that by Section 30 of said

Amendment of August 24, 1935, Section 21(a) was.

added to said Act, which in substance provides that

no suit to enjoin the collection of any tax imposed by

said Act shall be maintained. . ‘Plaintiff alleges that

said section is not intended to apply,. and does not

apply, to the injunction prayed for by this plaintiff

inasmuch as plaintiff has no adequate remedy at law.

Plaintiff alleges, however, that if said section should

be interpreted as providing that no injunction should

be granted to the plaintiff as prayed for in this cause,

then the said section, together with the other provi-

/ \ sions of said Act, is invalid and in violation of the

Fifth Amendment to the Constitution of the United

States, that no person shall be deprived of his property

without due process of law, in that said illegal and un-

constitutional taxes will be collected from the plain-

tiff and the plaintiff will have no remedy to prevent

the collection of said ‘unlawful taxes, and will be for-

ever deprived of the right in any manner to test the

> constitutionality of such taxes.

16.

Said Section 21(d) further denies to the plaintiff

a complete and adequate remedy at law, because a.

multiplicity of claims* and suits would be required to

enforce’ such rights as are granted thereunder and

because said .subsection requires that the facts re-

quired to be proved thereunder be established: to’ the

satisfaction of the Commissioner of Internal Revenue’

and makes no provision for .a judicial review of his

decision.

17.

A refund of processing taxes paid by the plaintiff

could not actually be obtained even if it.were possible

for the plaintiff to prove the negative facts required

by subsection (d) of Article 21, because Congress has

. i :

not appropriated funds for the payment of such refunds

_and plaintiff believes, that in view of the aggregate

amount involved, there i is a reasonable doubt whether

such appropriation would ever be made.

18.

Plaintiff i is ready, able and willing and hereby atless

and agrees that in the event the injunctive relief herein

prayed for is granted, it will deposit at such time and in

-such manner as this Court shall direct the said sums

claimed to be due from plaintiff for processing taxes on |

account of the rice processed by plaintiff during the |

month of September, 1935, and the plaintiff further

offers and: agrees that at the end of each month here-

after it will file processing tax returns: with the defend-

ant as required by existing laws and regulations and that

as and when processing taxes under said returns become —

due and payable according to existing laws and regula-

tions or any extension lawfully granted to the plain-

tiff, it will deposit the amount of such taxes in such

manner as the Court may direct; all such deposits to

“abide the final decree in this cause.

Wherefore, plaintiff — without an adequate

remedy at law prays:

1. That process issue and be served upon the de-

fendant requiring him to appear and answer this hill,

but not under oath, and answer. under oath being here-

by expressly’ waived:

2. That pending the hearing of the application for

a preliminary | injunction hereinafter prayed for, a

temporary restraining order issue immediately enjoin-

ing and restraining the defendant until the hearing

of its application for a preliminary injunction or until

the further ordef of this, Court, from assessing or

collecting or attempting ‘to assess or collect from

' the plaintiff in any~ manner whatsoever, whether -

by lien or jeopardy or by distraint | proceedings,

in Court or otherwise, any processing taxes under

-.and pursuant to said Agricultural Adjustment Act

and any interest or penalty on account of. plaintiff’s

failure to pay said processing tax, and from im-

posing or giving notice of intention to. impose any

. lien for said taxes upon the property, real or personal,

of the plaintiff; ;

3. That notice issue to the defendant advising him

that plaintiff is hereby applying for a preliminary

injunction and that plaintiff’s sard\application ‘will be

heard at a time to be fixed by the Court in said notice,

and that upon said hearing a preliminary injunction

pending the final disposition of this case’be issued

enjoining and restraining the defendant from assess- |

ing or collecting or attempting to -assess ‘or collect

from the plaintiff in any manner whatsoever, whether

by lien or jeopardy or by distraint - proceedings, in

Court or otherwise, any processing taxes under and

pursuant to said Agricultural Adjustment Act and

;any interest or penalty on account of plaintiff’s failure

to pay said processing tax, and from imposing or giving

notice of intention to impose any lien for said taxes

upon the ‘property, real or personal, of the plaintiff;

4. That at the final hearing of this cause said

preliminary injunction shall not have been granted,

then that a permanent injunction be granted per-

manently restraining and enjoining the defendant from

assessing or collecting or attempting to assess or collect

from the plaintiff in any manner whatsoever, whether

by lien or jeopardy or by distraint proceedings, in

Court or otherwise, any processing taxes under and

_ pursuant to said Agricultural Adjustment Act and any

Ti 6 ee it anid ade el eee ae

interest or penalty on account of plaintiff's failure to .

pay said processing tax, and from imposing or giving

notice of intention to impose any lien for said taxes

upon .the property, real or oe of the plaintiff;

5. That at the final hearing it be adjudicated that ©

the provisions of said Agricultural Adjustment Act:

“ «providing for the levying, assessing and collecting of

said processing taxes against an@ fromthe plaintiff

are invalid, unlawful and unconstitutional on each and

every one of the grounds upon whichgthey are herein-

above alleged tp be unlawful, invalid and unconstitu-

tional; and that the defendant has no lawful right

to attempt in any manner to collect said processing

_taxes from the plaintiff or any of the penalties or in-

“terest thereon purported to be. provided for in’ said

‘Agricultural Adjustment Act’;

6. And plaintiff prays. for such other and: further

relief, both general and special, to which it. aad be

justly entitled.

(Signed). A. B. DORF, Plaintiff,

(Signed) JOHN P. BULLINGTON,

HOMER L. BRUCE,

(Signed) - BAKER, BOTTS, ANDREWS,

oot & WHARTON, ©

By JOHN P. BULLINGT ON,

Attorneys for Plaintiff

State of Louisiana,

Parish of Orleans.

Before me, the undersigned authority, on this day

personally appeared A. B. Dore, proprietor of The

Dore Rice Mill, who, having been by me first. duly

‘sworn; stated on oath that he has read the foregoing

and above bill and knows the contents thereof ‘and

that the facts therein set out are true, except as to~

such facts as are therein stated on information and

belief, and that as to those facts so stated to be on -

information and a he believes’ them to be true.

(Signed) ~ A.B, DORE.

Subscribed and Sworn to before me, tits 25th day

of October, 1935.

(Signed) SUMPTER D. MARKS, oe

(Seal) ~ Notary Public in and for Or-

! leans Parish, Louisiana.

EXHIBIT “A.”

Filed October 25, 1935.

~ Issued April 18, 1935.

United States Department of Agriculture,

Agricultural Adjustment Administration.

Administrative Rulings Relating to the 1935 Southern

Rice Production Adjustment Program.

Explanation.

These Administrative Rulings apply to and are part

of the Southern Rice Production Adjustment Contract

and documents pertaining thereto.

If any of the provisions are not understood, the

‘Community or County Committee should be consulted.

No producer should make out’ and submit to his

Community or County Committee an Application or a

Contract or other documents pertaining thereto with- |

. . . o |

m ose se .

out knowing exactly what he must do in order to

receive the benefits of .the program. ~~

~ |. efinitions—As used in the Southern Rice Pro-

duction . Adjustment Application, Declaration, Con-

tract, Schedule, and these Administrative Rulings:

(a) “Person,” “tenant,”. “landlord,” “producer,”

aiid “well or canal operator,” include individuals, co-

partnerships, and corporations; and where it is* re-:

quired by the context, the singular shall include the

plural.

(b) “Farm” -means one contiguous tract of land

operated as one unit substantially separate from any

other such tract of land.

‘ating their own farms; tenants operating farms rented

for cash; tenants operating farms under a crop-share

lease, contract, or agreement; landlords leasing to share

tenants; corporations, copartnerships, or individuals

* furnishing water for production of-rice on a. share

basis;° and such other persons or classes of persons

as the Secretary may determine to be eligible to sign

Southern Rice Production Adjustment Contracts.

(d) \ “Participation in the production of rice” means.

sharing as a producer in any manner in the produc-

tion-of rice on a farm.

(e) “Farming Operation” means the production of

rice or the participation in the production of rice by

a producer.

(f) “Applicatioh”_means any Application for Rice

Acreage Allotment (forms Rice 1 and 2) heretofore

. or hereafter executed by: any producer. “Application:

a> 29 |

serial number” means the serial number of any such ©

Application. ,

(g) ‘SDectaration” means any 1935 Southern. Rice °

Declaration of Farm Acreage (form Rice 30) hereto-

fore or hereafter executed by any producer. The “farm |

serial number” means the serial — of any such

Declaration.

~ (h) “Schedule” means any Producer’s Schedule of

Rice Acreage (Form Rice-37) heretofore or hereafter .

executed by any producer.- Each such Schedule shall

bear the same serial number as the Contract executed

’ by the producer who executes the Schedule.

ee 7

(i) -“Contract” means any: 1935 Southern Rice

Production Adjustment Contract (Form Rice-36) here-

tofore or hereafter executed by any producer. The

“Contract serial number” means the serial. number of

any such Contract.

(j) “1935”' means the period from January — :.

1935, io December 31, 1935.

(k) “1934” means the peviod from January 1,

1934 to Eeceeiper 31, 1934. |

(1) The term “State Sai period” means the period

_ of calendar years 1929 to 1933, inclusive.

{m) The “State Allotment” shall be 135,000 acres

for Arkansas, 364,500 acres for Louisiana, and 142,500

acres for Texas.- The “State Quota” shall be 1,834,-

722 barrels for Arkansas, 3,898,333 barrels for Louis-

iana, and 2,010,833 barrels for Texas.

(n) The .term “base sinlel in Arkansas’ and

Louisiana means the period of the calendar years

1929 to 1933, ‘maton and in Texas the years 1931

to 1933, inclusive.

(0) The “production history” of a producer means,

as the context may require, the producer’s rice acreage

or rice production, or both, for the base| period as ad-

justed to the official figures and accepted by the State

Committee. :

(p) The “producer’s Allotment” and the. “pro-

ducer’s Quota” means respectively the rice acreage

_and_the rice production assigned by the State Com-

mittee, acting for and on behalf of the Secretary, to

the producer for 1935 and determined according to the

ees set forth in Administrative Ruling Il hereof.

(q) _ The “acreage allocated” by the producer means

that ‘part of a producer’s allotment which, in a De-

claration, ° he allocates: to a given farm as a basis for

determining his share of the total ricé acreage planted

on that farm in 1935.

(r) “Producer’s share of the rice acreage planted”

and the “Producer’s share of the acreage planted to

rice in 1935” each means with respect -to any farm,

that acreage which bears the same ratio to the total

ricé acreage planted on that farm in 1935 (as de-

termined upon checking compliance with the Contract

in the manner prescribed by the Secretary) that the

acreage allocated by the producer to that farm in a

Declaration bears to the total rice acreage allocated

to that farm in such Declaration. \

(s) The “Secretary”. means the Secretary of

Agriculture of the United States: ;

(t) ‘Rice Section” means the Rice Section of the

Agricultural] Adjustment Administration.

(u) “Official figures” means the records of acreage ,

and production prepared by the United States Depart-

ment of Agriculture.

(v) A “barrel” means 162 pounds of rough rice.

(w) A “bushel” means 45 pounds of rough rice.

II. Determination of Allotments and Quotas.—1.

The allotment of a producer shall be, determined by.

each State Cormmittee as follows: (a) Add the

acreage of rice planted annually by each producer

for his own account during the base period, after ad-

justment of acreage of all producers fo the official

figures for each. state for each of the years. of.the

base period; (b) Divide the total thus secured by

five (5) in Louisiana and in Arkansas, and theetotal

thus secured by three (3) in Texas; (c ) Reduce the

result obtained by 20 per cent in Louisiana and in

Arkansas and the result obtained’ by 22 percent in

Texas.

The total divest assigned to producers in each

state shall not in any event exceed the state allotment .

for that state. |

2 The quota of a producer shall be determined by

each State Committee as follows: (a) Add the number

of barrels of rough rice produced annually by each

_ producer for his own account during the base period,

after adjustment of the production of all producers

to official figures for each state for each of the years

of the base period ; (b) Divide the total thus secured

by five (5) in Louisiana ee in Arkansas, and the

total thus secured by three /(3) in Texas; (c) Reduce

the result obtained by 20 Ae in Louisiana and in

rkansas and the result/ ob*gined by 22 percent in

Y a

: !

| 32 (

The total quotas or to sicdecers j in each state

shall not in any event exceed the state quota for that

State.

3. If the total of allotments and quotas deter-

mined according to the provisions of sections 1 and 2

of this numbered ruling, in any state, is less than the

State Allotment and State Quota such excess may

be allocated to producers by the State Committee, sub-

ject to approval by the Secretary or his authorized

agent,

4. The Allotment and Quota are based upon

the personal production history of the producer, -

regardless of where the rice was produced and are

the measure of such history. ‘The producer’s produc-

tion history shall not be transferred except as the

State Committee shall, in writing, approve transfers

made pursuant to the provisions. of subsections a, b,

and c of this numbered paragraph 4 of Administra—

tive Ruling II. All requests for transfer of produc- .

tion history shall be in writing, signed by, or on behalf

of the producer by his duly authorized agent, and ap-

proval thereof shall be in writing signed by at least

two members of the State Committee. In no event

shall. the State Committee approve the transfer, of

production history by reason of foreclosure, execution

or any forced sale. :

(a) If a producer has died or has been declared

legally incompetent by a Court of competent juris-

diction and has not ‘executed, prior to the date of such

death or incompetency, an Application for an allotment

and quota, his records of production may be used by

such heirs or devisees, or such member of the family

of such deceased producer or by such members of the

family of such incompetent producer as are continuing

the farming operation of the deceased or incompetent

producer, upon their furnishing proof of such relation-

ship and succession to the producer’s farming opera-_

tion.

(b) If a well or canal operator voluntarily sells

-his well or canal system and has not executed an

application, his production history shall be trans-

ferred to such successor, provided that the former well

or canal operator was not engaged in farming opera-

. tions -in 1934.

tion for an allotment and quota has been executed

by or on behalf of the partnership, its records of rice

production for the base period shall be divided among.

the partners in such proportions as is agreed upon

by the partners or their authorized representatives in

writing submitted to the State Committee.

_ 5. In all figures representing final determination

of individual allotments and quotas, fractions amount-

ing to one-half a unit or less shall be dropped and

fractions amounting to more than one-half a unit

shall be considered a whole unit. |

6. If a producer during the base period had oper-

ated in more than one state, he shall°apply for an’

allotment and quota to the State Committee of each

state in which he had farmed during the base period.

Only the history earned by the producer in that state

shall be- presented. to the State Committee in his

Application. No producer shall be assigned Allot-

ments and Quotas in two or more. states, larger in

the aggregate, than the Allotments and Quotas assign-

able to him in one state, had all of his farming opera-

tions been confined to that one state.

7. The sum of all Allotments and of all Quotas

. within a State shall not in any event exceed the State

Allotment and Quota, respectively.

III. Transfer-of Allotment and Quota.—The pro-

ducer’s Allotment and Quota shall not be transferred

-except as the State Committee shall in writing approve

transfers made pursuant to the provisions of sub-

sections a, b, c, and d of this Ruling III. In no event

shall the State Committee approve the transfer of an

Allotment or Quota by reason of foreclosure, execution,

or any forced sale. All requests for transfer shall be

made in writing signed by or. on behalf of the pro-

ducer by his duly authorized agent, and approval there-

of shall be in writing signed by at least two members

of the State Committee.

(a) If.a producer dies or has been declared in-

competent by a Court of competent jurisdiction after

executing an Application but before executing a Con-

tract, his allotment and quota. may be transferred to

‘such heirs, devisees, or such members of the family

of such deceased. producer or such members of the

family of such incompetent producer as are continuing

the farming operations of the deceased or incompetent

producer, upon their furnishing proof of such relation-

ship and succession to the producer’s farming opera-

tion. a

(b) If a producer voluntarily withdraws, either

wholly or.in part, from the production of rice

after executing an Application but before exe-

cuting a Contract, he may transfer all or part of his

Allotment and Quota to such persons as are continu-

ing his, farming operation, upon proof of such with-

drawal and succession.

retired from the production of rice after executing an

Application but before executing a Contract, he may

transfer all or poet of his Allotment and Quota to such

pérson as is continuing his farming operations upon

proof of such disability, retirement, and succession.

(d) Upon dissolution of a partnership, after an

Application has been: executed by or on behalf of the

. partnership, but before a Contraet-has been executed ©

by. or-on behalf of the - ‘partnership, the Allotment and

Quota shall be divided among the partners in such

proportions as is agreed upon by the partners or their -

duly authorized representatives in writing submitted

to the State Committee.

IV. Use of Allotment and Quotas by Well or Canal

Operators.—If a well or canal operator has an allot-

ment and quota assigned to him by the State Commit-

tee on the basis of his personal history as’a furnisher

of water qn a crop share basis, such well or canal

operator shall not change his statusaso as to use such

allotment and quota in a capacity other than as a fur-

nisher of water on:a share crop basis.

V. Signing of hainalian, Declaration, Contracts,

and Other Documents by a Person in a Representative

Capacity.— os

(1) In the event any document is to be executed

on behalf of a Corporation, it shall be signed on behalf

of the Corporation by an officer of the Corporation,

who shall state his title, and affix the corporate seal

to the Contraet, (If: the Corporation has no cor-

porate seal, the following | statement in writing shall

appear’ over the signature, “No corporate seal re-

quired or adopted,”) or by a representative of the

‘corporation other than an officer, who has been au-

thorized by the corporation to execute the contract:

by power of attorney, under seal, duly executed on

behalf of the corporation on a prescribed form and

filed with the Comptroller of the Agricultural Ad-

justment Administration at Washington, D. C.,

attached to the contract, which authorization shall be

considered a part of the contract documents.

(2) In the event a document is to be signed by

an executor, administrator, guardian of an incompe-

tent person, receiver, or other person appointed by a

Court in a fiduciary capacity, there shall be furnished

either the original or a certified copy of the Court

order of appointment or a certificate on a prescribed

form showing that such person was duly appointed

as such fiduciary and that the opment is’ still in *

full force and effect.

(3) Where a document is signed by a manager or

an agent for a producer, the original or a certified copy

of a Power of Attorney, on a prescribed form, author-

izing the manager or agent so to sign shall be fur-

nished.

(4) If the producer is a Governmental body or

agency, there shall be attached to the document a

certified copy of a resolution of the Board or other

authority authorized by statute to lease and contract

in regard to the land and personal property covered

by the contract,. authorizing the execution of such

document by the person executing the document on

its behalf.

(5) ‘When one producer has several documents to

‘be signed by the same agent or attorney, a properly

executed power of. attorney may be filed with the

Comptroller of the Agricultural Adjustment Adminis-

tration to cover all such cases, and shall be considered

as a part of each document so signed.

-- (6) A document to be signed for a partnership

‘Shall be executed in the name of the partnership and

of each partner as an individual, by each member of

the. partnership, or on behalf of each partner who

does not personally sign, by an agent duly author-

ized to so sign by a Power of Attorney, on a prescribed

form.

VI. Pledge of Adjustment Payments. —Adjustment

payments may not be assigned under any condition.

This is forbidden by the Contract, as well as prohibited

-by law. ) :

However, the producer’s right to adjustment pay-

ments under the Contract may be pledged in -

order to obtain funds (or credit) for carrying on the

current operation of the farm. The expression “funds”

(or credit) for carrying on. the current operation of

the farm and “current production credit” means funds

or credit to meet any necessary expense of preparing

of land, planting, cultivating, watering, harvesting, and

marketing of the rice crop grown in the ‘year 1935.

Without in any way limiting the exclusiveness of the

above definition, the expression shall not include cash

rent or debts incurred in conhection with the produc-

tion of past crops.

No pledge of any producer’s right to adjustment

payments under his contract for any purpose other

than to procure current production credit as defined

above shall give rise to any obligation under the Con-

tract upon any payee designated therein by the pro-

ducer to distribute such payment, when and if accepted

by such payee, to the person claiming to hold such a

pledge not given for current production credit.

Dated April 18, 1935.

R. G. TUGWELL, |.

Acting Secretary of Agriculture.

EXHIBIT “B”. |

Filed Oct. 25, 1935.

Form Rice 36,

U. S, Department of Agriculture,

Agricultural Adjustment Administration,

Rice Séction.

Form approved by Comptroller General, U. S.,

May 1, 1935.

1935 Southern Rice Production Adjustment Contract.

(Pursuant to and to effectuate the purposes of the

Agricultural Adjustment Act, approved May 12,.

1933, as amended, hereinafter referred to as -the

. Act. )

I. Performance by Producer:

1. The undersigned producer (and each and all

of them if more than one signs. this instrument) .here-

by offer(s) to enter into a contract with the Secretary -

of Agriculture (hereinafter referred to-as the “Secre-

tary”) upon the terms and conditions hereinafter set

forth and subject to such regulations or administra-

tive rulings (which shall be part of the terms and

conditions of this contract) as have been heretofore or

'" may hereafter be prescribed by the Secretary relating

- to 1935 Southern Rice Production Adjustment Con-

tracts. This contract.shall apply to every farm upon

which the producer participates:in’ any manner in the

production of rice in 1935 (hereinafter referred to

as “the farm(s) covered by this contract”). This.

offer shall become a binding contract upon its accept-

ance by the Secretary.

2. The producer,

(a) Represents that he has allocated to each farm -

upon which he will participate in any manner in the

production of rice.in 1935 some part of his allotment .

‘and that the total acreage allocated by the producer

to all such farms does-not exceed his allotment;

(b) Agrees that he will:not share or participate in

any manner in the production of rice in 1935 on any

farm to which he has 1 not allocated a portion of his

allotment;

pliance and making payments under this contract “the

producer’s share of the acreage planted to rice in

1935” on each farm covered by: this contraci shall be

that acreage actually planted to rice on such farm

in 1935 which’bears the same‘ratio to the total acre-

age planted to rice on such farm in 1935 that the

acreage allocated by the producer to such farm bears

to the total acreage allocated thereto by all persons

participating in the production of rice. thereon;

(d) Agrees that his total share of the acreage

planted to rice in 1935 on all the farms covered i

this contract shall not exceed his allotment;

(e) Agrees that the pane permitted under this

contract to be planted to rice in 1935 shall be farmed

in a workmanlike. manner throughout 1935;

(f) Applies for membership in the Rice Production -

Control Association organized pursuant to Form Rice

35 in each County or Parish in which a farm covered

by this contract is located;

(g) Agrees to permit: access by any authorized

agent of the Secretary to the farm(s) covered: by this _

contract, and to all fiscal books, records, and docu- .

ments, regardless of where located, pertaining to the

production and/or sale of rice on or frova any and all .

of ‘such farms, and expressly waives any right to have

such records kept confidential ; 3

(h) Agrees not to sell, pledge, transfer, dr assign,

in whole or in part, this contract or his right ‘to or

claim for payments under this contract, and not

to execute any power of attorney to collect such

payments, and any sale; pledge or assignment, order

or power of attorney shall be null and void, except

that the producer may pledge or hypothecate his right

to any adjustment payments under this contract, for

the purpose of obtaining funds (or credit) for carry-

ing on the current operation of the faria‘s) covered

by this contract (hereinafter referred to as “current

production credit”) and such pledge or hypothecation

shall operate to establish an interest or right on the

part of the pledgee in and to said adjustment pay-

ments as against any other person or persons, but

the pledge or hypothecation thereof shall not alter the

provisions of paragraph 5 that all adjustment pay-

ment checks drawn in compliance with this contract

shall be made pavable to the payee therein stipulated.

If the adjustment payments herein provided for shall

have been pledged by the producer for current pro-

duction credit, the producer, or'if a payee is designated

in paragraph 5 hereof and accepts such payment, then

such payee if notified in writing of the pledge, shall

receive the adjustment payment in trust to pay there-

from to the pledgee the amount of the obligation owing

for current production credit secured by such pledge

and to pay the balance of said payment to the producer. |

If a payee other than'the producer is mamed in para-

graph 5 hereof, and if such payee shall not have been

notified of any pledgé of the adjustment payments

for current production credit made pursuant: to the

terms of this numbered paragraph, such payee shall

receive such payments.in trust to pay the whole, amount

thereof to the producer, it being expressly understood

and agreed that the Secretary shall have no duty or

obligation to see that distribution is made in accord-

ance with the foregoing provisions, but shall have the

right to enforce the performance of said trust by the

payee; f

(i) Represents that the statements contained here-

in are true to the best of his information and belief.

Without limitation of any other right or remedy of

the Secretary conferred by law or this contract, a

material misstatement herein or in any information

furnished by the producer in connection with this

contract or any noncompliance. by the. producer with

any of the terms hereof,-or with any applicable regula-

tion or administrative ruling which has. been or may

hereafter be prescribed by: the Secretary with reference

to 1935 Southern Rice Production Adjustment Con-

tracts shall be grounds for termination of-this contract

by the Secretary. The determination of the Secretary

that any such misstatement or noncompliance has

occurred shall be final and conclusive. In the event

of termination of this contract by the Secretary, the

producer shall return to the Secretary all payments

theretofore made under this contract, together with all

costs incident to the collection thereof.

II. Performance by Secretary:

3. Amount of Payments.—The Secretary shall, as

a consideration for the performance by the producer

of all the terms and conditions of this contract, and in

the manner and at the times specified in paragraph 4

hereof, make

(1) A first adjustment payment at a rate of 81

cents per barrel. of rice, and

~“

(2) A second adjustment payment at a rate per

barrel of rice, uniformly applicable to all such con-

tracts, to be determined by the Secretary,

upon an amount of rice determined in the manner

specified in sub-paragraph (a) or (b) of this num--

bered paragraph, whichever shall apply:

(a) If the producer’s‘total share of the acreage

planted to rice in 1935 on all the farm(s) covered by

this contract is not more than 100 per cent nor less

than 85 per cent of the producer’s allotment, such pay-

ments shall be made upon that number of barrels of

rice which equals 85 per cent of the producer’s quota.

(b) If the producer’s total share of the acreage

planted to rice in 1935 on all the farm(s) covered by

this contract is less than 85 per cent of the producer’s

allotment, such payments shall be made. upon . that

-number of barrels of rice which bears the. same ratio

-to the producer’s quota that the producer’s total share

of the acreage planted to rice in 1935 on all such farms

bears to the producer’s allotment.

4. [Time of Payments.

(a) . The first adjustment payment shall be made

as soon as practicable after August 1, 1935, provided

that proof satisfactory to the Secretary, of compliance

with the terms and conditions of this contract, has been

submitted to the Secretary or his authorized agent.

(b) The second adjustment. payment shall be

made as soon as practicable after December 1, 1935,

provided that proof satisfactory to the Secretary, of

compliance with the terms and conditions of this con-

tract, has been submitted to the Secretary or his

| authorized agent.

a a

5. (a) All adjustment payments ; hereunder are for

the benefit of the producer and shall be made only t

the producer unless the producer shall, by naming an-

other person in this numbered paragraph, direct ‘<*

such payments’be made to the person so named, 1

which event the payments shall he made by check pa n

payable to the person so named who shall receive them

subject to the provisions of this contract, and particu-

larly subject to the provisions of subparagraph (h) of

paragraph 2 hereof. If the person so named shall have

died or shall refuse to accept such payment, or shall

for any reason be unable to receive and distribute such

payment subject to the. provisions of this contract then

such payment shall be made to the producer, who like-

wise shall receive such payments subject to the pro-

visions of this contract and particularly subject to the |

provisions of subparagraph (h) of paragraph 2 hereof.

(Stamp State and County code above.)

Se eee i ae eer eer ee

County §

Community.......... Contract )

Metin) AGA. cc os bv ceded. |

(Address of payee)

III. Signature(s) of Producer(s).

6. In Witness Whereof, each of the undersigned has

hereunto set his hand on the date indicated opposite

his signature.

cna, RA oa evi aa ay caeaens ea , 1935.

oe oe oe a ee ee ee oe ek oe ee ek ee ee Oe ee ee ee ee ee ek

(Signature of Producer) _ (Application No.)

Address of Producer (Rural Route No.) .... (Box

No.) .... (Post Office) ......... ae

ee ete es teed. |

(Witness) (Date of Producer’s signature)

(Signature of Producer) (Application No.)

Address of Producer (Rural Route No.) .... (Box

Peo.) .... (Peet Gilice) ......... Se

IV. Certification of Committees. |

We Hereby Certify that we have examined the fore-

going offer and that, to the best of our information

and belief, the total acreage allocated by the producer

to all the farm(s) covered by this contract does not

exceed the producer’s allotment, and hereby recom-

mend that the foregoing offer be accepted by the Sec-

retary.

eee koe eh ee ee ee ee ee ee ee ee

ote... cy TONS. De... . , 1935. Date....., 1935.

‘V. Acceptance by Secretary. - » |

in consideration. of and in reliance upon the agree-

ments of the producer herein set forth and the repre-

sentations made by the producer in and in connection

with this contract, this offer is hereby accepted, this

eee ff Pore

HENRY A. WALLACE,

Secretary of Agriculture, for

and on behalf of the United

States,

- ipiedninn of Secretary

of Agriculture.

VI. State Committee’s Certificate of Cianelinece.

The undersigned State committeemen certify that

the producer’s total share of the acreage planted to rice

in 1935 on all farm(s) covered by this Contract does

not exceed the produger’s allotment, and further certify

that the producer’s allotment and quota and the pro-

ducer’s total share of the acreage planted ‘to rice in

1935 on all farms upon which the producer is partici-

pating in the production of rice in 1935 are correctly

stated in items 1, 2, and 3, respectively, of part: VIII

below, and further certify that to the best of their in-

formation and belief the producer has fully complied

with all terms of this Contract and all regulations and

-administrative rulings issued by the Secretary applic--

able up to and including the date of this certificate.

(For State Comenittes)

VII. Producer’s Certificate of Compliance.

The producer certifies that his total share of the

acreage planted to rice in 1935 on all farms upon which

he is participating in any manner in the production of

rice does not exceed his allotment, that his allotment

and quota, and his total share of the acreage: planted to

rice in. 1935 on all farms on which he is participating

in any manner in the production of rice in. 1935 are

correctly stated in items 1, 2, and 3, respectively, in

part VIII of this contract, and further certifies that

he is not sharing in the production of rice on any

farms covered by this Contract are being farmed in

a workmanlike manner, and that he has fully complied —

with all other terms of this ‘Contract, and with all

regulations and administrative rulings issued by the

- Secretary, applicable up to = including the date of

this certification.

RNG! ch tree tea » 1935.

(Producer.

VIII. Certified Basis for Determining Payments.

Producer's allotment ..,.......(acred) ........

ee S| a rrr tree

Producer’s share of acreage measured ........

Quota percentage (item.3 + item1).... ..... %* \

‘Number of barrels for payment (item 4 M

times item:.2) :...:... en ee rea vad

mem wWd

*If the above percentage is not more than 100 nor less

than 85 per cent, then 85 per cent shall be used.

Do not write in this blank; for use by Comptroller” S_

Office.

Computation of payments:

1935 first adjustment payment Item 5 times

81¢ per bbl. ...... Ne ee errr Big saee as

1935 second adjustment payment, Item 5

"72 3.40 Os ee eee eee

- Do Not Write in Space Below.

Certificate of Comptroller. | .

Audited and approved for 1935 first adjustment

payment in the amount of ........... ee ener

JOHN B. PAYNE,

Comptroller,

BP - 6a iNGee here oe

Auditor.

Schedule No. ........

Sion eceadaue

Pe ca aa .... by check on Treasurer of the

United States in favor of payee or payees named

thereon.

Check No..........00. | aa Sak

Certificate of Comptroller.

Audited and approved for 1935 second adjustment

payment in the amount of .............. Dace au |

JOHN B. PAYNE,

Comptroller,

— We Rieck s ba cea Cane oe

, Auditor

Schedule No. ........

Bee in Go see cans

eee by check on Treasurer of the

United States’ in favor of payee or payees named °

thereon. ;

CONE FOR ks exicxeses rere re ere Tee

(Any intentional misrepresentation of fact made in

this contract for the purpose of defrauding the United

States will be subject to the criminal provisions of the

United. States Code.)

EXHIBIT “C”.

Filed October 25, 1935.

Sec. 21. (a) No suit, action, or proceeding (includ-

ing probate, administration, receivership, and bank-

ruptcy proceedings) shall be brought or maintained i in

any Court if such suit, action, or proceeding ..

for the purpose or has the effect (1) of ne

ing or restraining the assessment or. collection of

.« any tax imposed or the amount of any penalty or in-

* terest accrued under this title on or after the date of

the adoption of this amendment, or (2) of obtaining a

declaratory judgment under the Federal Declaratory

Judgments Act in connection with any such tax or

such amount of any such interest or penalty. In pro-

bate, administration, receivership, bankruptcy, or other

- similar proceedings, the claim of the United States

for any such tax or such amount of any such interest

or penalty, in the amount assessed by the Commis-

sioner of Internal Revenue, shall be allowed and

ordered to be paid, but the right to claim the refund

or credit thereof and to maintain such claim pursuant

to the applicable Provisions of law, including sub- .

section (d) of this section, may be reserved in the

Court’s order.

(b) The taxes imposed under this title, as de-

termined, prescribed, proclaimed and made effective by

the proclamations and certificates of the Secretary of

Agriculture or of the President and by the regulations

of the Secretary with the approval of the President

prior to the date of the adoption of this amendment,

~ are hereby legalized and ratified, and the assessment,

levy, collection, and accrual of all such taxes (to-

gether with penalties and interest with respect there-

to) prior to said date are hereby legalized and ratified

and confirmed as fully to all intents and purposes as

if each such tax had been made effective and the rate

thereof fixed specifically by prior Act of Congress. All

such taxes which have accrued and remain unpaid on

the date of the adoption of this amendment shall; be

assessed and collected pursuant to section 19, and to

the provisions of law made applicable thereby. _Noth-

ing in this section shall be construed to import illegal-

ity to any act, determination, proclamation, certificate,

or regulation of the Secretary of Agriculture or of the

President done or made prior to the date of the adop-

tion.of this amendment. |

under this title, prior to the date of the adoption of

_ this amendment, as determined, prescribed, proclaimed

and made effective by the proclamations of the Secre-

tary of Agriculture or of the President or Ly regula-

tions of the Secretary, and the initiation, if formally

approved by the Secretary of Agriculture prior to.such

date of adjustment programs under section 8 (1) of

- this title, and the making of agreements with producers

prior to such date, and the adoption of other voluntary

methods prior to such date, by the Secretary of Agri-

culture under this title, and rental and benefit pay-

ments made pursuant thereto, are hereby legalized and

ratified, and the making of all such agreements and

payments, the initiation of such programs, and the

adoption of all such methods prior to such: date are

hereby legalized, ratified, and confirmed as fully to all

intents and purposes as if each such agreement, pro-

gram, method, and payment had been specifically au-

thorized and made effective and the rate and amoun®

thereof fixed specifically by prior Act of Congress.

(d) (1) No recovery, recoupment, set-off, refund,

or credit shall be made or allowed of, nor shall any

counter claim be allowed for,.any amount of any tax,

penalty, or interest which’accrued before, on, or after

the date of the adoption of this amendment under this

title (including any overpayment of such tax), unless,

after a claim has been duly filed, it shall be established,

in addition to all other facts required to be established,

to the satisfaction of the Commissioner of Internal

Revenue, and the Commissioner shall find and declare _-

of record, after due notice by the Commissioner to such

claimant and opportunity for hearing, that neither the

claimant nor any person directly or indirectly under’

his control or having control over him, has, directly or

indirectly, included such amount in the price of the

- article with respect to which it was imposed or of any

article processed from the commodity with respect to

_ which it was imposed, or passed on any part of .such

amount to the vendee or to any other person in any

manner, or included any part of such amount in the

- charge or fee for processing, and that the price paid by

the claimant or such person was not reduced by any

. part of such amount. In any. judicial proceeding re-

lating to such claim, a transcript of the hearing before

the Commissioner shall be duly certified and filed as

_the récord in the case and. shall be so considered by

the Court: The provisions of this subsection shall not

apply to any refund or credit authorized by subsection

(a) or. (c) of section 15, section 16, or section 17 Of this

title, or to any refund or credit to the processor of any

tax paid by him with respect to the provisions of sec-

tion 317 of the Tariff Act of 1930.

(2) In the event that any tax imposed by this title

is finally held invalid by reason of any provision of

the Constitution, or is finally held invalid by. reason

of the Secretary ‘of Agriculture’s exercise or failure to

exercise any power conferred on him under this title,

there shall be refunded or credited to any person (not

a processor or other person who paid the tax) who-

would have been entitled to.a refund or credit pur-

suant to the provisions of subsections (a) and (b) of

section 16, had the tax terminated by proclamation

\. pursuant to the provisions: of section 13, and in-lieu -

thereof, a sum in an amount equivalent to the amount

_to which such person would: have been entitled had

the Act been valid and had the tax with respect to the

particular commodity terminated immediately prior

to the effective date of such holding of invalidity, sub-

ject, however, to the following condition: Such claim-

ant shall* establish to the satisfaction of the Commis-

sioner, and the Commissioner shall find and declare

of record, after due notice by the Commissioner to the

claimant ‘and. opportunity for hearing, that the.amount

of the tax paid upon the processing of the commodity

-used in the floor stocks with respect to which

the claim is. made was included by the _ pro-

cessor or. Other person who- paid the -tax in

the price of ‘such stocks (or of the material from

which such stocks were made). In any judicial pro-

ceeding relating to such claim, a transcript of the

hearing before the Commissioner shall be duly certi-.

fied and filed as the record in the case and shall be so

considered by the Court. Notwithstanding any other

provision of law: (1) no suit or proceeding for the re-

covery, recoupment, set-off, refund or credit of any .

tax imposed by this title, or of any penalty or interest,

which is based upon the invalidity of such tax by

reason of any provision of the Constitution or by

reason of the Sécretary of. Agriculture’s exercise or

failure to exercise any power conferred on- him under

this title, shall be maintained in any Court, unless

prior to the expiration of six months after the ‘date on

which such tax imposed by this title has been finally

held invalid a claim therefor (conforming to such regu-

lations as the Commissioner of Internal Revenue with

the approval of the Secretary of the Treasury, may

prescribe) is filed by the person entitled thereto; (2)

no such suit or. proceeding shall be begun before the

expiration of one year from the date of filing such

claim unless the Commissioner renders a decision

thereon within that time, nor after the expiration of

. five years from the date of the payment of such tax,

penalty, or sum, unless suit or proceeding is begun

within two years after the disallowance of the part

-of such claim to which such suit or proceeding re-

lates. The Commissioner shall within $0 days after

such disallowance notify the taxpayer thereof by mail.

(3) The District Courts of the United States shall

have jurisdiction of cases to which this subsection

applies, regardless of the amount in controversy, if

such Courts would have had jurisdictien of such cases

but for limitations under the Judicial Code, as

amended, on jurisdiction of such Courts based upon

the amount,in controversy.

(e) In connection with the establishment, by any

claimant, of the facts required to be established in

subsection (d) of this section, the: Commissioner of

Internal Revenue is hereby authorized, by any officer

or employee of the: Bureau of Internal Revenue, in-

cluding the field sefvice, designated by him’ for that

purpose, to examine any books, papers, records, or

memoranda, relative to any matter affecting the find-

ings to be made by the Commissioner pursuant to sub-

section (d) of this section, to require the attendance

of the claimant or of any officer or employee of the

claimant, or the attendance of any other person having

knowledge in the premises, and to take, or cause to be

taken, his-testimony with reference to any such matter,

with power to administer oaths to such person or

persons. It shall be lawful for the Commissioner, or

any collector designated by him, to summon witnesses

on behalf of the United States or of any claimant to

appear before the Commissioner; or before any person

designated by him, at a time and place named in the

summons, and to produce such books, papers, cor-

respondence, memoranda, or. other records as

the Commissioner may deem relevant or ma-

terial, and to give testimony’ or answer in-

terrogatories, under oath, relating to any matter affect-

ing the findings to be made by the Commissioner pur-

suant to subsection (d) of this section. The provisions

of Revised Statutes 3174 and of Revised Statutes 3175

shall’ te applicable with respect to any summons

issued pursuant to the provisions of this subsection.

Any witness summoned under this subsection shall be

paid, by the party on whose behalf such witness was

summoned, the same fees and mileage as .are paid

witnesses in the Couris of che United States. All in-

formation obtained by the Commissioner pursuant to

this subsection shall be available to the Secretary of

Agriculture upon written request therefor. Such in-

formation shall be kept confidential by all officers and

employees of the Department of Agriculture, and any

such officer or employee who violates this requirement

shall, upon conviction, be subject to a fine of not more °

than $1,000 or to imprisonment for not more than

one year, or both, and shall be removed from office.

(f) No refund, credit, or abatement shall be made

or allowed of the amount of any tax, under section 15,

ar section 17, unless, within one year after the right

to such refund, credit, or abatement has accrued, a

claim for such refund, credit, or abatement (conform-

ing to such regulations as the Commissioner of In-

ternal Revenue, with.the approval of the Secretary of

the Treasury,:may prescribe) is filed by the person

entitled to such refund, credit, or abatement, except

that if.the right to any such refund, credit, or abate-

ment accrued prior to the date of the adoption of this

amendment, then such one year period shall be com-

puted from the date of this amendment. No interest

shall be allowed or paid, or included in any judgment,

with respect to any such claim for refund or credit.

. (g) The provisions of section 3226, Revised

Statutes, as amended, are hereby extended to apply to

any suit for the recovery of any amount of any tax,

penalty, or interest, which accrued, before, on, or after

the date of the adoption of this amendment under this -

title (whether an overpayment or otherwise), and to

any suit for the recovery of any amount of tax which

results from an error in the computation of the tax or’ -

from duplicate payments of any tax, or any refund

or credit authorized by. subsection (a) or (c). of sec-

tion 15, section’ 16, or section 17 of this title or any

refund or credit to the processor of any tax paid by

‘him with respect to articles exported’ pursuant to the :

provisions section 317 of the Tariff Act of 1930.

RETUE TO RULE TO SHOW CAUSE. WHY

- TEMPORARY INJUNCTION SHOULD NOT

ISSUE. nese

Filed Oct 28th, 1 1935.

(Title Omitted.)

To the Honorable the Judge of the District Court of

* the United States in and for the Eastern District

of Louisiana: /

Now into Court comes Rufus W. F ontenot, Acting

Collector of Internal Revenue, Defendant in the above

entitled and numbered cause, through Rene A. Viosca,

-United States Attorney in and for the Eastern District

of Louisiana, and Robert Weinstein, Assistant United

States Attorney for said District, his attorneys, and

by virtue, of*the rules and practice of this Court re-

quiring the defendant in rule.to file all defenses to the.

_ rule on the date set for the hearing on the application

- for a temporary injunction, and with full reservation

of all of his rights under the pleadings in this cause,

answers the rule by stating that for lack of sufficient

information to justify a belief he denies all of. the

allegations of paragraph two, three, four, five, six,

seven, eight, nine, ten, eleven, twelve, thirteen, four-

teen, ‘fifteen, sixteen, seventeen and eighteen of. the

_ Bill: ‘of Complaint, and also denies the allegations of

paragraph one with the exception of the statement

relative to the defendant, which statement is admitted.

Your Respondent further avers that the proceedings

should be dismissed for the reasons that this Honor-

. able Court has no .jurisdiction and ‘that the Agricul-

‘tural Adjustment Act is constitutional, valid and

enforceable.: -

Wherefore, your Respondent prays this Honorable

Court to dismiss the Bill of Complaint at Complain-

ant’s costs and to refuse granting any injunction in’

these proceedings, and for all generai and. equitable

relief.

(Signed) RENE A. VIOSCA,

: United “States Attorney.

(Signed) ROBERT ' WEINSTEIN,

Asst. United States Attorney.

( Verification.)

State .of Louisiana,

Parish of Orleans. :

Before me, the undersigned authority, personally

came Rene A. Viosca, who is the United States At-

torney for the. Eastern District of Louisiana, who in

his oath says: That in his aforesaid official capacity

he is of counsel for defendant in the above case; that .

he has drawn the return to the’rule to show cause.and

that all the allegations of fact therein are true and

correct to the best of his knowledge, information arid

belief. :

(Signed) RENE A. VIOSCA.

i es 4

_ Sworn to and subscribed before me this 28th day of

October, 1935. :

_ (Signed) CLAUDE D. SHAW,

Deputy Clerk, U. S. District

~ Court, Eastern. District of

Louisiana.

MOTION TO DISMISS.

Filed Oct. 28, 1935.

(Title Omitted.)

To the Honorable, the Judge of the District Court of

" the United States in and for the Eastern District

of Louisiana:

Comes now Rufus W. Fontenot, Acting Collector

of Internal Revenue, defendant in the above entitled

and numbered cause, ty Rene A. Viosca, United States

Attorney in and for the Eastern District of Louisiana,

‘and Robert Weinstein, Assistant United States At-

_torney for said District, his attorneys, full re-

servation of his rights to further plead in this cause,

and moves the Court to dismiss the Bill of Complaint

filed herein, with costs to be paid by the Complainant °

--upon the following grounds and for the following

reasons:

ss | a

That this Court is- without jurisdiction to restrain

or enjoin the collection of taxes herein involved, or to

hear and/or determine the issues presented by said

bill of complaint because:

1. Section 3224 of the Revised Statutes.of the

United States ‘prohibits the maintaining in any Court

of a suit for the purpose of restraining the assessment

and/or collection of Federal Tax.

2. Section 21-A of the Agricultural Adjustment

Act, as amended, prohibits the maintaining in any

Court of a- suit for the purpose of restraining the

assessment and/or collection of any processing tax .

under the said Agricultural Adjustment Act.

3. The bill of complaint sets forth no facts which,

if true, would entitle complainant to the relief prayed

for in a Court of Equity. ,

4. Complainant has a plain, adequate and complete

remedy in the ordinary course of law.

That the United States of America is the real party

in interest, which may not be sued without its con-

sent.

IIT.

That there is no actual controversy between com-

.plainant and defendant or between any parties over

which this Court. has jurisdiction within the purview

of the Declaratory Judgment Act.

That the Declaratory Judgment Act was not intended

by the Congress to be used for the litigation of ques-

tions arising under the Revenue Laws, and particu-

larly was not intended as a means for obtaining in-

junctive relief. < :

¥, po ae

- \ <9

This proceeding is prohibited by the ae. of

the Declaratory Judgment Act, as tf id can-

not be maintained. ( Revenue Act of 1935, royed

August 31, 1935, Section 405). se

; | 58

Dated: this 28th day of October, 1935.

(Sgd.) RENE A. VIOSCA,

| United States "Attorney. >

(Sgd.) ROBERT WEINSTEIN,

Assistant . United States

Attorney.

ORDER OF COURT CONSOLIDATING ALL

CASES FOR TRIAL, ETC.

Filed, Oct. 28, 1935.

United States District Court, Bastern District of

Louisiana, New Orleans Division.

— No. 321—In Equity:

Rickert Rice Mills, Inc.,

versus

Rufus W. Fonwave, Individually and as Acting

Collector of Internal Revenue.

Docket No. 322—In Equity:

A. B. Dore, ding business under the name of The

Dore Rice Mill,

versus

Rufus W. Fontenot, Individually and as Acting ”

Collector of Internal Revenue.

Docket No. 323—In Keulty:

United Rice Milling Procucts Co., Inc.,

versus

‘Rufus W. Fontenot, Individually and as Acting

Collector of Internal Revenue.

fs | 59

Docket No. 324—In Equity:

Baton Rouge Rice Mill, Inc.,

. versus” |

Rufus W. Fontenot, Individually: and as Acting

Collector of Internal Revenue.

Docket No. 325—In Equity:

T. Simon |

| versus. ,

Rufus W. Fontenot, Individually and as a Action.

Collector of Internal Revenue.

Docket No. 326—In Equity.

Levy Rice Milling Company, Inc.,

versus

— W. Fontenot, Individually and as «Acting

Collector of Internal Revenue. —

Docket No. 327—In Equity:

Farmers Rice Milling Company, Inc.,

versus

Rufus W. Fontenot, Individually and as Acting

Collector of Internal Revenue. |

or No. 328—In Posies:

Noble-Trotter Rice Milling Co., Inc.,

. versus

Rufus Ww. ‘Fontenot, Individually and as Acting

Collector of Internal Revenue.

Considering the stipulation. and agreement of coun-

sel’ for all parties made. this day in open Court;

It is Ordered that the above numbered and entitled

cases be and they are hereby consolidated for the

\ |

purpose of trial and that the affidavits and evidence

offered in one case be- considered to apply to all.

(Signed) JOHN McDUFFIE, Judge.

_ New Orleans, Louisiana, October 28, 1935.

State of Louisiana, ”

Parish of Orleans.

Before me, the undersigned authority, on this day

personally appeared W. M. Reid, known .to me, who

being by me first duly sworn in“térms of law deposed

and said.on his oath as follows:

My name is W. M. Reid. I reside in New Orleans,

Louisiana,‘ and am Executive Secretary of the Rice

Millers’ Association. My principal duties are the

preparation and interpretation of statistical and econ-

omic: data with regard to the rice milling industry. I

have been engaged in the rice milling business since

1909, and from 1916 to, 1928, I personally operated

a rice mill. I am thoroughly familiar with the rice

milling industry in all of its phases. ~

I have réad all of the allegations contained in Sec-

tion 12 of Plaintiff’s btll of complaint and Fquity 321,

Rickert Rice Milling Company vs. Rufus W. Fontenot,

-Equity 322, A. B. Dore vs. Rufus W. Fontenot, Equity

323, United Rice Milling Products Company, Inc., °

Vs. Rufus W. Fontenot and companion cases, and all

of such. allegations are true and correct in every re-

- spect.

It is true that rice millers, when they purchase rough

rice, consider the fact that they will have to pav a

processing tax on the milling of such rough rice. How-

ever, this is simply one of the many factors entering

‘into the miller’s determination of what he ought. to -

pay for rough rice. As a practical matter, when the

rice. miller negotiates for the purchase of a given lot

of rice, he first estimates what he believes he could get

for such rice after milling on the existing market for

clean rice and rice products. He then estimates what

he thinks it will cost him to process the rough rice

into its various grades and products, and in this esti-

* mate is included the amount of the processing tax, as

well as: other taxes. Having made these estimates,

he determines what he ought to pay for the rough rice.

However this is not necessarily what he does pay, be-

cause each individual miller. is buying in competition

with other millers. Thus, if other millers are paying

more than he thinks he ought to pay, he has to meet

the price the others. are paying, if he is to get any

rice. No individual miller makes the rough rice

market. It is a market made of the composite pur- |

chasing of all millers in the particular terri-

tory. While. the estimates above referred to

are made with .regard to the market ‘for clean .

rice and rice products at the time of the purchase of

the rough rice, that market, however, does not neces-

sarily control since rough rice is not ordinarily milled,

and the clean rice ‘and products sold until several

months after-the purchase of the rough rice. |

Since the market for.clean rice and rice products

fluctuates from day to day and month to month, the

prospects of the future market has a bearing on what

the miller may have to pay for rough rice. Optimism

' with reference to the future market for clean rice on

the part of a sufficient number of rice millers will

force up the market for rough rice, and all millers will

have to meet the increased price of rough rice (if they

are to have any rice at all), even though some of them

may be pessimistic as to the future market.

For example, the present market price of rough rice

is quite high with reference: to the present market

price for clean rice and rice products. In _ other

words, using the estimates above referred to, the cost

62 ,

of rough rice on today’s market plus estimated cost

of milling (including the processing tax) is more than

the miller could reasonably expect to procure for the

rice and rice products made from such rough rice on

the existing market for clean rice and rice products.

This present day market for rough rice is not made

by any individual miller, but is made by the com-

posite of purchases by all millers in the territory.

Thus, -as. | have previously said, while the processing

tax is considered by the miller in determining what

he ought to pay for rough rice, it is simply one of

many factors entering into such determination, and

is by no means controlling. 7”

Furthermore, it is impossible to tell on any given

purchase of rough rice how much, if at all, that price

has been affected by the existence of the processing

tax. ,

I am familiar with accounting and_ statistical

methods, and I know of no possible method of keep-

ing books and records im the rice business which would

accurately réflect the gain or loss from the purchase,

milling and sale of any given lot of rice as dis-

tinguished from the gain or loss from the aggregate

of all transactions during a season. A profit or loss,

however, may be estimated at any’ given time by the’

use of averages, predictions and arbitrarigs.

The rice milling business is seasonal; _ the

season beginning on August Ist and_ ending

‘on July. 31st, the operations gradually... in-

creasing until the peak is reached during the months

of October, November @nd December, and decreasing

to the end of the seasoM. For this reason as well as

others, the cost of_milling varies greatly from time to

time during the season. The estimated cost of milling

which millers use. in budgeting and determining what

they want to pay for rough rice is arrived at by aver-

aging the cost of the entire season so that this factor,

when used to estimate a profit or loss on a given

transaction, could never be exact, and might be very

much too high or very much too low when applied to

that particular transaction.

Under these circumstances, when a miller purchases

a particular lot of rice, "he may F-elieve that all, or a.

part of the processing tax to be assessed on such rice

will be absorbed by the farmer. On the other hand,

he may believe that all, dr a part of such tax will be

absorbed by himself. However, he can never even

_know, much less prove, even after all the clean, rice

and rice products made from the particular lot of

rough rice has been sold whether he, or the farmer,

or the purchaser, or al! of them together has borne the

ultimate economi¢ burden of the tax. This is because

any belief he may have had as to whether the burden

of the tax would fall, must of necessity, have been

based in part on estimates, which are in turn, based

on, averages, which are never accurate with respect to

any given lot of rice.’ In addition, such belief must

‘also be based inspart on assumptions as to market

conditions on clean rice and rice products, which may

or may not be correct. The rough rice may go

through the mill on a day when large amounts are

being milled,.and the cost per unit is lower than the

average; or, it might go through on a day when little

rice was being: milled resulting in a unit cost higher

than the average; ‘or, it might go through partly on one

kind of a day, and ‘partly on another. Furthermore, ©

the rice may not mill out what he expected, even if

‘the market on cleanxrice and rice products remains

the same. And, in, addition, the price at which he

eventually sells the clean -rice and rice products may —

be substantially less or substantially more than the.

sale price on which he based his presumptions.

‘Phere is no necessary relation between the market

for clean rice. and for rice products, since they are

’ sold for different purposes, and this is an added reason —

why the miller cannot possibly allocate the cost of a

given lot of rough rice among the clean rice and rice

products produced from it.

pene aN sat ot

For example, it is entirely possible for the market

on bran or hulls to be relatively high, while the market

on the various grades. of head rice is relatively low.

The rough rice: market is affected by the clean rice

and rice products market. and vice versa, but it is as

impossible to determine their relative affect on each

other as it is to determine whether the hen or the egg

came first. I know of no way‘of determining what

either the rough rice or clean rice*marked would be

if there were no processing tax. I do know, however,

that the individtal miller cannot force down the price

.paid to the farmer for rough rice because of the tax,

and thus force the farmer to pay all, or a part of

the burden of the tax. The individual miller simply

pays the market price for rough rice which has been

fixed by the composite action of all millers, and it

would be impossible to prove whether a lowering of

the rough vice market was the result of the assessment

of the tax, or whether it was caused by other factors,

such as a drop in time clean rice and rice products

market, a composite-pessimism on the part of rice

millers as to the future market or other factors. The

same thing is true with regard to the market for clean

rice and rice products, and no individual miller can

arbitrarily force that market upwards in order to pass.

on the tax. ;

(Sed.) W. M. REID.

Sworn and subscribed to before me, the undersigned

authority, this 28 day of October, 1935.

(Sed.) HARRY R. CABRAL. °

(Seal) : Notary Public.

State of Texas,

County of Harris. )

Before, me, the undersigned authority, on this day

personally appeared Homer L. Bruce, who, having

been by me duly sworn, stated on oath as follows:

He lives in Houston, Harris County, Texas, and is

duly licensed and practicing attorney at law. He is

familiar with the bills of complaint that are being pre-

sented to the United States District Court at New

Orleans; Louisiana, on ‘behalf of certain rice millers

of Louisiana seeking an injunction against the collec-

tion of processing taxes on rice, having worked with

his partner Mr. John P, Bullington in the preparation

of said bills of complaint, and is familiar with the

general practice of the rice industry of.selling rice on

samples and the filling of orders for clean rice by

mixing rice from different lots of clean rice in the

manner set out in the bills of complaint.

This affidavit is made in connection with the allega-

tions in said bills that it is impossible for the plaintiff

rice millers to comply with the requirements of Section

21 (d) ofthe Agricultural Adjustment Act that they

shall establish that no part of the processing tax has -

been passed on to the consumer or taken out of the

price paid the producer before they are allowed to re-

cover any processing taxes paid.

Section 8 (3) of the Agricultural Adjustment Act

gave the Secretary of Agriculture authority to issue

licenses to processors, including processors of - rice,

and provided that the Secretary should have the right

to revoke any license for violations of its terms. Sec-

tion 8 (2) of the same Act ‘authorized the Secretary

to enter into marketing agreements with processors.

In, the fall of 1933, the Secretary entered into a

marketing agreement with members of the southern

rice milling industry, and at the same time. issued a

license applicable to all mills. This marketing agree-

ment and the license were in substantially the same

form. Later various amendments were made to both

the marketing agreement and the license.

In the marketing agreement and in the license,

the Secretary of Agriculture fixed the price to.be paid

‘to-farmers for rough rice, these prices being set out in

Article III of the marketing agreernent and license

ereinafter referred to, namely, the one effective on

July 2i, 1934. Article IV, Section 1 of the license

P ri - 66 3 ‘ - &

av) iy 3 ary

effective July |2 1934, set out the minimuin price

that millers mi ight sell clean rice for in the domestic

market and that section 1S as follows:

“Section 1. To bestia’ the purposes of this

Amended license and to aid in the carrying out. and

enforcement of the provisions hereof, no gmiller shall

:offer for sale, se or deliver for domestic consumpflon ;

any quantity of clean rice for an amount per pocket

less than the sum of :

©: . 2 ‘

ia the siduininun ee; determined pursuant. to

article III and Schedule 1, for the grade, variety and

quantity of the rough rice from. which such clean rice

_ was milled, =.

harge for such quantity of

rough rice and prevailing at the time of such offer,

sale or delivery, and . as

ae, a

‘(c) the published c - lot rail rate for transporting

such rough rice from the customary point of delivery

‘to the ‘miller’s mill, and , |

(d) “the administrative assessment for such quan-

tity of rough rice and prevailing when such Tice was

- milled;

Provided, however, that any miller may offer clean

rice. for sale for export to foreign countries, on the

foregoing basis’ less a maximum discount of 20 cents

per barrel of such! ough rice and may, if the rice is

- actually exported, ‘sell or deliver clean:-rice for” export

to foreign countries on said basis’ less said maximum

discount. The determination of the Millers Commit-

tee as to whether or not clean rice is actually exported

‘shall be final and conclusive, subject to appeal -to the

- Secretary. Said minimum amounts, below which this

‘section provides that clean rice shall ‘not be offered’

for sale, sold, or delivered, by a miller, apply f. o. b.

the. miller’s mill. o

. Sec. 2. The conversion ‘charge per barrel of rough

rice shall, ‘until and except as changed by the Secre-

tary, be an amount equal to the sum of (a) seventy

(70) cents per barrel of rough rice, (b) nine (9) cents

per barrel of rough rice if standard one-hundred pound-

single packages are used for the 'clean rice, and (c), if

cotton or paper inner linings or regular.burlap outer

slips are used for the clean rice, an additional five. (5)

cents per barrel-of rough rice, or (d) if any other type

of container is used for the clean rice,-the actual in-

voice price for: the container used. The Secretary may

at any time and from time to time during the effective

period, increase or decrease the. amount of, and/or

change the basis. of computation of, the conversion

. Charge”. vy,

One of the main purposes, if not actually the main

purpose,.of the Agricultural- Adjustment Act and this

‘license was to increase the price of rough ‘rice paid

the farmer, and in order to kgep the rough rice price

at a higher level, the Secretary attempted by this

Section 1 to fix the price that clean rice might be

sold at as roughly. 79¢ per barrel above the cogt of the

rough rice. It was. extremely important to ‘keep the

clean rice ‘up to. this level in order to ma‘ itain the

- rotgh rice price. In the fall of 1934, the Secretary of

Agrieulture brought proceedings, according to the in-

formation and belief. of the affiant, against a number

of different rice mills in Louisiana and to affiant’s.

knowledge against Bay City Rice Mills of Bay City,

. Texas, a partnership composed of W.’M. Loving and

three other partners. The case against, the Bay City

Mills was case No. 11-1-7, entitled In the Matter of. W.

NS SAE OE ERLE CELE IIRL CREDLE LAL EGS PEN ELE TS NIN SILOM OES EFI

M. Loving, R. Q. Pegram, S. M..Clements and_L. D.

‘Clements, Individually and as Co-partners trading

under the name Bay City Rice Mills. One of.the orig-

inal chargés against ‘the Bay City ‘Rice Mills. was

Charge No. 11, which charged in general terms that

the Mill had sold clean rice for domestic consumption

_for an amount less than the price fixed far the sale of

the clean rice pursuant to this license. This Charge 11 .

was later made more specific as follows:

- ™ e

wh, That de said Linessse since ie effective date

of said License has violated Section 1 of Article V of |

said License as in effect until July 21, 1934, 12:01 A.°

M. Eastern Standard Time, and Section 1 of ‘Article IV

of said License as in effect from July 21, 1934, 12:01

A. M. Kastern Standard Time on, in that said’ Licensee

has offered for sale, sold and delivered, fox domestic -

consumption, quantities of clean rice, to-wit: Clean

tice lot numbered 36 on the books of the, respondent

derived from rough rice lot numbered 33 on the books

-of the respondent and purchased from C. FE. Everitt ;.“

clean rice lot numbered 43. on the: books of the re- .

-spondent derived from-rough rice’lot nuwnber 33 on |

the boaks of the respondent and purchased\from C. FE.

- Everitt; clean rice lot -numbered 123 on/ the books

of the réspondent derived from rough rice lot,

numbered 153 on the books of the respondent. _

and purchased from “A. P. Powers clean rice >

lot numbered 124 on the books of: the respond-

ent -derived from rough rice .lot. numbered 154

_on the books’ of the respondent and. purchased from.

_J..R. Reed; for an amount per pgcket less than the

price fixed for the sale of such clean rice pursuant to

said Section 1 of Article V. of said License as in effect

up until July 21, 1934, 12:01 A. M. Eastern Stand-

ard Time, and pursuant to said Section 1 of Article

IV of said License as in- effect from July 21, 1934, —

12:01 A. M. Eastern Standard Time 6n.”

' ture’s representatives, that it utterly impossible,

owing to the manner in which ice industry 1 is con-

ducted, through the sale of cleam’free on samples made.

The affiant, jullie with Mr: ‘W..E. Davant of Bay

City, Texas, represented. the Bay City Rice Mills in

this hearing before the representatives of the Secretary

of Agriculture og these charges, which he@ring ‘was

held in Houston, Fexes, and again on December 27,

1934, and ran through January, 2, 1935. |

The Bay City Rice Mills in that proceeding took”

the position, and so advised the Secretaty: of Agricul-

up of mixés of different lots of clean rice, as’ more .

fully set_put in the bills of complaint presented to the

United States District Court at New @rleans tn the

processing tax suits,’to determine in the case of any

lot of fice,’whether the clean rice had heen sald for

79¢ more* than the rough rice had. cost, or for the

amount above™the cost of the clean: tice that the-

Secretary required’ under Section 1 of Article IV.

The Secretary of Agriculture’s representatives had

access to all the books, vouchers and records of the

Bay City Rice Mills, both in’ connection with ‘its

rough rice purchases and its clean rice sales and had

several auditors continuously working on those re-

cords. The amount paid for the rough-rice purchased

-from Evoritt, Powers and Reed, as set forth in said

~ Charge II was established. The clean rice derived

- usual in the rice, business, an almost infinite variation»

_ in the combinations of these mixes of cleafi rice lots, »

from the rough*rice purchased from these three pro-

ducers was tracedyat the hearing into the sales of

clean rice into whith they entered ‘and the price of

clean rice sales ‘was established. However, owing to.

the fact that each quantity of clean rice ‘that went

lots of clean rice, which were in turn produced from

various lots of rough rice bought from different pro-:

ducers,. and owing to the fact that theré was, as is

and owing to the fact that rough rice when -milled

ERS LETTE EEE LAL ES NIE ELE LOBES SEG OE ILS LOPE SI + eel EEE RF

RE PS Pn eee ere Kom REN ME Ka ae : essa ot

: . . :

' 4 F

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produces difterent gr des of clean rice, as set forth in

the above mentioned bills of complaint, ‘the Secretary of

Agriculture was never able to shofv in that case whether

or not ‘the Bay City.Rice Mills had obtained for the

clean rice derived from the Evoritt, Powers, and Reed

rough rice. the amount (roughly 79c) above the cost

of the rough rice that Article*IV, Section 1, attempted

to require the mill to get. . Although that was one

of the charges most vitally affecting -the entire, ricé

‘program in affiant’s belief, and although the Secretary

of Agriculture through his two attorneys who prose-

cuted the case and through his several auditors who

were continuously working onthe records of the Bay

City Mills made every effort to prove the charge, the

Secretary of Agriculture in his findings did not find

that the charge had been proven 2nd did not find that

the Bay City Rice Mills had violated the license in the

manner set forth in Charge 11.

Affiant believes, and on that belief states, that the .

reason the Secretary of Agriculture did not find that.

Charge 11 had been supported by any..evidence was

because it was utterly. impossible practically to. show

' whether clean rice had been sold for the amount above

the Tough rice cost that the license required.

The charge referred specifically to the sale of clean

rice lots 36, 43, 123 and 124. Evidence as to the

history of those clean’ rice we is as ‘set out below.

The clean rice in each case was eclieibid 3 in various

_ Sales, each sale being represented by a separate invoice.

The ‘history of those clean rice lots was as follows :

(As shown by the record in that * "case.)

‘Clean Rice Lot 36: |

This. rice cdme from rough rice lot 33 Seti ..&

Everitt. It was mixed with various other lots of rice

and went in as a part of thé-rice sold and. représented

® es

: a

by the foHowing. 9 invoices: ‘Invoice’ Nos. ls: 6622,

6634, ‘6639; 6645, 6767, 6770, om and T-162 (R

324-326). - |

Tlie rice coveted by invoice No. 6615 was made up

of rice from various lots as follows:

39 pockets from lot 17, fancy

125 pockets ‘from lot 31, fancy is

200 ‘pockets from lot 36, fancy .

26 pockets froin lot 33, heads

26 pockets from lot 31, heads

(R. 472.) z gfe

Invoice 6622 consisted of the following:

75 pockets from lot 26, fancy

. °250 pockets from jot 35, fancy

175. pockets from. lot 36, fancy en

(R. 475.) ae yer

Invoice 6634 consisted of the following:

148 pockets’ from lot 34 EP

75 pockets from lot 35 EP

75 pockets from lot 36 EP

81. pockets from lot 37 EP

68 pockets from lot 38 EP

201 pockets from lot 45 EP. Pe

(R. 478.) oo

There was no evigence whatsoever as to the different _

lots going to make up the rice on any of the other

invoices heretofore or hereafter referred to, but ‘each

invoice represented a mix from various lots.

Clean Rice Lot 43: .

This lot went into invoices 6634, 6639, 6644, "T-126,

. T-127, T-128, and P-1006 (R. 327-329).. “No evidgnce

* &

was introduced as to the component part of those. in-

' voices, except invoice 6634 above set ‘forth, but they all

consisted of mixes.

Clean Rice “ 123: ..

“This tice went into the following invites:

)

tevelees Nos. 6832, 6833, T-187, T-188, 6840, T-195,

6839, T-200, 6885,. 6886, T-201, T-202, T-187, T-188,

and T-182 (R. 329 et seq.).. No evidence was intro-

duced as to the lots going into these ifvoices but they *

were all mixes.

Clean’ Rice Lot 124: a | e ;

Affiant does not have the record at this» time as to

‘what invoices this lot- went into but it was mixed into

a number of mixed invoices.

To have traced the cost of ‘the various lots of clean

. rice that went into each invoice would have been long

‘- involved and in fact practically impossible,- and then.

to trace thescost: of all rice going into all invoices into

which any one of these clean rice’ lots went would -

‘ have involved further and innumerable records and

evidence. : :

We =

This is further illustrated when _it™ is noticed that .

a large number of rough rice lots and clean rice lots.

were involved, as,. for example, in Charge. 11 it re-

ferred to rough rice lot as high as’No. 154 and clean

rice lot as high as No. 124.

‘No charge was ais that Bay City Rice Mills qid ‘

not keep accurate and complete records of its opera-

tions. | . =

Nor was. any issue made as’ to the fact that the >

selling of rice by samples and mixing rice was usual

and vastomary. ae” : ne

: \ | f

For example, Mr. F. A. Farda, who testified as a

witness for the Secretary of Agricultuge, and who is the

Manager of Standard Rice Company, one of the largest

rice milling companies in the United States, testified

as follows: . ‘

> ane >

“Mr. F ides , a ‘ +

‘Well, it, is. not common practice, in fact, it is not

a practice to make a mixture just in order to put it in

a warehouse and keep it. You make the mixture ,

when you sell yqur rice, get ready to sell it, you sell it

on'a sample and then you make your composite mix-

iure and your lots match your sample. That tS .@: *

common:-practice. ;

“Mr.:Davant: » ... ./ i ;

’ Is it. not a practice to make up these samples prac-

tically in the beginning of the season and to send

them out as types? ADE ie

“Mr. Farda: .

‘The practice is to make hand mixes, and to send them

samples, and when you sell on the samples. you make .

your actual mixture, make it up.” (R. 420-421. )

* - . a

. a

Mr. Farda: eee

The usual practice is, you don’t make your mix

until you have the rice sold.” (R. 429-430.)

; i | + tt ‘e@,-@ .

“Mr. Finda:

. You never make a mix until’ you have a sale

~.° made, because jit would not be of material ad-

ae ee eer Ne ee ee. ee ee ee eee ee Se EE ee ee ee Pes oe Oe Hat Only, + OA fod Bodin. Bi Bistans

‘ vantage to do’ so because you may not find another

market for that particular blend that you make. You

therefore keep your rice in the original lots to be in

a position to make a blend of whatever the trade or

market requires at that time.” (R. 430.) .

In connection with the ‘above lots of clean rice, the

Secretary’s attorneys tried to maké sdme allocation

of the cost of rough rice to the different grades of

clean rice produced as between. fancy rice and head

rice, but this was realized by aff to be purely arbitrary

allocation’ of cost without any real or sound basis’ for

the same.

The ‘aie proceeding’ against ‘Bay City Rice Mills

was a proceeding before the Secretary of Agriculture

to forfeit the license of Bay City Rice Mills for alleged

violation of.the license, The. hearing was: held before

a | Pepresentative of the Secretary ‘of Agriculture.

In the levennind affidavit the figure of 79c above

rough rice cost has been referred to. That, ‘as stated,

was used only roughly. Under the. license, the price

for clean rice was to be the price fixed for rougli rice

plus the conversion charge ‘plus the carload rail rate

for transporting rough rice to the miller’s mill plus

the administrative assessment of Sc per barrel. ‘The

coriversion CNarge was 70c per barrel plus 9¢ per barrel

if standard one hundréd pound single packages were, *

used for clean rice plus 5c pgr VArrel if cotton or paper

interlinings were‘used.: This, would make the spread |

‘between the rough rit€ price and clean rice price ap-

proximately 89c exclusive of the freight item.

(Sgd.) = - HOMER L. BRUCE.

Subscribed and Sworn to before mé, the undersigned

authority, by Homer L. Bruce, this 27th day of Octo- : *

ber, 1935.

- (Sgd.) RAYMOND REILSON,

(Seal) Notary Public in and for

Hairis County, Texas.

‘

’

75 0

AFFIDAVIT,

State of ‘Louisiana, .

' Parish of Orleans. |

We, L. Je Bartel, R. F. Gould, and J. J. Mayer,

each fifst being duly sworn, deposes and says: *

v . Mies

That we are Deputy Collectors of the Treasury De-

‘partment, Internal Revenue Service,. Louisiana Dis- .

~ trict, working in connection with the rice processing

tax division, and that the experience of each in. the

rice industry, prior'to becoming Deputy Collectors, is

as follows: L. J. Bartel has had: actual experience of °

approximately twenty years in buying. ugh rice;

operation of ‘rice milling plants, and the distribution .

of milled rice and by-products. R: F. Gould has shad

actual experience as follows: Fifteen years with’ the

largest rice millers of the’industry as Office Manager,

and Chief Accountant; one year as Sectetary, and

auditor of a rough rice buying agency for New Or-

leans rice mills, and one and éme-half years as traveling

auditor: for the Millers Committee, an agency operat-

ing under a Marketing .Agteement for the. Southern

Rice Industry. J. J..Mayer has had approximately

seven years actual experience in buying, selling ‘and

grading rough rice and distributing milled rice, and

by-products. _ Our broad. experience, as above out-

lined, reveals the following facts as existing in the rice

milling industry: -

There is no established market price on rough rice,

and the method of buying the rough rice by the millers.

els a competitive bidding method.’ Each miller has

outlined to him: by the management of the mill. he

basis is as follows: Rice millers determine the price

to make their. bid to a producer for his rough rice

based on the prevailing market price for milled . rice.

his bayer, who makes the competitive bid on the basis _ :

computing the values to the different grades and by-

products obtained from the processing of the rough

rice being bid. ‘upon. For example:

A lot (parcel) of rough rice,-estimated to produce .

(per barrel of 162 pounds) the following articles,

grades, classes, etc., when processed, with estimated

values as set out for each of the respective grades,

classes,. etc.:

Fancy Head Rice—100 cua at 4 a $4.50

Second Héad Rice—4 pounds at 3c ...... a

Screenings Rice—6 pounds at 2%4c ...... fee, ae

Brewers Rice—2 pounds at 2c ............ 04

~ Total yield per barrel—112 pounds.

gc RAE Santee iota beeen es $4.81 plus

Approximate revenue from by-products 3

(25c per barrel of 162 pounds) ........ 25

Total revenue ...... ee ae ae eae $5.06

Competitive bidding’ -basis prior to the processing -

tax law requiring payment of a processing tax in cash:

The above $5,06 is the’ gross. value of. milled

rice. articles and by-products resulting from a

162. pound barrel of rough rice. The mill

would deduct from this gross figure the conversion

charge, this conversion figure including the mills ex-

pense for processing the rough rice, and the estimated

profit. Assuming that this. conversion would be 60c

per barrel, the mill would then bid the producer $5.06,

less the 60c conversion, or $4.46 per barrel for the

rough rice. The affiants solemnly swear that they

have used and seen records of various rice mills estab-

lishing the basis-as, outlined above.

Competitive Bidding Basis after the Processing Tax

Law requiring Payment of a Processing Tax in Cash:

Since the beginning of the 1933 crop movement, which

become available for market during the month of July, —

and on which the processing tax applies, the rice millers

use the same basis to p olin values; however, in,

addition to deducting the conversion. charge, the. rice

millers deduct also .the 1c per pound processing tax

on the rough rice, or $1.42 per barrel, and submits his “

bid to the producer, less this deduction, as. follows:

From the value of the same lot of ‘rough rice as above .

illustrated, estimated:to produce milled rice and by- .

products with gross values of. $5.06 per barrel, the rice

miller deducts the following: Conversion 60c and pro- .

cessing tax $1.62, or a total-of\$2.22 per barrel, and

makes bid‘ to the producer of $2.84 per-barrél for that

particular lot of rough rice. as,

‘The affiants further solemnly swear that in their

practical experience they have prepared, and have seen

prepared profit and loss statements for certain given

periods .other than the entire season; further that these

profit and loss statements are prepared on particular

lots of rice, which is essential and hecessary in their

accounting™procedure. Should the Agricultural. Ad-

justment Act be held unconstitutional, th*affiants

state that the rice processors should enjoy the reniedy

_and benefits given by Section 21 (d) of the said Agri-

cultural Adjustment Act, as amended August 27th,

1935, beo@use the recerds of uying processing and

selling kept by the rice mills are @ quate enough to

properly allocate the cost‘of varidus grades of milled

rice and its by-products, resulting from the processing

of the rough rice; also to properly allocate in this cost,

the processing tax, proportionately to the various grades

of each lot of milled rice sold by itself ‘alone or

mixed. The greater portion of the milled rice sales are

straight mill run lots without blending. .

fe 78°

The affiants ‘arti’ solemnly swear that they have

‘kept or have seen rice millers’ records which reflect

correct cost of production, profits from sales,. etc.,

properly: allocated to milled rice of various ,varieties,

and grades, and by-products, and similarly allocated

as to profits in selling prices; and should the Agricul-

tural Adjustment Act be proven unconstitutional, each

rice processor has sufficient records to enable him to

recover in accordance with Section 21 (d) of the Agri-

cultural Adjustment Act, as amended.

Summed pp, the introduction of the rice processing

tax has in no wise alteréd the customary manner or

.procedure followed by the rice milling industry in

conducting their business..

(Sed.) . > L. J. BARTEL,

(Sed.) R. F. GOULD,

(Sgd.) JAMES J. MAYER.

Subscribed and sworn to before me this 28th day of

October, 1935.

~ (Sgd.) HOMER R. ROBINSON, «

an Deputy Collector.

DECREE.

*° Filed October 28, 1935.

(Title Omitted.)

This cause came on today to be heard upon ‘the |

application of the plaintiff for a preliminary injunc-

tion, as well as upon the motion filed on behalf of the |

defendant to dismiss the bill of complaint, and was

argued by counsel for the respective parties ;

Whereupon, and upon oMideration thereof, and for

the reasons — assigned:

. It is Ordered, Adjudged and Decreed that the ap-

plication for the Preliminary Injunction be and the

same is hereby denied;

It is Further Ordered, Adjudged and Decreed that

the plaintiff’s petition and bill of complaint in all re-

spects be dismissed. ,

(Signed) JOHN McDUFFIE, Judge.

_ New Orleans, Louisiana, October 28, 1935.

MOTION FOR INJUNCTION PENDING APPEAL.

Filed Oct. 29, 1935.

(Title Omitted. .

Comes now the plaintiff in the above entitled and

numbered cause and moves the Court to grant plain-

tiff an injunction pending appeal for the reason that, —

unless such injunction pending appeal is granted plain-

tiff, plaintiff will be. compelled to. pay the taxes re-

ferred to in plaintiff’s petition before plaintiff’s appeal .

can be determined by the Circuit Court of Appeals,

thus causing it great and irreparable injuries. Plain-

tiff offers to furnish good and sufficient bond by a

solvent surety company in an amount to be fixed by

Weg

the Court, ‘if the Court should grant its prayer ine

injunction pending .appeal,

BAKER, BOTTS, ANDREWS

& WHARTON, |

By JOHN P. BULLINGTON.

Motion denied. * [

(Signed): JOHN McDUFFIE, em

MOTION OF PLAINTIF r FOR APPEAL AND. .

ORDER ALLOWING SAME.

_ Filed Oct. 29, 1935.

(Title Omitted.)

On motion of plaintiff in the. above cause, and on

suggesting to the Court that plaintiff is. ‘aggrieved :

~by the decree entered by the Court herein on the 29th

day of October, 1935, granting defendant’s motion to

_- dismiss, sand. that’ plaintiff desires to appeal therefrom

with a> ’ supersedeas and a stay of proceedings in the-

District Court, pending appeal to the United States

~ Circuit Court of Appeals for the Fifth Circuit, and

.On further suggesting to the Court that said decree |

is contrary to the law and the evidence for the reasons

set forth in the assignment of errors filed in plaintiffs

behalf herein ;. and

On further suggesting to the Court that this motion

being filed in open Court on the entry of such decree

and in the presence of counsel for defendant, no cita-

tion of appeal is necessary or need issue herein;

It is: Ordered by the Court that ie appeal of hide

tiff from the decree entered herein to the United States

Cireuit Court of Appeals for the Fifth Circuit be and

the same is hereby allowed with supersedeas, on appel-

lant’s furnishing bond with good and solvent surety,

conditioned as required by law and to be approved. by

the Court in the sum of $250.00 said bond to act as a

supersedeas, as well as a bond for costs and damages;

It is Further Ordered by the Court that the appeal

of plaintiff from the decree entered herein. be made

returnable to the United States Circuit Court of Ap-.

peals for the Fifth Circuit at New Orleans, Louisiana,

on or before November 27th, 1935, and that a certi-

fied copy of the record herein be transmitted to said

- Court of Appeals by the Clerk of this Court, and that

. no Citation of appeal is necessary or need issue herein.

(Signed) JOHN McDUFFIE, Judge.

ASSIGNMENT OF ERRORS.

Filed, October 29, 1935.

(Title Omitted.)

Comes now plaintiff and says that, in the record in

the proceedings of the said Court in the above entitled

cause and in the decree made and entered therein on

the 28th day of October, 1935, there is manifest error

and for error the said plaintiff assigns the following:

. (1) The Court erred in sustaining defendant’s

motion to dismiss plaintiff’s Bill of Complaint, because

such. action was contrary to the law and the evidence.

(2) The Court erred in over-ruling and not sus-

taining plaintiff's motion for a preliminary injunction

because said ruling was contrary to the law and the.

evidence.

82 -

- Wherefore, plaintiff prays’ that said Decree be,

all things, reversed, with instructions to the said Dis.

trict Cgurt to grant plaintiff a preliminary injunction.

. | * (Signed) - BAKER, BOTTS, ANDREWS

, & WHARTON, .

By . JOHN P. BULLINGTON,

~ APPEAL BOND. -

Filed October 29, 1935.

Know all Men by these Presents, that we, A. B.

Dore, as principal and The Aetna Casualty and Surety

Company, Hartford, Conn., as surety, are held and

firmly bound unto Rufus W. Fontenot, in the full

sum of $250.00, to be paid to the Said ‘Rufus’ W.

Fontenot, his attorneys, executors, admini8trators’ ar

we bind ourselves, our heirs, executors and adminis-

trators, jointly and severally by these presents, sealed

with our seals and dated this 29th day of October,

1935.

Whereas, lately; in the: District Court of the United

States for the Eastern District of Louisiana, judgment

was rendered against A. B. Dore, and in favor of Rufus.

W. Fontenot, denying plaintiff’s application. for a

Preliminary Injunction and dismissing plaintiff’s Bill

of Complaint, and the said A. B. Dore, having ob-

tained an appeal to reverse said judgment, citing and

admonishing the said Rufus W. Fontenot to be and

appear at a session of the United States Circuit Court

of Appeals for the Fifth Circuit to be holden at the >

City of New Orleans, La., in said. Circuit Court on

the 27th day of? November, 1935.

83 Bak

Now thet condition of the above obligation is.such

that if the said A. B. Dore shall prosecute its appeal .

to’ effect and answer all damages and costs, if it fail

void, elsé to remain in full force and effect.

(Signed) A.-B. DORE,

By JOHN P. BULLINGTON,

| ‘Attorney of record,

Principal. .

THE AETNA CASUALTY. &

_A SURETY COMPANY,

. : Surety,

7 ~ By CARL F. WEISS, —

4 Seal) _ Attorney-in-Fact.

Approved, October 29, 1935.

(Signed): RUFUS g.. FOSTER, Judge. .

PRAECIPE.

Filed October 31, 1935.

(Title Omitted.)

To the Honorable H. J. Carter, Clerk of the United

States District Court for the ‘Eastern District

of Louisiana:

You will please include in the record upon appeal

in the above entitled cause the following documents

and procedures:

1. Plaintiff’s original bill of complaint.

2. Defendant’s motion to dismiss and answer.

4; , .

- 3. Order of Court consolidating causes for trial

and providing for evidence in cause No. 324 in Equity,

Baton Rouge Rice Mill, Inc., vs. Rufus W. Fontenot, '

etc., to be considered as evidence in this cause.

4, _ Affidavit of W. M. Reid,

5. Affidavit of Homer L. Bruce.

6. Joint affidavit of L. J. Bartel, R. F, Gouff and

J. J. Mayer.

7. Decree of the District rey . ae

8. Plaintiff’s motion for.injunction pending appeal

and erder denying same. |

9. Motion and order for appeal.

~10.. Plaintiff’s assignment of error.

u. Appeal bond.

12. This Praecipe.

13. Clerk’s certificate.

HOMER L. . BRUCE,

' JOHN P. BULLINGTON,

BAKER, BOTTS, ANDREWS

& WHARTON,

By JOHN P. BULLINGTON,

Attorneys for Plaintiff and |

Appellant.

Approved: ;

( sa a ROBERT WEINSTEIN,

Asst. U. S. Attorney, Counsel

for defendant.

85"

Clerk’s Office:

I, HENRY, J. CARTER, Clerk of the District

Court of the United States for the Eastern District of

Louisiana, do hereby certify that the foregoing 50 pages

contain and form a full, true and complete transcript

of the record, assignment of errors, anc all proceedings

- in the cause entitled “A. B. Dore, doing business under

name of The Dore Rice Mill, vs. Rufus W. Fontenot, .

Individually and as Collector of Internal Revénue for

the District of Louisiana,” No. 322 In Equity of the

Docket of this Court, as ‘made: up in accordance with

the praecipe for transcript copied herein.

Witness my Hand and the seal of the said Court

at the City of New Orlearis, Louisiana, this 2nd day

of November, A..D. 1935.

(Seal) —-«xH. J... CARTER, Clerk.

” H. W. NIEHUES,

Deputy Clerk.

Son

| 1 87

~~ [fol. 86] In Unrrep States Crrcurr Court or APPEALS FOR

THE. irre Circuit, at New Orueans, Louisiana ~

. « ”

. . No. 7945. 4

' A. B. Dore, Doing Business as the Dore Rice Mill, -

Appellant, | a

v. | .

* Rurvs. W. Fowrznor, Individually and as Acting United

States Collector of Internal Revenue for the Nistrict of

Louisiana, Appellee % F ,

Morron For PRELIMINgRY INJUNCTION Penne APPEAL—

Filed November 4, 1935

Comes A. B. Dore, doing business as The’ Dore Rice Mill,

appellant in the above numbered and entitled cause, and

after due notice given to the appellee above named, respect-

fully states to the Court that the said appellant on the 25th _

day of Ocicber, 1935, brought-a bill in equity in the United

States District. Court for the Eastern District of Louisiana, -

New Orleans Division, entitled A. B. Dore, doing business

as The Dore Rice Mill,-plaintiff, v. Rufus W. Fontenot,

‘individually. and as Acting United States Collector of In-

ternal Revenue for the District of Louisiana, defendant,

and numbered 322 in equity, in the New Orleans Divisj

. of said United States District Court. In-its bill of é0m-

plaint in said cause appellant prayed for a temporary re--

[fol. 87] straining order to be issued immediately, and for —

a preliminaryginjunction after notice to the appellee, and

for a permanent injunction onthe final hearing of said

cause, enjoining the appellee from assessing or collecting

or attempting to assess or collect from the appellant in any

manner whatsoever, whether by lien or jeopardy or dis-

traint proceedings, in cuurt or otherwise, any processing -

taxes levied under and pursuant to the Act of the Congress

_ of the United States known as the Agricultural Adjustnient

Act and amendments thereto; or purported to be eyied by

said Act, upon the appellant for the processing of rice ‘dur-

ing the month of September, 1936, and. for subsequent

months, and any interest or penalty on account of appel-’

1—578 ©

PLT Ie ee I EL tT eT -

FRE EM NER REET OTR Tet

iasiaies

lant’s failure to pay said processing tax, and from impos-

ing or giving notice of intention to impose any lien for said

taxes upon the property, real or personal, of appellant.

That said application for a preliminary injunction was set.

down for hearing before the Judge of said District Court

at New Orleans on Monday, October 28, 1935. The-notice

thereof was duly waived by the appellee. Prior to said

hearing the said appellee filed his motion to dismiss and

answer to said bill of complaint, copies of which motion and

also of appellant’s bill of complaint are contained in the

record in this cause filed in this Court.

After a hearing had on appellant’s motion for a prelim-

inary injunction and on .the said moti®n to dismiss, the

Honorable John McDufiie, acting judge of said District

Court gn October 28, 1935, refused appellant’s motion for

a preliminary injunction, granted the motion of the appel-

lee to dismiss the said bill of complaint and disniissed the

said bill of complaint, to which appellant herein duly ex-

[fol. 88] cepted. Thereafter, on the 29th day of October,

1935, the appellant herein in open court and in the presence

of counsel for appellee filed its petition for an appeal, which

‘ was duly allowed by the said judge of the said United

States District Court who tried said cause, and filed at the

same time its assignments of errors, and also a cost bond ~

was duly filed and approved by the said Judge of said Dis-

trict Court. At the time appellant presented its said peti-

‘tion for appeal, it also petitioned said judge of the District .

Court to grant it an injunction enjoining the appellee in the

manner set out in its request for a preliminary injunction

in its bill of complaint, pending the appeal of appellant to

this Honorable Court, but the said judge of said District

Court on October 29, 1935, refused appellant’s said peti-

tion and refused to grant appellant said injunction pending

- said appeal.

Appellant has therefore perfected its appeal to Gs Cir-

cuit Court.of Appeals for the Fifth Circuit, making said

‘cause returnable at New Orleans, Louisiana, as provided

by law. Appellant has duly caused to be prepared a tran-

script of the record in said cause and has filed the same,

in accordance with law, and within the time allowed by law,

in the Clerk’s office in the Cireuit Court of ae at New

- Orleans, Louisiana. ee

. = . =

Re 34 act

PSO pte SSH peri RAE se ate on - : weG

mar et A SIE err eRe es es ete Pe ——- —

nf prety ‘ * . PNG See ss is 35 tags Onsynigily RO REPENS Sst LN PI

In said bill of complaint appellant: alleged that the

amount of processing taxes on account of the rice processed

by the appellant during the month of September, 1935, was

$18,546.65, and that under said Agricultural Adjustment

Act appellant ‘was required to pay said amount to appellee

~.on or before October 30, 1935,- and that- ‘appellee was

[fol. 89] charged with the duty of collecting said tax, and

if said tax were not paid on or before October 30, 1935,

appellee would assess said tax against the appellant and

serve upon appellant notice ‘and demand for the payment

thereof and would allow appellant ten days from receipt

of such notice within which to pay the same; that in the

event said tax should not be paid within said time, appéllee

would assess against appellant a_penalty equal to 5% of

the amount of the tax and interest on the tax ‘at the rate

of 1% per month from the due date of the /tax until paid;

that if the appellant failed to pay the tax/within said ten

days, appellee would proceed to collect the tax, penalty and

interest by filing a notice of lien on all of appellant’s prop-

erty and distraining upon and selling such of appellant’s

property as might be necessary to realize the amount of

said tax, penalties and interest; and that additional proc-

essing taxes for months subsequent to September, 1935,

will accrue and be assessed against and collected from the

appellant in the same manner as the tax for the month of

September.

Appellant alleged that the said processing tax was illegal q

and unconstitutional, and violated various provisions of the .§ ff

Constitution of the United States in man articulars, more

fully set forth in appellant’s bill of complaint. The appel-

lant also alleged that under an amendment to said Agricul-

tural Adjustment Act approved on August 24, 1935, a Sec--

tion 21 (d) was added to said Act, which section provides

. in substance that appellant should be allowed no recovery ()@

_ of any of said taxes paid, if the same should be illegal or ’

unauthorized, unless appellant established to the s isfac-

_ tion of the Commissioner of -Internal Revenue, andthe

[fol. 90] Commissioner should so find, that neither appel-

_ lant nor any person directly or indirectly under appellant’s

* control or having ¢ontrol over appellant, has, directly or

indirectly,-included such amount in the price of the rice

with respect to which it wag imposed or of any article proc-

2—578 ‘

eran s semen ines ee

— wad “ a

90 .

essed from the rice with respect to which it was imposed,

or passed on any part of such amount to the vendee or to-

any other person in any manner, or included any part of

such’ amount in the charge or fee for processing rice, and

that the price paid by the appellant or such person for said

- rice was not reduced by any part of such amount. Appel- .

lant in said bill of complaint, alleged, as more fully set out

in said bill of complaint, that under said Section 21 (d) it.

had no adequate remedy at law by which it could recover

any part of said taxes if same were unconstitutional and

illegal, and that it was impossible, owing to the peculiar

conditions existing in the rice milling ‘industry and in the

purchase, milling and sale of rice, for appellant to dis-

. charge. the burden placed upon it by said Section 21 (d),

‘all as more fully set out in appellant’s bill of complaint.

Appellant further alleged that in said amendment of

August 24, 1935, a new section known as Section 21 (a)

was added to said Agricultural Adjustment. Act, which in

substance provided that no suit to enjoin the collection of

said processing .taxes should be maintained in any court.

Appellant further alleged that said section was not in-

tended to apply, and did not apply, to the injunction prayed

for ,by appellant, inasmuch as appellant had no adequate

remedy at law. Appellant further alleged that if said sec-

tion should be interpreted as prohibiting the injunction

prayed for by appellant, then the said section, together with

(fol. 91] the-other provisions of said Act, was invalid and

in violation of the Fifth Amendment to ‘the Constitution,

that no person shall be deprived of his property without

due process of law, in that said illegal and unconstitutional

taxes would be collected from appellant and: appellant

would have no remedy by which he could recover taxes and

would ‘have no remedy to prevent the collection of said un-

lawful taxes and would be forever deprived of the right to

test the constitutionality of said taxes.

Appellant further alleged that said Section.21 (d) de-

nied the appellant a complete and adequate remedy at law

for the various other reasons set forth in said bill of com-

plaint. — a

At the hearing before the District Judge appellant intro-

duced in evidence the affidavit of W. M. Reid, Executive

Secretary of The Rice Millers Association, a man of twenty-

six years experience in the rice business, in which affidavit

iain iia Ye cg oy Rs

i 2b seme teeesiereep neces 2 ROME Rem a SIRT INNO Ee on mre

he set out fully and in detail the methods of conducting the

rice business and the manner in which the rough rice mar-

ket and the clean rice market is made, showing. that it

would be utterly impossible for any rice miller to accu-

rately determine whether he had made a profit or a loss on

any given transaction, much less prove whether he had

introduced in evidence the affidavit of Homer L. Bruce, a

practicing attorney at the bar at Houston, Texas, setting

out in detail the proceedings under a complaint brought by

the Secretary of Agriculture to revoke the license of a rice

mill under the Act in effect prior to the present Act. The

Secretary of Agriculture sought to revoke the license of

[fol. 92] this mill for failure to sell clean rice and rice °

products processed from rough rice at a price ‘approxi-

mately 79¢ higher than the price paid for the rough rice.

The affidavit showed that although the Government was

able to prove the cost of the rough rice and to trace the

particular rough rice into various ‘‘mixes’’ of clean’ rice

and the price procured for these ‘‘mixes’’ of clean rice it

was never able to prove that the price procured for thé

clean rice processed from the particular lot of rough rice -

was not 79¢ more than the price paid for the rough rice

because of the fact that clean rice is customarily gold in

‘‘mixes’’ of various lots of rice and there was no way to

allocate the price procured for the mixed rice sold to the

various lots of rough rice which went into the mix.

In the meantime, appellant alleges that for the foregoing

‘reasons and those set forth in its said bill of complaint. in,

said cause, and because the judge of said court in his said

order dismissed saié bill of complaint and refused to grant

appellant the injunction prayed for pending the appeal in

this case, the appellee herein will, to the irreparable dam-

age and loss of the appellant herein, proceed to collect the

said taxes for September, 1935, which are now due and

unpaid, from appellant, and said taxes for subsequent

months, unless restrained by a preliminary injunction:

granted by this court. The appellant alleges that not only

has if no complete remedy at law, but in fact no remedy at

law at all, for the reasons hereinabove set forth and set

. forth more in detail in said bill of complaint, that it is faced

with the alternative of paying the tax with the certainty

that no remedy at law exists for its recovery in case it be

gia

— TERE GUSTER REP RH SSIES ERE NTE PINNED SOME TING RCE HS eT SENET RE OES

ve : . eS as : ~~ : F :

PIR Se A A

. 92

held that it was unconstitutionally assessed, or oi refusing

[fol. 93] to pay and running the risk of becoming liable for

the heavy civil and criminal penalties provided in the Act,

and that the said judge of said District Court should not

have dismissed said bill of complaint, but should have over-

ruled the same, and upon the hearing should have granted

the preliminary injunction as prayed for in said bill of-

complaint.

Appellant would further show that there is now pending

in the Supreme Court of the United States a case involving

the constitutionality of the said Agricultural -Adjustment

Act, being the. same case in which the Circuit Court of Ap-

peals for the First‘ Circuit’ declared the Act to be unconsti-

tutional, and that the Supreme Court, according to press

dispatches, has set said cause for oral argument on Mon-

day, December 9, 1935; that-a decision by the Supreme

Court of the United States upon the validity of the said

Act may be expected within a reasonable time fhereafter ;

that the first benefit payment to farmers provided for in

said Act has been made, and that under the standard form

of contract between the Secretary of Agriculture and rice

farmers no further payment is due yntil such time after

December 1, 1935, as the Secretary shall determine and,

declare what further amount of benefit payments shall be

made and when they shall be made; that the taxes to be col-

lected under said Act are for the purpose of making these

benefit payments and that since the Secretary of Agricul- °

ture need make no further benefit payments until such time

after December 1, 1935, as may be fixed by him, the delay

of the Government in collecting these taxes which might be

occasioned by the granting of the injunction prayed for

[fol. 94] herein will not occasion an injury to the Govern-

ment nor will it unduly interfere with the achievement of

the program set out in said Act if the Act be held constitu-

tional. On the other hand, as hereinabove alleged, great

and irreparable damage will be done to plaintiff in the event

the law is held unconstitutional unless the injunction here-

inafter prayed for is granted.

Appellant further shows that unless an injunction pend-

ing appeal be granted so as to preserve the status quo, the

subject-matter of the suit will be lost and the jurisdiction

of this Honorable Court defeated. Such injunction is

necessary to preserve the jurisdiction of this Honorable

Sw a ll Sa Ee a as EO oe oF

‘ Court, and in order that appellant may enjoy the just fruits

of a favorable decision on' this appeal. |

The appellant states that it is ready and willing to give

any reasonable bond or other.security that may be required

by any order of this Court, including the déposit from

month to month of the amount of tax due, in a depository

to be designated by the court, and therefore prays that this

Court make an order granting appellant a preliminary in-

junction ‘enjoining and restraining the appellee from as-

‘ sessing or collecting or attempting to assess or collect from

appellant in any manner whatsoever, whether by lien or

jeopardy or by distraint proceedings,-in court or otherwise,

the said processing taxes for the month of September and

subsequent months and any other processing taxes under

and pursuant to said Agricultural Adjustment Act upon

rice processed by appellant, and any interest or penalty on

account of appellant’s failure to pay said processing taxes, —

and from imposing or giving notice of intention to impose

[fol. 95] any lien for said taxes upon the property, real or

personal, of the appellant, pending the hearing of: appel-

lant’s appeal in this case and upon such conditions and

_terms as to this Court may seem just.

Homer L. Bruce. John P. Bullington. Baker, Botts,

Andrews & Wharton, of Counsel.

[fol.96] Duly sworn ie by John *P. Bullington. Jurat-

omitted im printing.

[fol. 97] In Unrtep States Circuit Court ‘or APPEALS

No. 7945

A. B. Dore, Doing Business under the name of Dore

Rice Mill,.

} versus |

Rurvus W. Fontenot, Acting Collector of Internal Revenue

Orver Denyine Motion For Previminary INJUNCTION . .

PENDING AppEaL—November 0, 1935

Upon the ‘authority of Rickert Rice Milling Company,

‘Inc., vs. Rufus W. Fontenot, etc., the application for in-

junction in the above numbered and entitled case is denied.

Seth, ery EET MP RES AMEE IRE PEAS ATR TELA EPRI TROL TTT I EY LL

[fol. 98]. In Untrep States Circuit Court or APPEALS FOR

THE FirtH Crkcuit

No. 7937

Rickert Rice Mituine Company, Inc., Appellant,

versus

Rurvus W. Fontenot, Acting Collector of Internal Revenue,

Appellee -

Appeal from the District Court of the United States for

the Eastern District of Louisiana

Motion for Preliminary Injunction Pending Appeal

Before Foster and Sibley, Circuit Judges, and Strum,

District J ndge

| Orrx1ox—November 5, 1935

By the-Court:

On consideration of the application for an injunction to

stay collection of taxes levied under the provisions of the

Agricultural Adjustment Act, as amended by the Act of

August 24, 1935, the Court is of the opinion-that the. tax-

payer has a remedy at law to recover back any taxes il-

[fol. 99] legally exacted and, further, that the provisions

of the Act as amended deprive the Court of jurisdiction to

grant injunctive relief.

It is ordered that the application be denied.

omitted in printing. .

[fol. 101] Surname Cover or tae Unrrep Srares

Orper ALLowine CzrtTiorarI—Filed November 25, 1935

The petition herein for a writ of certiorari to the United

States Circuit Court of Appeals for the Fifth Circuit is

- 95

granted, and the case is assigned for argument on Monday,

December 16, next.

And it is further ordered that the duly certified copy of

the transcript of the proceedings below which accompanied

the petition shall be treated as though filed in response to

such writ.

. End

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