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

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TRANSCRIPT OF RECORD

Supreme Court of the United States

OCTOBER TERM, 1935

‘No. 579 .

att,

UNITED RICE MILLING PRODUCTS CO., INC,,

PETITIONER,

US,

RUFUS W. FONTENOT, ee roe 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 \

' PETITION FOR CERTIORARI FILED NOVEMBER 11, 1935.

CERTIORARI GRANTED NOVEMBER 25, 1935.

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Stated at ia

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_ SUPREME COURT OF’ THE UNITED STATES

OCTOBEB TERM, 1935

“No. 579

€

UNITED RICE MILLING PRODUCTS CO., INC.,

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 THE UNITED STATES CIRCUIT COURT |

OF APPEALS FOR THE FIFTH CIRCUIT

INDEX.

Page

Record from D. ©. DU. B. Mapteorm Lomislame ..<ccccccccvccccccccvcves 1

NE a iS sanac nahn bankers eee ne oni necenueen cones 1

WHlt of COMMMMMERE occ csccccsvevevess Uedaene Ciuuabiekerecoenes 2

Exhibit “A”~—Administrative Rulings Relating to the 1935

Southern Rice Production Adjustment stain csheueuwes 27

pe ee 38

WEIR, “O"—Bectde Fh wc scccvecccvevsvcccccsoncssseces 48

BMOUGE «0 ceseccccccccreverwveteesenverecvesecosetevcseseees &4

BOTS OP GING occ sewrecccceveccesesvsedeccesecesececesees 56

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

Ee EN EE vest eu ee cdsuineeeesehexereacvaceass 60

. Affidavit of Homer L. Bruce... ......cccccccscccscccccccccccccs 64

Joint affidavit of L. J. Bartel, R. F. Gould & J. J. Mayer........ 75

MUNIN ro dectcta ch cd Pl eicta Gina's peur Wie aie WiGTEIN Wore aN UW's 6. Wis CW Dig WISI OO ree 78

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

—7201-C

ae INDEX

3 gee . ; Page

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

Motion of: plaintiff for injunction. pending appeal and order

Genying SAME .... 1... eee cececccccecccccceccccecccccees 79

Petition for appeal and order allowing same .................. 80°

Assignment of errors ........... Feet retaR ite hate aa ure rabwiwlaie ear eu wate 81

SE WORE 5 a snes hensicssevecdanecesicedvenes waeveduweee es 82

Een Ee SO ee ee ee ee ee 83

Ce ID hk b 000 k06 bn sehen ce deeereeetssatscesnese 85

» Original Print

Proceedings in U. S. C. C. A., Fifth Circuit.............2.4. 86: 87

Motion for preliminary in junction pending appeal.......... S6 87

' Order denying motion for preliminary injunction pending

OE cc occ etsreserewcees 5 lee ectdiet uieie derail waela aa alun ser 97 ‘93

Opinion by the Court ......ccccccccccccscccccs Ninn venenn 98 94

Oe ee re (omitted in printing).. 100

QCuGer allows Gertherert ..... cc ccccccscccccescccccccesccs \o1 94°

‘ he

UNITED STATES OF AMERICA.

DISTRICT COURT OF THE UNITED STATES,

_ EASTERN DISTRICT OF LOUISIANA, NEW

ORLEANS DIVISION. |

No. 323 (In Equity).

UNITED RICE MILLING PRODUCTS Co.

- versus

RUFUS: W. FONTENOT, INDIVIDUALLY AND

AS ACTING UNITED STATES COLLECTOR

OF INTERNAL REVENUE FOR ‘THE DIS-

TRICT OF LOUISIANA.

Appearances: : a : —_

Messrs. Baker, Botts, Andrews & Wharton, John

P. Bullington, Attorneys for United Rice Mill-

ing Products Co., 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:

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

_ of New Orleans, Louisiana.

_ TRANSCRIPT OF RECORD.

;°

BILL OF COMPLAINT & EXHIBITS

ANNEXED.

"Filed Oct. 25, 1935.

In the District Court of the United States, Eastern

District of Louisiana, New Orleans Division. |

United Rice Milling Products Co.

vs. No. 323 (In Fquity).

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 United Rice Milling Products Co. here-

inafter referred to as plaintiff and in the neuter singu-_

lar, complaining of Rufus W. Fontenot, individually

and as Acting United States Collector of Internal

Revenue for the District of Louisiana, hereinafter

called defendant, and for cause of action shows to the

Court as follows: ©

: : :

Plaintiff is a corporation organized under the laws

of the State of Louisiana, with its principal office and

domicile at New Orleans, in Orleans Parish, Louisi-

ana. The defendant is a citizen of the State of Louisi-

ana residing at New Orleans, Louisiana, and is the

duly appointed, commissioned, qualified and Acting

United States Collector of Internal Revenue for the

State of Louisiana.

ee ae -

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 ‘Fhousand 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 New Orleans,

Louisiana. .The milling of said rice, which constitutes

setae of said- rice under the terms of the Agri-

cultural Adjustment Act, hereinafter referred to, is

done wholly within said State and is a matter 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 and 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 relieve the existing national Economic

emergency by inereasing 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. “i

and said Act with its amendments, 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 the enactment of

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

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

“It 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 commodities in

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

agricultural commodities ‘except tobacco shall be the

prewar period, August 1909-July t914. In the case

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

August 1919-July 1929.

(2) To approach such equality of purchasing power

“i gradual correction of the present inequalities there-

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

’ the current consumptive demand in domestic and

foreign markets.

(3) To protect dhe 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 in 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 idiw 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 prices to farmers above the level

which it is declared to be the policy of Congréss 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 andcollection of said

taxes are wholly illegal, unlawful and unwarranted

under the Constitution of the United States.

Section 8 of said Agricultural Adjustment Act’ pro-

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

clared policy 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 ne

Section 9(a) of wid Agricultural Adjustment Act

levies the processing taxes thereinafter 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 basic agricultural commodity, he

shall proclaim such determination and a-~ pro-

cessing tax shall be in effect with respect to such

commodity from the beginning: of the marketing

year therefor next following the 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

-per pound of oe 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, and did proclaim, before April 1, 1935, that

rental or benefit payments would be made, with re-

_spect to rice and the processing tax of lc per pound

of rough rice would be in. effect on and after April .

, Fee.

Section 9(b) of: said’ ‘Agricultural Aonaen 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 exémpt 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

mentioned should be at the rate of lc 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 market 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 authorized to be made under Section

8, including said rental and benefit payments made

with respect to adjustment and reduction in acreage

_or production for market of basic agricultural com-

~~ modities, including rice.

Section 12(b) of said Act, prior to said Amend-

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 were appropriated to be available to the Secre-

tary of Agriculture for expansion of markets and re-

moval of surplus agricultural products and adminis-

: trative expenses, rental ‘and benefit payments, and

refunds on taxes. Section 12 (b) of said Act as

amended by said Amendment of August 24, 1935, pro-

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 be made

under said Section 8, including said rental and benefit

payments, said sum so appropriated to be equal to the

proceeds derived from all processing taxes imposed

under said Act. |

Acting pursuant to the purported authority given

to him under said Agricultural Adjustment Act, the

Secretary of Agriculture under date of April 18, 1935,

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

and made a part hereof as if fully copied herein at

this point. Under. said ruljngs the Secretary of Agri-

culture allotted acreage to be planted in rice .and bar-

rels of rice to be produced. (a barrel being defined as

being ‘one hundted sixty-two pounds of rough rice)

all

9°

in dics States of Arkansas, Louisiana and Texas as

follows:

Acres. Barrels.

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

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

BU 5 0%¢00: 142,500 2,010,833

Said rulings provided for a State Committee appointed

_ by the Secretary of Agriculture for each State and

for various forms and applications to be filled out by

those desiring to produce rice and to be filed with the

said State Committee. Said rulings proviaed that the.

base period for Texas should be the years 1931 to 1933,

inclusive, and for. Arkansas and Louisiana should be

the vears 1929 to 1933, inclusive. Said rulings further

provided that the said State Committee should make

an allotment to a producer applying to the Secretary

of Agriculture through said 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 give an _allot-

ment or permission to ‘said producer to plant said

80% (in the« case of Arkansas and Louisiana) °

or 78% (in the case of Texas) of~the~-aver-

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 in Arkansas or Louisiana)

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

rels of rice raised by him during said base period.

If a 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 executed 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 exécute 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.

Plaintiff alleges that said processing taxes were not

levied under. the taxing power of the United States

and for the purpose of raising revenue, but were levied

for the purpose of raising money with which the Secre-

_tary of Agriculture could make rental or benefit’ pay-

ments to producers of agricultural produets, 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 Constitution of the United States .to levy said pro-

cessing taxes for said purpose and for said objects.

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

~ $m acreage or ‘a reduction in production of any

or 11

basic agricultural commodity through agreements with

producers, and td -provide for rental or benefit pay- .

“ments in connection therewith in such amounts as

. the Secretary deems fair and réasonable, but there is

no standard or measure established or provided in said

Act by which the said Secretary shall be guided in

providing for said reduction in acreage or production

or in the amount of the rental or benefit payments,

-and said provisions are wholly invalid and violative

of Article 1 of the Constitution of the United States

which vests all of the legislative power in the Congress

of the United States and is an invalid and uncon-

stitutional delegation of legislative power by: Congress

to the Secretary of NS.

Plaintiff further alleges oe the Secretary has made

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

findings, they are wholly insufficient to support his

action 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.

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 shall be at such:

rate as will prevent such accumulation of surplus stock

and depreciation of said farm price. ‘Said provision

applies to the processing tax levied upon rice. ' Said

provision sets no proper standard: by which the Secre-

tary ‘shall be guided in determining the rate of the

processing tax on rice or how long said tax of one

cent (lc) per pound shall remain on rice, and the

continuation of said processing tax being dependent

upon said action by the Secretary, said provision is an

- unconstitutional delegation of legislative 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 in levying

said processing tax is void and illegal.

A 40,

_-¥n addition to the foregoing reasons, thé said Agri-

cultural Adjustment Act and its provisions for the

levying, assessment and collection of said processing

taxes upon 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 attempt 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 Constitution

ta levy and collect taxes, duties, imposts ‘and excises, -

in 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 commodities 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 Con-

stitution since the so-called processing taxes constitute

the deprivation of the property of one class of citi-

zens, including the plaintiff, namely, 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

7 gratuities or bounties or benefit payments to another

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

nated agricultural commodities, including rice, and

particularly since this taking is without just com-

pensation to the plaintiff and said processors.

: |

Said so-called processing taxes levied by the

ct 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 for the

purpose of enabling the government to carry out and .-

effectuate the said attempt, effort and scheme of the

_ United States as hereinabove set out. :

w.%

e | 14.

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

Constitution of the United States, the legislative

powers granted to the Federal Government are vested

in 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 such 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 of

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 1, Section 7, 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 1, Section 2,

clause 3 ‘of the Constitution, because not apportioned

according to population.

z. "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 deve taxes cannot be’ levied wie

Article 1, Section 8, clause 3, regulating 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

by Congress and itt so far as this plaintiff is concerned,

its processing of Said rice is not interstate commerce

and cannot be regulated by Congress.

11.

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 with

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

1935, showing the 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 by the plaintiff during said month

of September is $31,839.40. 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

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 within 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 morths sub-

7 6

, »® :

‘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 inventory of rough

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

Repeated levies upon and distraint of its property from

month to month will cause plaintiff irreparable injury

and damage, in that such levies and distraints will

impair the valuable good-will of its business; will seri-

ously interfere with, if’not prevent, the actual opera-

tions of its plant and’ the sales of its product; 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 not 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 Adjustment Act. Under Section 21(d) a

recovery will 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 rice

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 it has been either deducted from

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

ing price of clean, rice for the following reasons:

Rice millers buy rough ‘rice at the market 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 on 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 rice 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 make 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 with many other food products, such as wheat,

potatoes, beans and other food products, that can be

substituted for rice. Under such circumstances, 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

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 milled 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 grades

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 consumption .by human

beings. Brewers and screenings are a Very low priced

commodity and are.used in general by breweries.

Polish,.bran and hulls are ‘sold generally for stock

feed. Some of such products, particularly’ 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 deftnite 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 how

much the rice and rice products that have. been pro-

duced from any particular lot of rough rice have cost,

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 iax is levied upon the |

first processing of the rough ricaand must be 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 any

month, some of the grades may be sold immediately,

whereas some of the other grades produced from said

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

and it is thus impossible to tell how much has been

‘

received for the clean rice and its products that are

produced from any month’s processing, and it is im-

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

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

rice. .

Indeed, it is impossible even to determine whether,

for any given month, the mill operations have resulted

in a gain or loss and it is only at .ne 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 makes 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 in 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-

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 peculiar 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 plarntiff .and other

rice mills know approximately the different kinds of

rice 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 during the season. Owing to the

varied character of clean rice out-turn from rough

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 obtained

for.a given amount of clean rice of a _ certain

sample, the intiff and other rice millers then

find what diffgrent 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 different sources 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 innumerable combinations of other lots of clean

rice so fhat 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, to 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

e e \ € Po : é )

? i et é

t = ‘ ra . oe] _ oe

; a : ‘

Re®enue is the sole record of the’ case on appeal to the

Courts.” The effect of such section. is therefore to

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

minatiaan. ofgwhether 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 Cvnstitution. -

14. . ic Q

se A

' Under said Section 21(d) ‘of wid Agricultural

Adjustment Act, ifthe 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 passéd ‘back by the plaintiff; nor can the persons

to whom the processing tax has been. thus’ passed on

account, but all right of action — anyone to. recover

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

_has been wholly taken away. by sad amendments to

said Agricultuggl Adjustment Act. Moreover, Section

21a) of said Acé and Section 405 of the Revenue

Act of 1935 deprive the Courts of power to render

declaratory judgments with respect to such alleged

taxes. By reason of the _impossibilities of proof here-

ae 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 chi. shows that by Section 30 of said

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

constitutionality of such taxes.

ae ae

added to said ed, 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 far 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 causé,

‘then the said section, together with the other provi- |

sions df said Aet, is invalid and in violation of the”,

Fifth Amendment to the Constitution of the United

States, that ro 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 ©

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 ta, 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. ; a

17.

A: vebund 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

2 *

+ 24

not appropriated funds for the payment of such whine

aid plaintiff believes, that in view of the aggregate

amount involved, there i is a reasonable doubt whether .

such appropriation would ever be made.

< war 18.

Plaintiff is ready, able and willing, and hereby’ oilers

-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 ghall direct the said sums

claimed to-be due from plaintiff for processing taxes on

accuunt 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 réturns become

due and payable according to existing laws and regula-

tion’ 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 being without an adequate

remedy 3 at law prays: ~~

a That process issue and be served upon the de-

fendant requiring him to appear and answer this bill,

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

by expressly waived;

_ 2. That pending the hearing of the application for

a preliminary imjurction hereinafter prayed. for,

temporary restraining order issue immediately enjoin-

ing and restraining the defendant until the hearing ~

of its application for a preliminary injunction or until

Ly Et

the fstiline order 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

-_ r

and pursuant, to said Agricultural Adgustment 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 P perty; real or personal

of the plaintiff ;

yy , *

. oS id

3. ‘That notice issue to the fendant advising him

that plaintiff is hereby applying for a preliminary.

injuzetion and that plaintiff’s said application will be

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

and that upom said heating a prefminary 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 i in any manner whatsoever, whether

by lien or jeopardy or by distraint proceedings, in

Court or otherwise, any processing taxes under arid

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 injtthction 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, w -—

by hen or ‘jeopardy or by. distraint proceedings,.

'* Court or otherwise, any. processing taxes under aa

pursuant to said Agricultural Adjustment Act. and ©

Py , Pa 26 7

interest or penalty on account of plaintiff” S failure to

pay said processing tax, and from imposing or giving

notice of intentionto impose any lien for said ta>es

- upon the property, real or gervonal, . of the plaintiff;

red

“ih. That 1 at ‘the final hearing it be adjudicated that

“tthe provisions of said Agricultural Adjustment Act

providing for the levying, assessing and collecting of

said. processing taxes, against and from the plaintiff

are invalid, unlawful and unconstitutional on each and

every one of the grounds upon which they are herein-

above alleged to 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 —— Act;

6. And plaintiff ; ‘prays for such other and further

relief, both general and special, to which it may be

justly entitled.

((Signed) _E. V, SCHAFER,

(Signed). JOHN P. BULLINGTON,

HOMER L. BRUCE,

(Signed) BAKER, BOTTS, ANDREWS

: — & WHARTON,

By JOHN P. BULLINGTON, .

Attorneys, for Plaintiff.

g .

. State of Louisiana, | s

Parish of Orleans. Oh

Before: mé, the undersigned authority on this day

personally appeared E. V. Schafer, who having been

by me first duly sworn, stated on oath. that he the

Feveeue ., a corporation plaintiff in the above cause,

pee that he has been duly authorized by said corpora- .

tion to make t me affidavit for and in its behalf; that

» &

he has read the a and pom 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 belief, he believes

them to be ‘true. | :

(Signed) FE. V. SCHAFER.

Subscribed anid Sworn to before me this 25th day

of October, we.”

e (Signed) -HAROLD J. ZERINGER, }

3 Notary Public in and for

(Seal) Orleans Parish,~Louisiana.

" Ka

EXHIBIT “A.”

Filed October 25, 1935. °

Issued April 18, 1935.

United States Department of Agriculture,

Agricultural Adjustment Administration.

Adininlatoutive 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 Gontract: . -

_ and documents pertaining thereto. |

maar |

If any of the provisions are not understgod,. 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- - ie

‘out knowing exactly what he must do in ordér to.

receive, the benefits of the programn. .

~ 2

me Definitions —As used i in the Southern Rice Pro-

«duction Adjustment Application, Declaration, Con-

tract, ‘Schedule, and these Administrative Rulings:

‘

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

and “well or canal operator,” include individuals, CO-

partnerships, and corpofations; and where it is _re-

quired by the context, the singular shall include the

plural. ». a

‘(b) “arm” means one contiguous tract of land

operated as one unit substantially apes from any

other such tract of land.

{c) “Producer” includes persons owning and oper-

ating their own farms; tenants operating farms rented

for cash; tenants operating farms under a crop-share

lease, contract, or agreement; landlords leasing t6 share

tenants; corporations, copartnerships, or individuals

furnishing water for production ‘of ricé. 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 froduction.of rice” means -

sharing as a producer in any manner in the produc-

tion of rice on a farm. <4

(@) “F arming Operation” means the production of -

rice or the enune in the production of rice by

a producer. :

(f) “Application” means any Application fort Rice

Acreage Allotment (forms Rice 1 and 2) heretofore

or hereafter. executed by any producer. “Application

serial number” mean$ the serial number of- any such

- Application. |

“g) “Declaration” means any 1935 Southern -Rice

‘Declaration of Farm Acreage (form Rice‘30) hereto-_

fore or here@fter executed by any producer. The “farm —

serial number” meahs. the. serial number of any such«

Declaration. ie = at

- (h) “Schedule” means any enei cer’s Schedule ‘of

Rice Acreage (Form eng heretofore or hereafter ©

executed: by any producer.” Each such Schedule shall,

bear the same serial number. as the Contra¢t executed

. by the producer who executes the Schedule.

(i) “Contract” means any 4935 Southern Rice

Production Adjustment Contract (Korm/Rice-36) here-

‘tofore or hereafter executed by an¥ prodiicer. The

“Contract serial number” means the serial number’ of

-any such Contract. 4

(j) “1935”. means the period from ‘January 1,

1935, to December 31, 1935.

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

1934 to December 31,1934. 5

(1) The term “State base period” means the pone |

- . of calendar years 1929 to 1933, inclusive.

(m) The “State Allotment” shall be 135,000 acrés —

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-

- jana, and 2,010,833 barrels for Texas.

* (n) The term — pe in Askaneas’ and

Louisiana means the period of the calendar years

APY |

Agriculture of the United States.

1929 to 1933, inclusivé, and in Texas the years 1991

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 7. 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 ee) fo

the produger for 1935 and determined according-to

procedure set forth in Administrative Ruling I] hi co

(q) . The “acreage dHocated” by the producér 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 rice 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 .

rice acreage planted on that farm jin 1935 (as de-

terminedupon checking compliance with the Contract

in the manner prescribed by the Secretary) that the

acreage allocated by thg producer to that farm in a

Declaration bears to the total rice acreage allocated ‘

to, that farm in 4tch: Declaration:

(s) The “Secretary” means the Secretary of

Nd . }

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

? Agricultural Adjustment Administration,

31 a

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

and production prepared by re United States Depart- '

ment. of Agriculture.

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

‘ ‘ v e . ;

(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 Committee as follows: (a) Add the

acreage of rice planted annually by éach 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 the total

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: pevernt in

, Texas.

The total allotments 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 sumb

of barrels of rough rice produced annually by each

producer for his own account during the base périod,

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 and -in (inane and the

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

the result“obtained by 20 percent in Louisiana and in

Arkansas and the result ob*ained by 22 percent in

Texas. ae

. 4

. v.

32.

The total quotas assigned to producers in each state

shall not in any event exceed the state quota for that

state.

\ a 5

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 Adininistra-

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

tion Riistory. shall be in writing, signed by, or on behalf *

of the\producer bv 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 historv 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 recerds 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-

33 ‘

ship and succession to the producer’s farming opera-

tion.

(b) If a well or canal operator Valieswatie. sells

~his well or canal system and has not executed an

application, his ie ange 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, |

(c). If a partnership is dissolved before an applica-

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

allotnient 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

shallbe presented to the State Committee in his.

Application. No producer shall be assigned Allot-

ments gnd 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 arly _ exceed the State

Allotment and eats respectively ;

34 :

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

ducer’s AHotment 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. ‘

(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.

te 7

icieed from the production of rice after executing an

Application but before executing a Contract, he may

transfer all or part of his Allotment and Quota to such.

— ae =

art TAY RR NS BF, ee a i CAN DOU SLE GOGH GEG SA aS wn eis CEP we

person 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 befor Contract has been executed’

by or on behalf of the Rare 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 pei

to the State Committee. :

IV. Use of Allotment and Quotas by Well or Canal

Operators.—If a well or canal operator kas 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 on a crop share basis, such well or canal

operator shall not change his status so 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 Application, Declaration, Contracts, .

and Other Documents by a Person‘in a Representative

Capacity. —

(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 Contract, (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 corporatior on a prescribed form and

filed with the Comptroller of the Agricultural Ad-

justment Administration at Washington, D. C., or

attached to the contract, which authorization shall .be

cormidered a_ part of the contract documents.

(2) In dw 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 presexibed

form showing that such person was duly appointed

as such fiduciary and that the appointment 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. | 7 c

(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

, : 37

the ‘oieeiiy 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 pledgéd 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 exelusiveness of the

above definition, the expression shall not include cash

rent or debts incurred i in connection 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: TUGWE ELL,

Acting Secretary of Agriculture.

EXHIBIT -““B”.

Filed Oct. 25, 1935.

Form Rice 36,

- U.S. Départment of Agriculture,

- Agricultural Adjustment Administration,

‘Rice Section.

Form approved by Comptroller | | u. S.,

May 1, 1935. -

1935 Southern Rice Production Adjustment Bradtect.

(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:

Jd ’ .

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-

fary”) 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 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 contract 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 pre of rice thereon ;

(d) « - Agrees that his total share of the acreage

planted to rice in 1935 on all the farms covered by

this contfact shall not exceed his allotment;

(e) ‘Agrees that the acreage permitted under this

contract to be planted to rice in 1935 shall oe 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 from any and all

of such farms, and expressly waives any right to have

such’ records kept confidential ; .

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

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

claim for* payments under this contract,gand 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, @xcept

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 farm(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-amounft 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 named in para-

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

notified of any pledge of the adjustment payments

for current production credit made pursuant to the

terms of this numbered paragraph, such payee shall

receive such paytents in trust to pay the whole amount

er 41

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; a i re

| \

(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

oceurred 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 thereoh,

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 detémined 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 df ‘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 acréage planted to rice in 1935 on all such farms ©

‘bears to’ the producer’ s allotment.

4. Time of Payments.

(a) The first eljastuitnt payment shall be made

a§ 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, hag been submitted to the Secretary or his

authorized agent.

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

the benefit.of the producer and shall be made only to

‘the producer unléss the producer shall, by naming an-

other person in this numbered paragraph, direct *

‘such payments be made to the person so named,

which event the payments shall be made by chegk dan

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 shafl 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.) -

TE, 5°. . cewxncdseess . .. oar Seer eee

_ County §-

Community........ .. Contract ] .

ok re

| (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 ne

his signatyre.

edeteded ridbe eles DL anewenaee a. B

(Witness) (Date of Producer’s signature)

(Signature of Producer) > (Application No)" *

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

No.) .... (Post Office) ........ . (Stateh es... ee.

ea Meade reia tee os hea vonage ee

(Wines) (Date of Producer’s signature)

(Signature of Producer) (Application N . _

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

NO.) ....: (Poet ORs) .....3 Eyl k ME sa Sow oles

IV. Certification of Committees.

We Herekty Certify that we haveeexamined the fore-

- going offer -and that, to the best of our information

_ and belief, the total acreage allocated by the producer

to al 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.

oeereeree eee eee ee ee we we we we we we we

$66 8 6 ¢ ©. 4 ©. BO OE OCS 4 4. OO EO eS

e @'6 aS 69 8 Se. 4. 6.9 6°66 6.4 6 CE DS BS SC

1 Ee F288 SS SS ON 8 2 SOO SE Ee Se Se ee

S @C Gee CRBS EON TF C88 BS HY

Seseteeseeun oepeseeeeeadvnvnesc ew eves ee b 8

(For State Committee)

Date..... , 1935: Date..... , 1935. Date....., 1935.

Vv. 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

See [. Seeeeeeeeeee ee eee 1935.

HENRY A. WALLACE,

_ Secretary of Agriculture, for

and on behalf of the United

States,

coveuniidiies of Secretary _

of Agriculture.

VI. State Committee’s Certificate of CompMance.

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 producer’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.

ee OC Ce BDAC E SC VCH CBSE CRHB CHEE GD HES

/ - + (For State Committee)

< e “_

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 sadministrative rulings issued by the

Secretary, applicable up to and inclvding the date of

this certification.

if ere eshaaeiees , 1935.

(Producer.)

VIII. Certified Basis for Determining Payments.

1. Producer’s allotment .......... CS)

2. Predwcer’s quete ......6...5.: - ° ee

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

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

5. Number of barrels for payment (item 4

eS Ee er ee rae aes

*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 — for use by Comptroller’ S

' Office.

Computation of payments:

1935 first adjustment payment Item 5 times

cg: chee netswa ews - See ees

1935 second adjustment payment, Item 5

ee A 2 Sees

Do Not Write in Space Below.

Certificate of Cemtnatiee.

Audited and approved for 1935 first adjustment

payment in the amount of .............. | Ae

JOHN B. PAYNE,

Comptroller,

ad cilia sg balaats a

Auditor.

Schedule No. ........

De ese ee

NE is einen arian by check on Treasurer of the

United States in favor of payee or payees named

thereon.

Certificate of Comptroller.

Audited and approved for 1935 second adjustment

payment in the amount of .............. Brees vee

JOHN B. PAYNE, |

Comptroller,

eg ew ra aye iy ee a

Auditor.

schedule INO. ........

ee Pee. ee

PU ie aha aaa y by check on Treasurer of the

United States in favor of payee or ‘Payees named

thereon.

Check No Sey anes eee Paves. re rere?

(Any intentional misreprésentation 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 in

any Court if such suit, action, or proceeding is

for the purpose or has ‘the. effect (1) of prevent-

ing or restraining the assessment or collection of

any tax imposed or the amount of any penalty or ir-

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. intetest

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, proclaiméd 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 by 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 aggeements with producers

prior to such date, and thé 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 amount

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 record 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 iene’ 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 eredited to any person (not

51.

a processor or other'person who paid tlfe 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 termihated 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 Secretary of Agriculture’s exercise or

failure to exercige 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 fronr the date of the pay:nent 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 jurisdiction 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 fiéld service, 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 i 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 callector 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 testimagny 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 be 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 Courts of, the United States. All in-

formation obtained by the Commissioner pursuant to

this subsection shall be available to the Secretary o

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 m6re

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,

or 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 imterest, 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 of section 317 of the Tariff Act of 1930.

-RETURN TO RULE TO SHOW .CAUSE WHY"

TEMPORARY INJUNCTION SHOULD NOT:

ISSUE.

Filed Oct 28th, 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. Fontenot, 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,

‘ «55

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, eventéen 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. “s

Wherefore, your ' Repondies 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 general 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 offical capacity

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

he has drawn thevreturn 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 and

' belief. ee

(Sigtied) RENE A. VIOSCA.

a a iii a

tub to and —e before me this 28th day of

‘October, 1935.

Seed) CLAUDE D. SHAW.

Deputy Clerk, U. S. District

Court, Eastern District of

Louisiana.

MOTION TO DISMISS.

Filed Oct. 28, 1935.

(Title Omitted.) ae

To the Honorable, the Judge of the ae Caan 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, with 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:

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.

z. 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. yay ed

for in a Court of Equity.

4. Complainant has a plain, adequate and complete

remedy.in the ordinary course of law.

II.

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.

IV.

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-

jundtive relief. —

This ptoceeding is prohibited by the provisions of

the’ | All sito Judgment Act, as amended, and can-

not be maintained. ( Revenue Act of 1935, approved

August 31, 1935, Section 405).

——

~ 58

Dated: this 28th day of October, 1935.

(Sed.) RENE A. VIOSCA,

| United States "Attorney.

(Sg¢d.) ROBERT WEINSTEIN,

Assistant United States

Attorney.

ORDER OF COURT CONSOLIDATING ALL

CASES FOR TRIAL, ETC. |

Filed Oct. 28, 1935.

United States District Court, Eastern District of °

Louisiana, New Orleans Division.

Docket No. 321—In.Equity: a

Rickert Rice Mills, Inc.,

versus

Rufus W. ey Individually and as~ Acting

Collector of Internal Revenue.

Docket No. 322—In Equity:

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

Dore Rice Mill,

versus

Rufus W. Fontenat, Individually and as Acting

Collector of Internal Revenue.

Docket No. 323—In Fquity:

United Rice Milling Products Co., Inc.,

versus

Rufus W. Foenenct, Individually and as ‘Acting

. Collector of Internal Revenue.

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 Fquity::

T.Simon ~ |

versus

Rufus W. Fontenot, Individually and as ‘Acting

. Collector of Internal Revenue..

Docket No. 326—In Equity.

Levy Rice Milling Company, Inc.,

versus °

‘Rufus 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. -

Docket No. 328—In Equity:

Noble-Trotter Rice Milling Co., Inc.,,

versus

Rufus W. 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.

Beforé me, the undersigned authority, on this day

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

being by me first duly sworn in terms 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 read all of the allegations contained in Sec-

tion 12 of Plaintiff’s bill 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 pay 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 necessatily what he does pay, be-

cause each indiyidual 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

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

thé 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 I 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.

- Furthermore, it is impossible to tell on any given

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

has been affected Ly the existence of the ‘processing

tax.

I am —s -with accoufting and_ statistical

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

_ ing books and records in the rice business which would

accurately reflect 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 arbitraries.

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 and December, ‘and decreasing

to the end of the season. 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 Felieve 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, or a part of stich 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 all of them together has borne the

ultimate economic 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 in part 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 ayerage; 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 clean rice 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.

_ There 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.

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 individual 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 rice 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 i 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-

zs tions in said bills that it is impossible for the plaintiff

rice millers to comply with the requirements -of Section

21 (d) of the 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 agreement and license

hereinafter referred to, namely, the one effective on

July 21, 1934. Article IV, Section 1 of the license _

effective July 21, 1934, set gut the minimum price

‘that millers might sell clean rice for in the domestic

market and that section is as follows:

“Section 1. To effectuate the purposes of this

Amended license ahd to aid in the carrying out and

enforcement of the provisions hereof, no miller shall

offer for sale, sell or deliver for domestic consumption

any quantity of clean rice for an amount per pocket

less than the sum of

(a) the minimum price, determined pursuant to

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

-quantity of the rough rice ‘trom which such clean rice

was milled, ;

~ (b) the ‘conversion charge for such quantit} of

rough rice and prevailing at the time of such offer,

sale or delivery, and

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 rice 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 rough rice and may, if the rice is

actually exported, sell or. deliver clean rice for export

to foreign countries on sdid basis less said maximum

discount. The determination of the Millers Commit-

tee as to whether or not clean rice is actually exported

“a

67°

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.

Sec. 2. The conversion charge per barrel of rough

rice shall, until and except -as changéd 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 regula’ 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 timie and from time to time during the effective

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

‘change the basis of computation of, gthe conversion

charge.” ‘

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 keep 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 cost of the

rough rice. It was extremely important to keep the

clean rice up to this level in order to maintain the

rough rice price. In the fall of 1934, the Secretary of

Agriculture 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.

M. Loving; R. Q. Pegram, S. M. Clements and L. D.

Cléments, Individually and as Co-partners trading

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

inal charges 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 for the sale of

the clean rice pursuant to this license. This Charge 11

was later made more specific as follows :

- “11. That the said Licensee since the 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. Eastern Standard Time on, in that said Licensee

has offered for sale, sold and delivered, for domestic

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

_rice lot numbered 36 on the books of the respondent

derived from rf&ugh rice lot numbered 33 on the books .

of the respondent and purchased from C. E. Everitt;

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

spondent derived from rough rice lot number 33 on

the books of the respondent and purchased from C. E.

Everitt; clean rice lot numbered 123 on the books

of the respondent 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 pocket 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

TV of said License as in effect from July 21, 1934,

12:01 A. M. Eastern Standard Time on.”

The affiant, together 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 on these charges, which hearing was

held in. Houston, Texas, 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 Secretary of Agricul-

ture’s representatives, that it was utterly impossible,

owing to the manner in which the rice industry is con-

ducted, through the sale of clean rice on samples made

up of mixes of different lots of clean rice, as more

fully set out in the bills of complaint presented to the

United States District Court at New Orleans in the -

processing. tax suits, to determine in the case of any:

lot of rice, whether the clean rice had been sold for

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

amount above the cost of the clean rice 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

from the rough rice purchased from these three pro-

ducers was traced at the hearing into the sales of

clean rice into which they entered and the price of

clean rice sales was established. However, owing to

the fact that each quantity’ of.clean rice that .went

into a sale was made up of a mixture from various

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 there was, as is

usual i in the rice business, an almost infinite variation

in the combinations of these mixes of clean rice lots,

and owing to the fact that rough rice when milled

produces different grades of clean rice, as set forth in

the above mentioned bills of complaint, the Secretary of

Agriculture was never able to show 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 rice

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 on the 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 and 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 rough 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 lots is as set out below.

The clean rice in each case was included 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 came from ‘rough rice lot 33 from C. E.

Everitt. It was mixed with various other lots of rice

and went in as a part of the rice sold and represented

by the following 9 invoices: Invoice Nos. 6615, 6622,

6634, 6639, 6645, 6767, 6770, 6771 and T-162 (R.

324-326). :

The rice covered 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:

206 pockets from lot 36, fancy

26 pockets from lot 33, heads

26 pockets from lot 31, heads

(R. 472.) :

Invoice 6622 consisted of the following:

75 pockets from lot 26, fancy

250 pockets from lot 35, fancy

175 pockets from lot 36, fancy

(R. 475.)

Invoice 6634 consisted of the following:

148 pockets from lot 34 EP

A 75 pockets from lot 35. EP

Se 75 pockets from lot 36 EP

81 pockets from lot 37 EP

68 pockets from lot 38 EP

\ 150 pockets from lot 43 EP

201 pockets from lot 45 EP

(R. 478.)

There was no evidence 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-428, and P-1006 (R. 327-329). No evidence

7 72

.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 Lot 123:

This rice went into the following invoices:

Tice Mae ak 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 invoices but they

were all mixes.

Clean Rice Lot 124:

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 the cost 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.

This is further iHustrated 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 made that Bay City Rice Mills did

not keep accurate and complete records of its opera-

tions. ‘

fs 73

Nor was any issue made as to the fact that the

selling of rice by samples and mixing rice was usual

and customary. *

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

witness for the Secretary of Agriculture, and who is the

Manager of Standard Rice Company, one of the largest

rice milling companies in the United States, . testified

as follows:

“Mr. F arda:

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

whén you sell your rice, get ready to sell it, you sell it

on a sample and then you make your composite mix-

ture and your lots match your sample. That is a

common practice.

“Mr. Davant: :

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?

“Mr. Farda:

The practice is to maké 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.) |

ee * * . * *

“Mr. Farda:

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

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

“Mr. Farda: |

You never make a mix until you have a sale

made, because it would not be of material ad-

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

4 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’ make, some 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 all to be purely arbitrary

allocation of cost without any real or sound basis for.

the same. : noe

The above 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 representative of the Secretary of Agriculture.

In the foregoing affidavit the figure .of 79c above

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

was used only roughly. ' Under the hcense, the price

for clean rice was to be the price fixed for ‘rough rice

plus the conversion charge plus the carload rail rate

for transporting rough rice to the miller’s mill plus

the administrative assessment of 5c per barrel. The

conversion charge was 70c per barrel plus 9c per barrel

if standard one hundred pound single packages were

used for clean rice plus 5c per barrel if cotton or paper

. interlinings were used. This would make the ‘spread

between the rough rice price and clean rice price ap-

proximately 89c exclusive of the freight item.

(Sgd.) HOMER L. BRUCE.

Subscribed and Sworn to before me, the undersigned

authority, by Homer L. Bruce, this 27th day of Octo-

ber, 1935.

(Sgd.) RAYMOND REILSON,

(Seal) Notary Public in and for

Harris County, Texas.

AFFIDAVIT.

State of Louisiana,

Parish of Orleans.

We, L. J. Bartel, R. F. Gould, and J. J. Mayer,

each first being duly sworn, deposes and says:

_ 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 rough rice;

of milled rice and by-products. R. F, Gould has had

actual experience as follows: Fifteen years with the

largest rice millers of the industry as Office Manager,

and Chief Accountant; one year as Secretary, .and

auditor of a rough rice buying agency for New Or-

leans rice mills, and one and oné-half years as traveling

auditor for the Millers Committee, an agency operat-

ing under a Marketing Agreement 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

is a competitive bidding method. Each miller has.

his buyer, who makes the competitive bid: on the basis

outlined to him by the management of the mill. The

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 tor milled rice

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 pounds at 4c .... $4.50

Second Head Rice—4 pounds at 3c ..... see

Screenings Rice—6 pounds at 2M%c «-...... ~ “he

Brewers Rice—2 pounds.at 2c ............ .04

Total yield: per barrel—112 pounds.

(. i Be rer Pree Sa . $4.81 plus

Approximate revenue from by-products .

(25c per barrel of 162 pounds) ..... PO

bi | er ee 2 vata ore

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 conve®sion would be 60c

per barrel, the mill would then bidgthe 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 determine 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 $1.62 per barrel; and submits his

bid to the. producer, less this deduction, as follows:

From the value of the same lot of rouzh rice as above

illustrated, estimated to produce mil'ed rice and by-

products with gross values of $5.06 yer 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 barrel for that

particular lot of rough rice.

The affiants further solemnly swear that in hele’

\ 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 necessary in their

accounting procedure. Should the Agricultural Ad-

justment. Act be held unconstitutional, the affiants

state that the rice processors shouJd enjoy the remedy |

and benefits given ‘by Section 21 (d) of the said Agri- .

cultural Adjustment Act, as amended August 27th,

1935, because the records of buying processing and

selling kept by the rice miHs are adequate enough to

properly allocate the cost of various 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.

The affiants furtner 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 up, the introduction of the rice processing

tax has in no wise altered the customary manner or

procedure followed by the rice milling’ industry in

conducting their business.

(Sgd.) L. J. BARTEL,

(Sgd.) R. F. GOULD, P

(Sgd.) . JAMES J. MAYER.

Subscribed and sworn to before me this 28th 7 of

October, 1935.

(Sed.) HOMER R. ROBINSON,

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 fof the respective parties ;

Whereupon, and upon “consideration thereof, and for

the reasons, vated assigned ;

It i? 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 e.atitled 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 grante plain-

tiff, plaintiff will be compelled to pay the taxes re-

ferred to in plaintiffs 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

80. <*

the Court, if the Court should grant its prayer, for

injunction peadjng appeal.

7 - + BAKER; BOTTS, ANDREWS

— WHARTON, |

By JOHN P. BULLINGTON.

| Miosion denied.

(Signed) JOHN McDUFF IE, Judge a

MOTION OF PLAINTIFF 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, eT y granting defendant’s motion, to

_ dismiss, and that plaiuatt 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 sapie for the Fifth Circuit, ‘and

On further suggesting to the Court that “aa decree

is contrary to the law and the evidence for the-reasons

set forth in the assignment of errors filed in plaintiff's .

behalf herein ; and |

On further siesta 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; |

— re

__ It is Ordered by the Court that’ the appeal of plain-

tiff from the decree entered herein to the United States

‘ Circuit Court of Appeals for the Fifth Circuit: be and

the same is hereby allowed with supersedeas, on appel-

jant’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;

Lo)

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 Néw 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, Jifdge.

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 plaintiffts Bill of Comp‘aint, because

such action was contrary td 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. : Pa

. t

Wherefore, plaintiff prays that said Decree be, in

all things, reversed, with instructions to the said Dis-

trict Court to grant plaintiff a preliminary injunction.

(Signed) . | BAKER, BOTTS, ANDREWS

& WHARTON,

a 2 By JOHN P.BULLINGTON. .:-

; St Solicitors for laintiff.

APPEAL BOND...” -

Filed October 29, 1935.

Know All Men By These Presents that we, United

Rice Mill Products Company, Inc., as principal, and

The Agtna Casualty and Surety Company, ‘Hartford,

Conn., surety, are held and firmly beund unto~

Rufus we Fontenot, in the full sum of $250.00, to be

paid to the said Rufus W. -Fontenot, his attorneys,

executors, administrators or assigns, to which payment

_well and truly to be made we bind ourselves, our

heirs, executors and administrators,‘ jointly and sever-

- ally by these presents, sealed with our seals and dated

this 29th day of October, 1935.

Whereas; lately; in the District-Court of the United

was rendered against United Rice Mill Products Com- -

pany, Inc., and in fayor of Rufus W. Fontenot, deny-

ing plaintiff’s application for a Preliminary injunc-

tion and dismissing’ plaintiffs Bill of Complaint, and

' the said United Rice Mill Products’ Company, Inc.,

having obtained an appeal to’ revérse said judgment,

citing and admonishing the said Rufus. W. Fontenot

to be and appear at a session of the United States Cir-

cuit Court of Appeals for the Fifth Circuit to be

holden at the city of New Orleans, La., in said Cir-

cuit Court on the 27th day of November, 1935.

Now the condition of .the above obligation is such,

“that if the said United Rice Mill Products Company,

Inc., shall prosécute its appeal to effect and answer

all damages and costs, if it fail to make its Pipa good, )

.then the above obligation to be void, else to remain in

full force and effec

UNITED “RICE ‘MILL PRO- +

” ; ' DUCTS GOMPANY, INC.,~

. (Sgd.) BAKER, B S, ANDREWS -

° . OW TON, Tee

By JOHN Py. LLINGTON,

ane ‘ Principal.

THE -AETNA CASUALTY &

| _ SURETY COMPANY,

es : . Surety,

By CARL-F. WEISS, :

Attorney i in F: act. (Seal)

_ Approved October 29th, 1935.

(Signed) RUFUS FE. FOSTER, —

" PRAECIPE.

Filed Ciesabins 31, 1935. .

(Title Omitted; )

To the Honorable’ He tf ‘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: :

4. Plkiniiffe original mn of ‘complaint,

2. Defendant’s motion to dismiss and answer.. ~

“—

3. Order of Coust consolidating causes. for trial

and’ providing for evidence in’ cause No. 324 in Equity,

Baton Rouge Rice Mill, Inc., vé. Rufus W. Fontenot,

Ate ‘to be considered as evidence in this cause.

‘ " Affidavit of W. M. Reid.

$. Affidavit of Homer L: Bruee.

' 6° Joint affidavit of L. J. Bartel, R. F. Gould and

}: 3 Mayer.

7. . Decree of the Sewn Court.

' 8. ‘Plaintiff's motion for injunction pending appeal

and order denying same,

9. ‘Motion and order for appeal.

10. . Plaintiff's assignment of ‘error. .

4. odie bond —

i: 12. This Praecipe

(13. Clerks certificate.

‘« HOMER ‘ BRUCE,

- JOHN P. BULLINGTON,

BAKER, BOTTS, ANDREWS

er ae & WHARTON,

; By ‘JOHN P. BULLINGTON,

Attorneys for Plaintiff and °

” Appellant. —

Approved: ers |

(Sgd.) ROBERT WEINSTEIN,

end: _ Asst. U. S. Attorney, Counsel —

"|. for defendant. ”

* Clerk’s Office:

. I, HENRY J. CARTER, Clerk of thie District

Court of the United States for the Eastern District of

Louisiana, do hereby certify that the foregoing. 50.

transcript of the record, assignment of errors and all

proceedings in the cause entitled “United Rice Milling

Products Co., Inc. vs. Rufus W. Fontenot, Individual- .

fae tha Dis-

' ly and as Collector ol Internal Revenue 1O0r tne

trict of Louisiana,” No. 323 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 jaid Court at °

the City of New Orleans, La., this 2nd . of Novem- —

ber, A, D. 1935.

H. J. CARTER, Clerk,

; By H. ‘W. NIEHUES, !

(Seal) _ Deputy Clerk

+ a

(fol. 86] In Unirep States Circuit: Court op APPRALS FOR |

THE Firra Crecurt, At New Oreans, Louisiana

ate No. 7946 \

: 3

Unrrep Rice Minune Propvorts Co., Inc., Appellant,

v. |

Rurus W. Fontenot, Individually and as’ Acting United

States Collector of Internal Revenue for the District of

‘Louisiana, Appellee ; a,

Motion ror Preiminary Inguncrion Penpine “APPEAL—

Filed November 4, 1935 —

Comes now the United Rice Milling Products Co., Inc.

appellant in the above numbered and entitled cause, and

after due notice given to the appellee above named, re-

spectfully states to the Court that the said appellant on

the 25th day of October, 1935, brought a bill in equity in

the United States District Court: for the Eastern District

of Louisiana, New. Orleans Division, entitled United Rice.

Milling Products Co., Inc., plaintiff, v. Rufus W. Fontenot,

individually and.as Acting United States Collector of In-

ternal Revenue for the District ‘of Louisiana, defendant,

and numbered 323 in equity,-in the New Orleans Division

of said United States District Court. In its bill of com-

plaint in said cause appellant prayed for a temporary re-

[fol. 87] straining order to be issued immediately, and for.

a preliminary injunction after notice té the appellee, and

for a permanent injunction on the final hearing of said

cause, enjoining the appellee 4rom assessing or collecting ~

manner whatsoever, whether by lien or jeopardy. or dis-

taxes levied under and pursuant tq the Act of the Congress

of the United States known as the Agricultural Adjustment

Act and amendments thereto, or purported to be levied by |

said Act, upon the appellant for the processing. of rice

during the month of September, 1935, and for subsequent

months, and any interest or penalty,on account of appel-

lant’s failure to pay said processi ee pane from impos-

1—579 |

_ 6.

+ -

"98,

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

get 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 —

and answer to said bill of complaint, copiesof 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 prelimi-

- nary injunction and on said motion to dismiss, the Honor-

able John McDuffie, acting judge of-aaid District Court on,

October 28,1939, refused appellant’s motion for a, prelimi-

nary injunction, granted the motion of the appellee to. dis-) |

miss the said bill of complaint and dismissed the said bill

{fol. 88] of complaint, to which appellant herein duly ex- .

cepted. Thereafter, on the 29th day of October, 1935, the

appellant herein in open court and in the presence of coun-

sel for appellee filed its petition for an ap al, which w&s

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 District .

Court.’ At the time appellant presented’ its said . petition

for appeal, it also petitioned said judge of the District Court

to grant it an injunction enjoining the appellee in the man- | X

ner set out in*Hs request for a preliminary injunction in its

bill of complaint, pending thé appeal of appellant to this-.

Honorable Court, but the said judge of said District Court

on October 29, 1935, tefused appellant’s said petition and

appeal. | ae

Appellant has therefore perfected its appeal to the. Cir-

cuit Court of Appeals for the Fifth Circuit, making said

cause returnable at New Orleans, Louisfana, as provided by

law. Appellant has duly caused to be prepared a transcript °

of the record in said cause and has filed the santé, in accord-

ance with ldw, and within the time allowed by law, in the

Clerk’s office in the Circuit Court of Appeals ‘at New

Orleans, Louisiana. _—_—.. a . \

In said bill of complaint appellant alleged that the amount

_ of processing taxes on account.of the rice processed by the

89 9

‘ appellant during’ the month of September, 1935, was $31,-

839.40, and that under said Agrjfultural Adjustment Act. ~

appellant was required to pay said amount to appelleé on:

or before October 30, 1935, and that appellee was charged

with the duty of collecting said tax, and if said tax were

[fol. 89] not“paid on or before October 30, 1935, appellee

would assess said tax against tHe appellarft and serve upon

appellant notice and~demand for the payment thereof and

would allow appellant ten days from receipt of such notice

- within whicli to pay the same; that in the event said tax

should not be paid within said time, appellee 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,mppellee would |

proceed to collect the tax, penalty and interest by filing a

notice of lien on all of appellant’s property and by dis-

training upon and selling such of appellant’s property as

might be necessary to realize the amount of said tax, penal-

ties dnd interest; and that additional procéssing taxes for

months subsequert to September, 1935, will accrue and be

‘dssessed against and collected from the appellant in the

same manner as the tax for the month of September.

° Appeliant alleged that the said processing tax was illegal

and unconstitutional, and violated various provisions of .

the Constitytion of the United States in many particulars,

~ more fully set forth in appellant’s bill of complaint. The

appellant also alleged that under an, amendment to said

AgriculturaY.Adjustment Act approved on August 24, 1935,

a Section 21 (d) was added to said Act, which section pro-

. vides in substance that appellant should be allowed no re-

covery of any of said taxes. paid, if the same should be

-illegal or unauthorized, unless appellant established to the,

. satisfaction of the Commissioner of Internal Revenue, and

[folk 90] the Commissioner should so find, that neither ap-

pellant nor any person directly or indirectly under appel-

lant’s control or having control over appellant, has, directly |

or indirectly, included such gmount in the’ price of the rice

with respect to which it was,intposed or of any article pro-

cessed fram the rice with respect to which it was imnposed,

any other person in any manner, or included any part of

- guch amount-in the charge or fee for processing rice, and _

2-579, 4 | -

’

90 -

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 éollection 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

[fol. 91] prayed for by appellant, then the said section, to-

gether with the other provisions of said Act, was invalid

and in violation of the Fifth Amendment to the Constitu-

* tion, that no person shall be ‘deprived of his property with- |

‘out due‘process of law, in that said illegal and unconsti-

tutional taxes would be, collected from ‘appellant and ap-

pellant would have no remedy by which he could recover

taxes and would have no remedy to prevent the collection

of said unlawful taxes and would be forever deprived of

the right to test the constitutiondlity of said taxes.

Appellant further alleged that said Section 21 (d) denied

the appellant a complete. and adequate remedy at law for

the various other reasons set forth in said bill of complaint.

At .the hearing before the District Judge appellant in-

troduced 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

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 accurately

determine whether he had made a profit or a loss on any

91 ’

given transaction, much less prove whether he had passed

the tax,.or any part thereof, on. Appellant also 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 Secre-.

tary 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 this mill for

[fol. 92]-failure to sell clean rice and rice’ products pro- .

.cessed from rough rice at‘a price approximately 79¢c 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 tlean rice and the price procured for~

these ‘‘mixes’’ of clean rice it-was never able to prove that

the price procured for the clean rice processed from the

particular lot of rough rice was not 79c more than the price

paid for the rough rice because of the fact that élean rice

is customarily sold in ‘‘mixes’’ of Yarious 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 forego-

ing 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 said 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,oss of the appellant. herein, proceed to collect the

said taxes for September, 1935, which are now due and un- -

paid, from appellant, and said taxes for subsequent months,

unless reggrained by a preliminary injunction granted by

this court. The appellant alleges\that not only has it 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 certai ty that no

remedy at law exists for its recovery jn case it be held that

it was unconstitutionally assessed, or of refusing to pay

[fol. 93] and runtiing: 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 mp as prayed for in said bill of

complaint. .

Appellant would further si that there is now an

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 uncon- -

stitutional, 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 thereafter;

that the first benefit payment to farmers provided for in

said Act has beengmade, and that under the standard form

of contract between the Secretary of Agriculture and rice

farmers no further payment .is due until such time ‘after

December 1, 1935, as the Secretary shall determine and de-

clare what ‘further amount. of benefit. payments shall “be

made and-when they shall be made; that the taxes to be

collected under ‘said Act are for the purpose of making

these benefit payments and that since the Secretary of

Agriculture need make no further benefit payments until

such time :fter December 1, 1935, as may be fixed by him,

_ the delay of the. Government i in collecting these taxes which

might be occasioned by the granting of the injunction

prayed for. herein will not occasion any injury to the Gov-

[fol. 94] ernment nor will it unduly interfere with the

achievement of the program set out in said Act if the Act ~

be held constitutional. On the other hand, as hereinabove

alleged, great and irreparable damage will be done to plain-.

tiff in the event the law is held unconstitutional unless the

injunction hereinafter 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 neces-

sary to preserve the jurisdiction of this Honorable 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 deposit from

month to month of the amotnt 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 assess-

ing or collecting or attempting to assess or collect from

jeopardy or by distraint proceedings, in court or othetwise, ,

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

[fol. 95] impose any lien for said taxes upon the property,

real or personal, of the appellant, pending the hearing of

appellant’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. ol ° 3

~ [fol.96] Duly sworn to by John P. Bullington. Jurat

omitted in printing. -

(fol. 97] In Untrep States Crecurr Court or APPEALS

-No. 7946

Unirep Rick Mu Propucts Company, Inc.,

versus

Rurus W. Fontenot, Acting Collector of Internal Revenue

Orper Denyine Motion FoR Pretiminary IngunctTIoNn

PEenpinc AppraL—November 5, 1935 ‘

Upon the authority of Rickert Rice Milling Company,

Inc., vs. Rufus W. Fontenot, ete., the application for in-

junction in the above numbered and entitled case is denied.

“\

PRERENDER

% :

[fol. 98] ie THE UNITED STATES Circuit Court or APPEALS

' ¥OR THE Fors Crcurr

“Ne. 7937

RIcKERT Rice Mine Company, Inc., Appellant,

versus

Rurus W. Fontenot, beseter Collector of Internal sabiaae. ‘

Appellee

Appeal from the District Court of the United States for

the Eastern District of Lousiana -

. Motion for Peelbkniary Injunction Pending Appeal

Before Foster and Sibley, Circuit Judges, and Strum,

District Judge

Oprxron—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 hasa remedy at law to recover back any taxes illegally

[fol 99] exactéd and, further, that the provisions of the Act

‘as amended deprive the Court of jurisdiction to grant in-

junctive relief.

It is ordered that the application be Denied.

[fol. 100] Clerk’s sectithiate to foregoing _ transcript

omitted in printing.

‘

{[fol.101] Supreme Court oF THE UNITED States

| Orper ALLow1ne Certiorani—Filed November 25, 1935

The petition herein for a writ of certiorari to the United

States Circuit vert of Appeals for the Fifth Circuit is

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 i in b reapers to

such writ.

Endorsed on cover: : File No. 40,133. U.S. Cinepit Court

of Appeals, Fifth Circuit. Term No. 579. United Rice Mill-

ing Products Co., Inc., petitioner, vs. Rufus W. Fontenot,

Individually and as Acting United States Collector of In-

_ ternal Revenue for the District of Louisiana. Petition.for a

writ of certiorari and exhibit thereto. Filed ‘November 11,

1935. Term No. 579, O. T., 1935.

(7201-C)

: °

‘ : .

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.