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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Transcript of Record
- **Published:** January 1, 1936
- **Citation:** 297 U.S. 110

## Text

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TRANSCRIPT OF RECORD

Supreme Court of the United States

OCTOBER TERM, 1935.

: No. 581

Gs

T. SIMON, PETITIONER

)
vs.

RUFUS W. FONTENOT, INDIVIDUALLY AND AS

ACTING UNITED: STATES COLLECTOR OF IN-.

TERNAL REVENUE FOR THE DISTRICT OF
LOUISIANA i? Aare

ON WRIT OF CERTIORARI TO THE UNITED STATES CIRCUIT COURT
OF APPEALS FOR THE FIFTH (IRCUIT

4

PETITION FOR CERTIORARI FILED NOVEMBER 11, 1988,

CERTIORARI GRANTED NOVEMBER: 25, 1985,

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SUPREME, COURT OF THE UNITED STATES
-OOTOBER TERM, 1935" ©
d
No. 58]

'T. SIMON, PETITIONER,
vo. " o.,

-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 UNI ITED STATES CIRCUIT COURT .
OF APPEALS FOR THE FIFTH. CIRCUIT

. 4
‘ . INDEX.
3 % ns : . Page
Record from D. C. U. 8. Eastern IN 5s cdc cdesvceveg menses ‘ol 4.
COMOM ccccccccccsiccccccvopscccccecccecccccsccecceeesecees 1
Bill of complaint ........+..seseeeeeee eee eeeeeeeeeees eveeeens 2
Exhibit “A”—Administrative Rulings Relating to
the 1935 Southern Rice Production een ots

Program .......... Pelee eeadeecceacveseverGcencweceodes 27:

Wilt “B"—Oomtract occccccccccsccccccccepecccesccess ‘ 38

Exhibit “C”—Section 21 ......... seaknneeawss iesienaedees 48

Answer ....-- Rescues peregedetosecssetecervoesneves ‘seu eveues 54

Motion to dismiss .......2...+..eeeeeees ees aBeasces seuneres 56

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

Affidavit of W. M. Reid ..... eee see e we eeeeeeeeens 60
Affidavit of Homer L. Bruce..... ied ihaeisewaeeeudneees iecsiaa 64

‘Joint affidavit of L. 5. Bartel, R. F. Gould & J. J. Mayer wexresue 75

Decree OTT TTITITITITT TITLE 78

3 Motion of plaintiff for injunction pending aaa and order de-
nying same ........2ss0e0e0: Feeewews te eeeeees se eeeeeeeees : 79

‘Jupp & DETWEILER (INc.), — WasHInoron, D. C., DeceMBER 6, 1935.

—_ 7203-0 ona

ii .
Record from D. ©. U. 8., Eastern ‘Louisiana —Continued.
* Petition for appeal and order allowing same..............60+++
Assignment of CFrOrs 2.66.66 e cece cece ewes rire CooMecceces .
Appeal bond 2... .4 6 ccc ccc ccccweees Sevocccedcoucecescoesee ood
Preecipe eeereeeeeee eee eree ewe ee eee e eee a> “eee eee eer eee eeeeenenee
Clerk’s certificate .......66cee0. TTT TT LITT TT fooedeve oov'ee
Hh Original
Proceedings in U. 8. C. C. A., Fifth Circuit ....... jeeeees oan 86
Motion for preliminary injunction pending appeal.......... 6
Order denying motion for preliminary injunction pedémg ap-
peal PTTTITITITITTTT TTT TTT TO eee eee eeneeeeeeeneneee 97
Opinion by the Court ...... 66. ce cece eee eweeeeeeeee pees 98
Clerk's certificate ........+++++++++. (omitted in printing).. 100
Order allowing certiorariy, .......666:cceceebeeeeeeeneeues 101
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UNITED STATES OF ‘AMERICA.

DISTRICT COURF’ OF THE UNITED STATES,
EASTERN DISTRICT OF LOUISIANA, NEW .
ORLEANS DIVISION. -

Noy 325 (In, Radley).

bad

«”

T. SIMON

versus

RUFUS W. FONTENOT, INDIVIDUALLY AND

AS ACTING UNITED STATES COLLECTOR
OF. INTERNAL .REVENUE FOR THE DIS-
TRICT OF LOUISIANA’

Appearances: . Bf .
Messrs. Baker, Botts, Andrews & Wharton; John
. Bullington, Attorneys for T. Simon, Plain-

‘ tiff-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,
ites eee nana

APPEAL enn the District Court of the United Skates
for the Eastern District of Louisiana, to the
United States Circuit Court of Appeals for the

Fifth Circuit, returnable. within thirty €30) days -

from the 29th day of October, 1935, at t the City
of New Orleans, Lotisiana. | ‘

| TRANSCRIPT OF RECORD.

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,

47, -

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,.

2
BILL OF COMPLAINT & EXHIBITS
ANNEXED. : a

Filed Oct. 28, rons | .

In the District. Court of the United States, Eastern
District of Louisiana, New Orleans Division.

T. Simon
vs. No. 325 (In Fiquity).

— W. ities Individually and as Acting United
States Colkecter 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 T. Simon, hereinafter referred to as
‘plaintiff and in the neuter singular, complainigg of
Rufus W. Fontenot, individually and as Acting United
States Collector of Internal Revenue for the District
of Louisiana, hereinafter called defendant, and for ‘s
cause of action shows ‘to the Court as follows:

1.

Plaintiff isa resident of Crowley, Acadia Parish
Louisiana, and is a citizen of the State of Louisiana.
The defendant is a citizen of the State of Louisiana
residing at New Orleans, Louisiana, and is the duly
appointed, commissioned, qualified and Acting United
States Collector of Internal Revenue for the State of
Louisiana.

The grounds of jurisdiction of this Court in this

case are that this is a suit arisimfg under the Constitu-...
tion of the United States and the laws of the United*”

States, in off the United States and the laws of the °

United States; in which the matters in controversy
‘exceed Three Thousand Dollars ($3,000.00), and this
/suit is also one in which an injunction is sought against
an official of the United States to prevent him from
unlawfully collecting processing taxes levied by the
United States pursuant to certain ‘acts of Congress,
more fully set out hereinafter, and to have declared 1 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.

in oe ‘ j Se

_ Plaintiff is engaged in the business of milling
rice and owns and operates a rice mill at Crowley,
Louisiana. The milling of said rice, which constitutes
‘processing of said rice under the terms of the Agri-
cultural Adjustment Act, hereinafter referred to, is
done ,wholly within said State and is a 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.

‘Stee ee

s

4.

GS ws aS! , *
' 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

an ies by inereasing agricultural purchasing power,
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to raise revenue for extraordinary expenses incurred.by

“. reason of the emergency, to provide emergency relief

with respect to agricultural indebtedness, to provide for
the orderly liquidation of joint: stock land banks, and
for other purposes.’

and “aa 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 amendmient ap-
proved August 24, 1935, which amendment is herein-
after referred to as the Amendment of August 24, 1935.

5.

The policy to be effectuated by the enactment of
said, Act, prior togghe Amendment of August 24, 1935,
was declared by Congress in Section 2 to be as follows :

“Tt is hereby declated 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 1914: 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
by gradual correction of the present . inequalities there-

fa

5
in at as rapid a rate as is deemed feasible in view of
the current consumptive demand in domestic and
foreign markets.

(3) To protect the consumers’ interest by readjust-.
ing farm production at such level as will not increase.
the percentage of the consumers’ retail expenditures
for agricultur: | commodities, or products derived there-
from, which-1$ returned to the ‘farmer, above the per-
centage which was returned to the farmer i 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 the powers conferred upon
_the Secretary of Agriculture under this title.”

and Subsections (2) and (3) were stricken out and
the following inserted in lieu thereof:

“(2) To protect the interest of the consumer by
(a) approaching the level of prices which it is de-
clared to be the’ policy of Congress to establish in
subsection (1) of this section by gradual correction
of the curfent 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 Congress to
establish in subsection (1) of this section.” A

Plaintiff pn 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

~ 6

said policies above set forth,’and the levy, assessment
and collection of said taxes have been provided for in
said Act, not for, the purpose of raising revenue, but
for the purpose of accomplishing the things set out
‘in said declaration of policy of Congress and for said
reasons the levy, assessment and collection of said
taxes are wholly illegal,’ unlawful and unwarranted
under the Constitution of the United States. 2

«

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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
bcth, of any basic agricultural. commodity, including
rice, through agreements with producers or by other
voiuntary 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 pew out t of the moneys
hereinafter referred to. igs

‘

Section 9(a) of said ee 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

FM SE LP RAINES WRENNER eR ge enn IR Ree Bi rt ty: _—

‘
DOP oar 7 epee eRED Rag Ore oe YF ———

a

per pound of rough rice. Under a similar provision of
said Act before being amended by the Amendment of
August 24, 1935, the Secretary was directed to pro-
claim, 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 1c per pound
of rough rice would be in. effect-on and after April
1, 1935. )

Section 9(b) of said Agricultural Adjustment Act

' provides that the processing tax shall be at such rate

as equals the difference between the current average
farm price’ for the commodity and the fair exchange ‘
value of the commodity, as those terms*are defined in
the Act, plus such percentage of such difference, not
to exceed 20 per centum, as ‘the Secretary may deter-
mine will result in the collection in any marketing
year of an amount of tax equal to (A) the amount
of credits or refunds which he estimates will be allowed

- during: such period with respect .to the commodity

and (B) the amount of the tax which he estimates
would have been collected during such period upon all
processings of such commodity exempt from tax be-
cause such processings are done by or for a State or
a political subdivision or an institution thereof, except
that the processing tax on rice for the period above

_ Mentioned should be at the rate of 1c 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

ae yy ee hee ae Ok ME a Po Peele ae ae ee

8 ,

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- —
a: _"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 eAgriculture for expansion of markets. and re-—
moval of surplus agricultural products’ and adminis-
trative expenses, rental and benefit payments, and
refunds on’ taxes. -Seéction 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.

7.

Acting pursuant tc’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 telating 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 rulings 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 hundred sixty-two pounds of rough sice)

RARITY gripe rr en Mee! a athrS WRG ——— — CO

9

in the States of eRARENS, Louisiana and Texas as
follows:

siege ‘Acres. Barrels.
Arkansas ..... 135,000 1,834,722

Louisiana .... 364,500 3,898,333
i ee .. 142,500 2,010,833

é

-* 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’provided that the -
base period for Texas should be the years 1931 to 1933,
inclusive, and for Arkansas and.Louisiana should: be
dhe years 1929 to 1933, inclusive. Said rulings further’
provided that the said Staté 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 478% (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 iainies 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

SMe em a per eee OF —. .) .s ” h oe

10

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 groducer had not
produced rice during any of the years constituting his
base period, he was not eligible to execute said contract
with the Secretary and was not eligible #r 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 thé Secretary, he
was not eligible for the benefit payments as provided
for therein. — raters os

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 products, including
rice, and for.the purpose of controlling, regulat-
ing, and reducing the amount of acreage that
would be planted to rice and the amount of rice
that would be grown, and to accomplish the pur-
poses set out in Section 2 of said Act, and that the
Congress of the United States had no authority under
the Constitution of the, United States to levy said pro-
cessing taxes for said purpose and for said objects.

8.

Section 8 further provides that, in order ‘to
effectuate the declared policy of the Act, the Sec-
retary is empowered to provide for a reduction:
in’ acreage or a reduction in production of any

= —

ee ee 11

basic agricultural commodity through agreements ‘with
producers, and to provide for rental or benefit pay-
ments in connection therewith. in such amounts as_
the Secretary deems fair and reasonable, but there’ is
no standard or measure established or provided i 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 |
pf the United States and is an invalid and uncon- *
stitutional delegation of legislative power ~ Congress
to the Secretary of Agriculture.

Plaintiff oe alleges that 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. .

2."

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 thé 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

.
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a ie . a 12

Secretary finds that such. result will occur, then ‘the-—.
processing tax on such commodity shall be at such
rate as wall prevent:such accumulation of surplus stock
and: depr@ciation 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 (Ic) 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. °

oo
.

10.

In addition to the foregoing reasons, the said Agri-
cultural Adjustment Act and its provisions for the
leyying, 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 oa ain by the tfaieed
States to regulate, control and reduce the production of
certain. agricultural commodities specified i in said Act,
including rice. The so-called processing taxés 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 inthe’
Congress by. Section 8 of Article 1 of the Constitution
to. 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 Unitéd 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 cofiform 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, inclwding 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 ublic pur-
pose but for a private purpose, to-wit, the payment of
gratuities or. bounties or benefit payments to another
class of persons, namely, the producers of the desig-
-nated agricultural commodities, ‘including rice, and
particularly ‘since this taking is without just’ com-
pensation to the plaintiff and said processors.

4. Said so-called processing taxes levied by the
w\ct are taxes in name only and not ir fact. They
constitute merely an exactment and imposition by
the Government: for the purpose, not of raising
Jevenue for the support of ‘the government, bu
of raising the price for farm products and ad-
justing farm income god 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 attémpt, effort’ and scheme &f the
United States -as hereinabove set out.’ ‘

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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 upen 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
Section 1; Article J, 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

ee to population.

7. The said taxes are not excise taxes, and are not
uniform throughout the United States as required by
Article 1, Section 8, clause :.

8. The said alleged taxes cannot be levied under
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

15

by Congress and in 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 Septentber, 1935, and
the amount of said so-called processing tax on ac-
count of said rice procéssed 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 om account |
of the rice processed by the plaintiff during ‘said yponth
of September is $53,531.86. Thé 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,
pénalty and interest by filing a notice of lien upon
all of plaintiff's property, and by distraining upon and
selling such of plaintiff’s property as may be necessary
in order to realize the amount of said tax, penalties and
interest. Additional processing taxes for the mor ths sub-

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16

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. te
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-wiil 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
lainttt will be irretrievably lost. to plaintiff, to its
great. and irreparable injury. , :

x | 2.

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
Agrtcultural 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 pricé 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.

*

7

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 buy it instead
of other competitive commodities. Under these
circumstances the rice miller carnot fix or make

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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 ‘prades
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 definite proportion by which
the price paid- for rough rice can be allocated in any
way to thesé 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 a pur-

chaser of these articles.

Furthermore, the processing tax is levied upon the
first processing of the rough rice and must be paid
by the end of the calendar month following the month
in which the processing oecurred: 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 mav be kept for several months before being sold,
and it is thus impossible to tell how much has been

an

19

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 the end of the
season that a gain or loss for the season can be de-
termined. ;

In addition, in the cost of rough rice processed
during any month,. there is an additional item
of the cost of the milling of such rice.’ The
cost of milling rice depends upon many factors so
that it is impossible to determine what has actually
been the cost of milling any: particular lot of rice.
There are many varieties of rice, some of which have

longer grains than others. Dyjfferent 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-

20

mination of whether ‘in selling the clean rice it has

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

in the price for which tt 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 plaintiff 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 chdracter 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 imipossible 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 appreciabie 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 plaintiff and other rice millers then

find what different lots of clean rice they have
on hand. which by mixing will produce the sam-
ples upon which the sale has been-made. As a result,
when a sale of clean rice is made, the order is filled
by a mixture of clean rice which is made up from
many different lots of clean rice. These different

lots of clean rice have been milled from different lots

of rough rice for which different prices have been
paid. As a result the rice that goes into a clean

wae

21
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. that it is impossible to trace through the history.
of rice processed during any month to determine what
price was obtained for it, whether it was sold at a
profit or a loss, and what part, if any, of the process-
ing tax has been passed on to the purchaser.

Furthermore, there is no way in which the cost of
a lot of rough rice can be allocated between the various
grades of rice and the various rice products produced
from such lot except by speculation for the use of
arbitraries.

In short, it is impossible to determine, statistically
or otherwise, where the ultimate burden of the pro-
cessing tax falls—how much of- it is paid. by the con-

sumer, how much by the producer, or how much by
the processor. ;

In view of the above facts, the purported remedy
given by Section 21(d) of said Agricultural Adjust-
ment Act is wholly inadequate and is in fact a statu-
tory denial of any legal remedy at all.

13.
¢
In addition, the conditions imposed upon the right
of the plaintiff to. recover taxes paid by it must,
under Section 21(d) be established to the satisfaction
of the Commissioner of Internal Revenue, and no
provision is made for judicial review. The-transcript
of the hearing before the Commissioner of Internal

22

Revenue is the sole record of the case on appeal to the
Courts. The effect of such section is therefore to
limit the function of the judicial review to the deter-
mination of whether there was any evidence submitted ~
to the Commissioner of Internal Revenue tending to
support the findings of the Commission. Said Section
21(d) therefore deprives tthe plaintiff of its. property.
without due process of law in violation of the Fifth
Amendment to the Constitution.

14.

Under said Section 21(d) of said Agricultural
Adjustment Act, if the processing tax has been either
passed on or passed back by the plaintiff, then the
plaintiff cannot maintain any action to recover the —
tax, if itis ultimately determined to be invalid, either
for its own account or for the account of the persons
to whom the processing tax has been thus passed on
or passed back by the plaintiff; nor can the‘ persons
to whom the processing tax has been thus passed on
or passed back maintain such an action on their own
account, but all right of action by anyone to recover
the tax, if it has been passed on or passed back,
has been wholly taken away by said amendments to
said Agricultural Adjustment Act. Moreover, Section,
21(a) of said Act and Section 405 of the Revenue
Act of 1935 deprive. the Courts of power to render.
declaratory judgments with respect to such alleged
— By reason of the impossibilities of proof here-

bove referred to, the practical effect of said Act
vail be. to deny taxpayers and the plaintiff all means
of securing a judicial decision as to the constitutional-
ity of the processing taxes, unless the Court grants
the relief herein sought.

15.

Plaintiff further shows that by Section 30 of said -
Amendment .of August 24, 1935, Section 21(a) was

23.

added to said Act, which in substance provides that
no suit to enjoin the collection of any tax imposed by
said Act shall be maintained. Plaintiff alleges that
said section is not intended to apply, and does not
apply, to the injunction prayed for by this plaintiff
inasmuch as plaintiff has no adequate remedy at law.
Plaintiff alleges, however, that if said section. should
be interpreted as providing that no injunction’ should
be granted to the plaintiff as-prayed for in this cause,
then the said section, together with the other provi-
sions of said Act, is invalid and in violation of the
Fifth Amendment to the Constitution of the United
States, that no person shall be deprived of his property
without due process of law, in that said illegal and un-
constitutional taxes will be collected from ‘the plain-
tiff and the plaintiff will have no remedy to prevent
the collection of said unlawful taxés, and will be for-
ever deprived of the right in any manner to test the
constitutionality. of such taxes.

16.

Said Section 21(d) further. denies to the plaintiff
a complete and adequate remedy at law, because a
multiplicity of claims and suits would be required to
enforce such rights as are granted thereunder and
because said subsection requires that the facts re-
quired to be proved ‘thereunder be established to the
satisfaction of the Commissioner of Internal Revenue
and makes no provision for a judicial review of his
decision. ,

7, .

A refund of processing. taxes paid by the plaintiff
could not: actually be obtained even if it were possible
for the plaintiff to prove the negative facts required °
by subsection (d) of Article 21, because Congress has

24

not appropriated funds for the payment of ial refunds
and plaintiff. believes, that in view of the aggregate
amount involved, there is a reasonable doubt whether
such appropriation would ever be made. .
— ; oa

Plaintiff is ready, able and willing and hereby offers
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 shali direct the said sums
claimed to be due)from plaintiff for processing taxes on —
account of the rice processed by plaintiff auring the
month of Séptember, 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 undér said returns become °
due and payable according to existing laws and regula-
tions or any extension lawfully granted. to the plain-
tiff, it will deposit the amount of such. taxes in such
- manner as the Court may direct, all such deposits to
abide the final decree in this cause.

Wherefore, plaintiff being without an adequate
remedy at law prays:

1. That process issue and be served upon the de-
fendant requiring him to appear and answer this bill,
but not under oath, and answer under oath being here-
by expressly waived; .

2. That pending the hearing of the application ~
a’ preliminary injunction hereinafter prayed for,
temporary restraining order issue immediately por
ing and restraining the defendant until the hearing
of its application for a preliminary injunction or until
° \ ,

25

' the further 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 ta%es under
and pursuant te said Agricultural Adjustment Act
and any interest or penalty on account of plaintiff’s
failure to pay said» processing _ tax, and from im-
posing or giving notice of intention to impose any
lien for said taxes upon the property, real or personal,
of the plaintiff ;

3: That notice issue to the defendant advising him
that plaintiff is hereby applying for a preliminary
injunction and that plaintiff’s said application will be
heard at a time to be*fixed by the Court in said notice,
and that upon said hearing a preliminary injunction
pending the final disposition of this case be issued
enjoining and restraining the defendant from assess- -
ing or collecting or attempting to assess or collect
from the plaintiff in any manner whatsoever, whether
by lien or jeopasdy or by’ distraint proceedings, in
Court or otherwise, any processing taxes under and
pursuant to said Agricultural Adjustment Act and
any interest or penalty on account of plaintiff's failure
to pay said processing tax, and from imposing or giving
notice of intention to impose any lien for said taxes
upon the property, .real or personal, of the plaintiff;

4. That at the final hearing of this cause said
preliminary injunction shall not have been granted,
then that a Permanent injunction be granted per-
manently restraining and enjoining the defendant from
assessing or collecting or attempting to asséss or collect
from the plaintiff in any manner whatsoever, whether
by lien or jeopardy or by distraint proceedings, in
Court -or otherwise, any processing taxes under and.
| Pursuant.to said Agricultural Adjustment Act and any

_ |

,

Se prter itv as
.

26

interest or penalty on account of plainuff’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;

5. That at the final héaring it be adjudicated that
the 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, invatid and unconstitu-
tional; and that the deferdant has no lawful right
to attempt, in any manner to collect said processing
taxes from the plaintiff or any of the penalties or in-
terest thereon purported to be provided for in said
Agricultural Adjustment Act;

6. And plaintiff prays for such other and further
relief, both general and special, to which it may be
justly entitled.

(Signed) T. SIMON, ar
(Signed) BAKER, BOTTS, ANDREWS .
| & WHARTON, 7 |
By JOHN P. BULLINGTON,
Attorneys for Plaintiff.

State of Louisiana,
Parish of Acadia.

Before me, the undersigned authority on this day
personally: appeared T. Simon, who, having been
by me first duly sworn, stated on "oath that he has been
duly authorized by said corporation to make this
affidavit for and in its behalf; that he has read the
foregoing and above bill and knows the contents
thereof and that the facts therein set out are true, ex-

.cept as to such facts as are therein stated. on informa-

Agios.

FEE ST

27

tion and belief, and that as to those facts so Pe
to be on inleornation and belief, he believes them to
be true.

(Signed) - T. SIMON.

Subscribed and Sworn to before me, this 27th i“
of October, 1935.
(Signed) : a MULLER,
Notary Public in and_ for.
(Seal) Acadia Parish, La.

EXHIBIT “A.” -
Filed October 25, 1935.
Issued April 18, 1935.

United States Department of Agriculture,
Agricultural Adjustment Administration.

Administrative Rulings Rélating to the 1935 Southern
Rice ‘Production Adjustment Program.

Explanation.

These Administrative Rulings apply to and are part
of the Southern Ricé Production espana Contract
and documents pertaining thereto.

i any of the provisions are not understood, the
Community or County Committee should be consulted.
No producer should make out and submit to ‘his
Community or County Committee an Application or a
Contract or other documents pertaining thereto with-

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28

out knowing exactly What he must do in order to

‘receive the benefits of the program.

I. Definitions—As used 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 corporations; and where it is re-
quired by the context, the singular shall include the

* plural.

(b) “Farm” means one contiguous tract of land.
operated as one unit substantially separate from any
other such tract of land. \

(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 to share
tenants; corporations, copartnerships, or individuals
furnishing water for production of rice on a share
basis; and such other persons or classes of persons
as the Secretary may determine to be eligible to sign
Southern Rice Production Adjustment Contracts.

.(d) “Participation in the production of rice” méans
sharing as a producer in any manner in the produc-
tion of rice on a farm. -

(e) “Farming Operation” means the production of
rice or the participation in the production of rice by
a producer:

(f) “Application” means any Application for Rice
Acreage Allotment (forms Rice 1 and 2) heretofore

or hereafter executed by any producer. “Application

ee a en essen

;
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:
‘

29

serial number” means the serial number of any such
Application.

(g). “Declaration” means any 1935 Southern Rice
Declaration of Farm Acreage (form Rice 30) hereto- .
fore or hereafter executed by any producer. The “farm
serial number” means the serial number of any such
Declaration. :

(h) “Schedule” means any Producer’s Schedule’ of
Rice Acreage (Form Rice-37) heretofore or hereafter
executed by any producer. Each such Schedule shall
bear the same serial number as the Contract executed -
by the producer who’ executes.the Schedule.

(i). “Contract” means any 1935 Southern Rice
Production Adjustment Contract (Form Rice-36) here- --
tofore or hereafter executed by any producer. The
“Contract serial number” means the serial number of:
any such Contract. . 7

e |
‘
; B
. NEARER PRET a ele Re at eon RR Wis SRE EN RIA eI PE Eee ee

(j) “1935” means the period from January 1,
1935, to December 31, 1935.

(k) £1934” means the period from January 1,
1934 to December 31, 1934. . .

(1) The term “State base period” means the period -
of calendar years 1929 to 1933, inclusive.

-_(m) The “State Allotment” shall be 135,000 acres
for Arkansas, 364,500 acres for Louisiana, and 142,500
acres for Texas. The “State Quota” shall be 1,834,-
722 barrels for Arkansas, 3,898,333 barrels for Louis-
iana, and 2,010,833 barrels for Texas.

(n) The term “base period” in Arkansas and
Oulsiana means the period of the calendar years

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30

1929 to 1933, inclusive, waa in Texas the years. 1931
to 1933, inclusive.

(o) The “production history” of a producer means,
as the context may require, the producer’s rice acreage
or rice production,: or both, for the base- period as ad-
justed to the official figures and accepted by the State
Committee.

(p) The “producer’s Allotment” and the “pro-
ducer’s Quota” means respectively the rice acreage
and the rice production assigned by the State Com-
mittee, acting for and on behalf of the Secretary, to
the-producer for 1935 and determined according to the
procedure set forth in Administrative Ruling II hereof.

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

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

claration, he allocates to a given farm as a basis for
determining his share of ‘the total 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 in 1935 (as de-
termined upon checking compliance with the Contract
in the manner prescribed by the Secretary) that the
acreage allocated by the producer to that farm in a°
Declaration bears to the total rice acreage allocated
to that farm in such Declaration. :

(s) The “Secretary” means the Secretary of
Agriculture of the United States.

(t) “Rice Section” means the Rice Section of the
Agricultural Adjustment Administration.

ie Pee Saree ©

31

(u) “Official figures” means the records of acreage
and production prepared by the United States Depart-
ment of Agriculture.

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

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

-

II. Determination of Allotments ‘and Quotas.—1.
The allotment of a producer shall be determined by
each State Committee as follows: (a) Add the
acreage of rice planted annually by each producer
for his own account during the base period, after ad-
justment of acreage of all producers to 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 percent in

Texas. :

The total allotments assigned to producers in each
state shall not in any event exceed the state allotment
for that state. se

2. The quota. of a producer shall be determined by
each State Committee as follows: (a) Add the number
of barrels of rough rice produced annually by each
producer for his own account during the base period,
after adjustment of the production of -all producers
to official figures for each state for each of the years
of the base period; (b) Divide the total thus secured
by five (5) in Louisiana and in Arkansas, 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 obtained by 22 percent in
Texas.

i

32
The total quotas assigned to producers in each state
shall not in any event exceed the state quota for that

State.

3. If the total of allotments and quotas deter-

“mined according to the provisions of sections 1 and 2

of this numbered ruling, in any state, is less than the
State Allotment and State Quota such excess may

be allocated’to producers by the State Committee, sub-

ject to approval by the Secretary or his authorized
agent.

4. The Allotment and Quota are based upon
the personal production history of the producer,
regardless of. where the rice was produced and are
the measure of such history. The producer’s produc-
tion history shall not be transferred except as the
State Committee shall, ‘in writing, approve transfers
made pursuant to the provisions of subsections a, b,
and c.of this numbered paragraph 4 of Administra-
tive Ruling II. All requests for transfer of produc-

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

of the producer by his duly authorized agent, and ap-
proval thereof shall be in writing signed by at least
two members of the State Committee. In no event
shall the State Committee approve the transfer of
production 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 records of’ production may be used by
such heirs or devisees, or such member of the family
of such deceased producer or by such members of the
family of such incompetent producer as are continuing
the farming operation of the deceased or incompetent
producer, upon their furnishing proof of such relation- :

33

ship and succession to the producer’s farming opera-
tion.

(b) If a well or canal operator voluntarily sells
his well or canal system and has. not executed an
application, his production history shall be trans-.
ferred to such successor, provided that the former well
or canal operator was not engaged in farming opera-
tions in 1934. , :.

(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
allotment and quota to the State Committee of each
state in which he had farmed during the base period.
Only the history earned by the producer in that state
shall be presented to the State Committee in his
Application. No producer shall be assigned Allot-
ments and Quotas in two or more states, larger in
the aggregate, than the Allotments and Quotas assign-
able to him in one state, had all of his farming opera-
tions been confined to that one state.

7. The sum of all Allotments and of all Quotas
within a State shall not in any event exceed the State
Allotment and Quota, respectively.

34

III. Transfer of Allotment and Quota.—The pro-
ducer’s Allotment and Quota shall not be transferred
except as the State Committee shall in writing approve
transfers made pursuant: to the provisions of sub-
sections a, b, c, and d of this Ruling III. ‘In no event
shall the State Committee approve the transfer of an
Allotment or Quota by reason of foreclosure, execution, |
or any forced sale. All requests for transfer shall be
' made in writing signed by or on behalf of the pro-
ducer by his duly authorized agent,.and approval there-
of shall be in writing signed by at least two members
of the State Committee.

(a) If a producer dies or has been declared in-
competent by a Court of competent jurisdiction after
executing an Application but before executing a Con-
tract, his allotment and quota may be transferred to
such heirs, devisees, or such members of the family
of such. deceased producer or such members of the
family of such incompetent producer as are ‘continuing
the farming operations of the deceased or incompetent
producer, upon their furnishing proof of such relation-
ship and succession to the producer’s farming opera-
tion.

(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.

(c) If a producer has become disabled and ‘has
retired 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

q5°

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 thé
partnership, but before a Contract has been executed
by or on behalf of the partnership, the Allotment and
Quota ‘shall be divided among the partners in such
proportions as is agreed upon by the partnérs: or their
duly authorized representatives in writing submitted
to the State Committee.

IV. Use of Allotment and Quotas by Well or Canal
Operators.—If a well or canal operator has an .allot-
ment and quota assigned to him by the State Commit-
tee on the basis of his personal history as a furnisher
of* water 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 3s 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. — wo |

(1) In the event any document is to be executed “
on behalf of a Corporation, it shall bé 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 corporation on a prescribed form and
filed with the Comptroller of the Agricultural Ad-
justment Administration at Washington, D. C., or

i

36

. attached to the contract, which authorization shall be
considered a part of the contract documents.

(2) In the event a document is to be signed by
an executor, administrator, guardian of an incompe-
tent person, receiver, or other person appointed by a
Court in a fiduciary capacity, there shall be furnished.
either the original or a certified copy of the Court
order of appointment or a certificate on a prescribed
form showing that such person was duly appointed
as such fiduciary and that the 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

‘ocument. by the person executing the document on
its behalf.

(5) When one producer has several documents to
be signed by the same agent or attorney, ‘a properly
executed power of attorney may be filed with the
Comptroller of the Agricultural Adjustment Adminis-
tration to cover all such cases, and shall be considered
as a part of each document so signed.

(6) A document to be signed for a partnership
shall be executed in the name of the partnership and
of each partner as an individual, by’ each member of

37

the partnership, or on behalf of each partner who
does not personally sign, by an agent duly author-
ized to so sign by a Power of Attorney, on a escribed
form."

VI. Pledge of Adjustment Payments.—Adju tment
payments may not be assigned under any con
This is forbidden by the Contract, as well as prohibited
by law.

However, the producer’s right to adjustment: pay-
ments under the Conttact may be pledged in
order to obtain funds (or creait) 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 k
of land, planting, cultivating, watering, harvesting, and a
marketing of the rice crop grown in the year 1935.
_Without in any way limiting the exclusiveness of the ‘
above definition, the expression shall not include cash
rent or debts ‘incurred in 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. TUGWELL,
Acting Secretary of Agriculture.

ss tei mal Wa Sal Bi SET a se ls

38

EXHIBIT “B”.

Filed Oct. 25, 1935.

Form Rice 36,

U.S. Department of Agriculture,

Agricultural Adjustment Administration,

Rice Section.

Form approved by ‘Comptroller ‘General, uy, &.
May 1, 1935. |

1935 Southern Rice Production Adjustment Contract.

(Pursuant to and to effectuate the purposes of the
Agricultural Adjustment Act, approved May 12,
1933, as amended, hereinafter referred to as the

Act.)

I. Performance by Producer:

1.. The undersigned producer (and each and all
of them.if more than one signs this instrument) here-
by offer(s) to enter into a contract with the Secretary
of Agriculture (hereinafter referred to as the “Secre-
tary”);upon the terms and conditions hereinafter set
forth and subject to such -regulations or administra-
tive rulings (which shall be part of the terms and
conditions of this contract) as have been heretofore or
may hereafter be prescribed by the Secretary relating
to 1935 Southern Rice Production Adjustment Con-

tracts. .This contract shall apply to every farm upon

which the producer participates in any manner in the
production of rice in 1935 .(hereinafter referred to
as “the farm(s) covered by this contract”). This
offer shall become a binding contract upon: its accept-
ance by the ery

‘2. -The producer.

(ar

39

(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;

(c) Agrees that for the purposes of checking com-
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 production of rice thereon;

(d) Agrees that his total share of the acreage.
pianted to rice in 1935 on all the farms covered by
this contract shall not exceed his allotment;

(e) Agrees that the acreage permitted under this
contract to be planted to rice in 1935 shail be..farmed
in a workmanlike manner throughout 1935;

(f) Applies for membership in the Rice Production
Control Association organized pursuant to Form Rice
35 in each County or Parish in which a farm covered
by this contract. is located;

(zg) 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

4

pe Red A: LST Atay " ahlas sean vase

bin ate!

SEAM est

eect y tes Me RN RN hi kL GAN a be

a eT a tre

40
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, and not
to execute any power of attorney to collect such
payments, and any sale, pledge or assignment, order
or power of attorney shall be null‘and void, except
that the producer may pledge or hypothecate his right
to any adjustment payments under this contract for
the purpose of obtaining funds (or-credit) for carry-
ing on the current operation of the 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-
diction credit, the producer, or if a payee is designated —
in paragraph 5 hereof and accepts such payment, then. |
such payee if notified in writing of the pledge, shall,
receive the adjustment payment in trust to pay there-
from to the pledgee the amount of the obligation owing
for current production: credit secured by such pledge
and to pay the balance of said payment to the producer.

If a payee other than the producer is 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 mdde pursuant to the
terms of this numbered paragraph, such payee shall

‘receive such payments in trust to pay the whole amount

|

meee

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,

(i) Represents that the statéments contained here- -

in are true to the best of his information and. belief.
Without limitation of: any other right or remedy of
the Secretary: conferred by law or this contract, a

material misstatement herein or in any information.

furnished by the producer in connection with this
contract or any noncompliance by the producer with
‘any of the terms hereof, or with any applicable regula-
tion or administrative ruling which has been or may
hereafter be prescribed by the Secretary with reference
to 1935 Southern Rice Production Adjustment Con-
tracts shall be grounds for termination of this contract
by the Secretary. The determination of the Secretary
that. any such misstatement or noncompliance has
occurred shall be. final and conclusive. In the event
of termination’ of this contract by the Secretary, the

producer shall return ‘to the Secretary all payments ©

theretofore made under this contract, together with all
costs incident to the collection thereof..

II. Performance ~ Secretary:

3. Amount v Payments —The Secretary shall, as

a consideration for thé 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

42.

(2) A second adjustment payment at a rate per
barrel of rice, uniformly applicable to all such con-
tracts,-to be determined by the Secretarye

‘upon an amount of rice’ determined .in. the manner
specified in sub-paragraph (a) or (b) of this num-
bered paragraph, whichever shall apply:

(a) If the producer’s total share of. the acreage
planted to rice in 1935 on all the farm(s) covered by:
this contract is not more than 100 per cent nor less
than 85 per cent of the producer’s allotment, such pay-
ments shall be made upon-that number of barrels of
~ rice which equals 85 per cent of the producer’s quota.

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

planted to rice in 1935 on all the farm(s) covered by
this contract is.less than 85 per cent of the producer’s
allotment, such payments shall be made upon that
number of barrels of rice which bears the same ratio
to the producer’s quota that the producer’s total share
_of the acreage planted to rice in 1935 on all such farms
bears to the producer’s allotment.

4. Time of Payments.

(a) The first adjustment payment shall be made
as soon as practicable after August 1, 1935, provided
that proof satisfactory to the Secretary, of compliance
with the terms and conditions of this contract, has been
_ submitted to the Secretary or his authorized agent.

(b) The second adjustment payment shall be
made as soon as practicable after December 1, 1935,
- provided that proof satisfactory to the Secretary, of
compliance with the terms and conditions of this con-
tract, has been submitted to the Secretary or his
authorized agent.

3

fs

43

5. (a) All adjustment payments hereunder are for-
the benefit of the producer and shall be made only to
the producer unless the producer shall, by naming an-
other person in this numbered paragraph, direct that

_ such payments be made to the person so named, in
which event the payments shall be made by check drawn
payable to the person so named who shall receive them
subject to the provisions of this contract, ‘and particu-~
larly subject to the provisions of subparagraph ¢h) of ° .
paragraph 2 hereof.. If the person so named shall have
died or shall refuse to accept such payment, or shall
for any reason be unable to receive and distribute such
payment subject to the provisions of this contract then .
such payment shall be made to the producer, who like-

_wise shall receive such payments: subject to the pro- —
visions of this contract and particularly subject to the ©
provisions’ of subparagraph (h) of paragraph 2 hereof.

(Stamp State and County cade above.)

| EPPO a Pa one oe See oe
County §
Community.......... Contract )

er an

5. (b) Designated payee ......... Rents ye

er EEE Te eT Cer ere | }
(Address of payee)

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

6. In Witriess Whereof,.each of the undersigned has ©
hereunto set his hand on the date indicated opposite
his signature. ; ;

Re es OE ne Pree reeeret. , 1935.

(Signature of Producer) (Application No.)

F 44 . ,
a Address of Producer (Rural Route No.) .... (Box

‘No.) .... (Post Office) ..... pens Ew. 6:0 6 05 09-1
ee te ine vass Me aeons caw vite ; 1935.
(Witness) (Date of Producer’s signature)
‘(Signature of Producer) | (Application.No.)-
Address of Producer (Rural Route No.) .... (Box

INO.) .... (Post Ofice)-...... ee | eer
- IV. Certification of Committees. |

We Hereby Certify that we have €Xamined the fore-
going offer and that, to the best of. our information
and belief, the total acreage allocated by the producer
to all the farm(s) covered by this contract does not
exceed the producer’s allotment, and hereby recom-
mend that the foregoing offer. be — by the Sec-
retary.

Sw eeaweweee@eceneesr @ 4060906470049
CCPH eC CCC CECT H OCH EHH © HES Ee ©
6 6 28 © CCE OCC CCH SEG ECO OOOH EH 6 ¢

Date....., 1935. Date....., 1935. Date....., 1935.
V. . Acceptance by Secretary.

In consideration of and in reliance upon the agree-
ments of the producer herein set forth and the repre-

45

sentations made by the producer in and in connection
with this contract, this offer is hereby accepted, this
‘aaa i POR Se ee,

. e ’
Representative of Secretary
of Agriculture.

VI. State Committee’s Certificate of Compliance.

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 FP CF 8 68 2 2 eee 6 ae Oe eee Se OS

(For State Committee)

Y S228. 2 P22 SS. OS. SSeS Se Bee a a a

(For State Committee)
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

46 ~~

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 itéms 1, 2, and 3, respectively, in
. part VIII of this contract, and further certifies that
he is not sharing in the production of rice on any
farms covered by this Contract are being farmed in
a workmanlike manner, and that he has fully complied
with all other terms of this Contract, and with all
regulations and administrative rulings issued by the
Secretary, applicable up to and + nee the date of
this certification.

(Producer. )

VIII. Certified Basis for Determining Payments.

1. Producer’s allotment .......... eer re
(e.g mre th RE ee
3. Producer’s share of — . gicseaes
4. Quota percentage (item 3 = item 1).... .....%*
5. Number of barrels for payment (item 4

Tg RS a ae

*If the above percentage is not more than 100 nor less
than 85 per cent, then 85 pgr cent shall be used.

Do not write in this blank; a, use by Comptroller’ S

Computation of payments:

1935 first sian payment Item 5 times
81¢ per bbl... ..... .. eee eee eee eee ss ai

¢
\

47

1935 second adjustment payment, Item 5
eee ff Oe Duras can

Do Not Write in Space’ Below.

Certificate of Comptroller.
Audited and approved for 1935 first adjustment

payment in the amount of .............. _aegaipirnee
JOHN B. PAYNE,
Comptroller,
Ml seven tases Chua
Auditor.
: Schedule No. ..:.....
are Aer yn ae
5 PCE ree by check on Treasurer of the

United States in favor of payee. or payees named
thereon. ;

Check No...........-. Ste Deree

Certificate of Comptroller.
Audited and approved for 1935 second adjustment

payment im the amount of ... 65. scenes SRA es
_ JOHN B. PAYNE,
Comptroller,
\ By: ee ee ee ee ee ee

: Auditor.

| Schedule Ne rte
SS as anes

_ , RNS CER een by check on Treasurer of the

United States in favor of payee or payees named
thereon.

Chock Mo..........:;. | Ty ae nt

48

(Any intentional misrepresentation of fact made in
this contract for the purpose of defrauding the United
States will be subject to the criminal provisions of the
United States Code.) ‘S

%
‘
‘

EXHIBIT “C”,
Filed October os 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 interest
or penalty, in the amount assessed by the Commis-
sioner ‘of Internal Revenue, shall be allowed and
ordered to be paid, but the right to claim the refund
or credit thereof and to maintain such claim pursuant
to the applicable provisions of law, including sub-
section of this section, may be reserved in the
Court’s order. :

(b) The’ taxes imposed under this title, as de-
termined, prescribed, proclaimed and made effective by
the proclamati s and certificates of the Secretary of
Agriculture my 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,

49

are hereby legalized and ratified, and the assessment,
levy, coJlection, 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.

(c) The making of rental and benefit payments
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 agreements with producers
prior to sych date, and the adoption of other voluntary’
methods prior to such date, by the Secretary of Agri-
culture under this title, and rental and benefit pay-
ments made pursuant thereto, are hereby legalized and
ratified, and the making of all such agreements and
payments, the initiation of such programs, and the
adoption of all such methods prior to such date are
hereby legalized, ratified, and confirmed as fully to all
‘intents and purposes as.if each such agreement, pro-
gram, method, and payment had‘been specifically au-
thorized and made effective and the rate and amount
thereof fixed specifically by prior Act of Congress.

_ article wi

+ 50

(d) (1) .No covery, recoupment, set Soff; refund,
or éredit. shall 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 adopfion of this amendment under this
title (including any overpayment of such tax), unless,

after a claim has been dulv ‘led,-it shall -be established,
in addition to all other fac. ; required to beeestablisbed,

‘to the satisfyétion of the Commissioner of Internal

Revenue, and\the Commissioner shall find and declare.
of record, afterdue noticé by the Commissioner to such

‘claimant and opportunity fos hearing, that neither the

claimant nor any person: directly or indirectly under
his contrgl or having control over him, has, directly or
indirectly, included. such’ amount in the price of the
respect to wheeh it was imposed or of any_
article pr essed from the commodity with respect to
which it was eS or Sead on any part of such

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

the claimant or such person was not reduced by any
part of such amou oe any judicial proceeding re-
lating to such claim, | a transcript of the hearing befgre

the Commissioner shall be duly certified and filed as

the record in the case ana shall be so considered’ by
the Court. The provisions of this subsection shall rot
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 a of 1930.

(2) ° le the evens that any tax oe by this title
is finally held inv d by reason of any provision of

‘the Constitution, or ‘is finally held invalid by reason

of the Secretary ‘of Agriculture’s exercise or failure to
exercise any power conferred on him under. this title,
there shall be refunded or credited to any person (not

a

is)

* -

a processor or other person who paid the tax) who

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

suant to thé provisions of subsections (a) and (b) of, .
section 16, had the tax terminated ky ‘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 woult\have been entitled had.

the Act been valid and had the*tax ‘with’ respect to the

particular commodity terminated immediately prior
to the effective date of such holding of invalidity, sub-
ject, however, to the following condition: Such -claim-

ant shall establish to thé ‘satisfaction of the.Commis- —
sioner, and. the Commissioner shall find and declate
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 respéct 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 intérest,

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 exercise any power conferred on him under
this title, shall be niaintained in any Court, unless
prior to the expiration of six months after the date on
which such tax imposed by his 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 pf the Treasury, may
prescribe) is filed by the person entitled thereto; (2)

52

no such suit or proceeding shall be begun before the
expiration of one year from the date of filing such
claim unless the. Commissioner renders a decision
thereon within that time, nor after the expiration of
—five years from the date of the payment of such tax,’ *
penalty, or sum, unless, suit or proceeding is begun
within, two years after, the disallowance of the part ©.
of such claim to which such suit or proceeding re-
lates. The Commissioner shall within $0 days after
such disallowance notify the taxpayer thereof by mail.

(3) The District Courts of the United States -shall

. have. jurisdiction of cases to which this subsection

applies, regardless of the amount in ‘controversy, if

such Courts would have had jurisdiction of. such cases

but forslimitations under the Judicial Code, as

amended, gn jurisdiction of such Courts based upon
the amouft in controversy.

(e) In connection with the establishment, .by_ any
claimant, of the facts required to be established in
subsection (d) of this section, the Commissioner of
Internal Revenue is hereby authorized, by any officer
or employee of the Bureau of Internal Revenue,’ in-
cluding the field 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 attendarice
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 collector designated by him, to summon’ witnesses _
on behalf of the United States or of any, claimant to
appear before the Commissioner, or before any person
designated by him, at a time. and place named in the

4
EELS TOO mr Mey ROLES ABN TA Sa Fo TET op PARROT en ee tac tena se

oy

summons, and to produce such books, papers, cor-
respondence, memoranda, or . other ang ‘as
‘the Commissioner ‘may deem relegant - ma-_
terial, and®.to, give testimony or ne in-
terrogatories, pnder oath, relating to any'matter affect-
‘ing the findings to be made by the Commissioner, pur-
suant to subsection (d) of thjs section.. The provisions
of Revised Statutes 3174 an@j of Revised Statytes 3175
shall te applicable “wit spect. to any * summons
issued pursuant to the sions of this subsection.
Any witness summoned under this subsection shall be
paid, by the party on whose behalf such witness was

_ surffmoned, the same fees and mileage as are paid
witnesses in the Courts of the United States. All in-

formation obtained by the Comniissioner pursuant to
this subsection shall be available to the Secretary of
Agriculturé upon written. request therefor. Such in-

formation shall be kept confidential by all officers and

employees of the Department of Agriculture, and any’
such officer or employee who Violates this requirement
shall, upon conviction, be subject to a fine of not more
than $1,000 or to imprisonment for not more than
one year, or both, and shall be removed: from office.

(f) . No refund,-credit, or atdtement 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.

4 ae

54
. —.. : j

(g), The provisions of . section 3226, Revised
Statutes, as amended, are hereby‘ extended to apply to
any suit for the recovery of any amount of any tax,
penalty, or. interest, which. accrued, before, on, or after
the date of the adoption of this amendment under «his
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
fromsduplicate 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° Ml the Tariff Act of 1930.

RETURN TO RULE TO SHOW CAUSE WHY
TEMPORARY INJUNCT ION iat NOT
_ISSUE. ,

; Filed ‘Oct 28th, 1935.

(Title Omitted. )

To _ 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 Weinsteir, 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

ofeall of his rights under ‘the pleadings in this cause,

ai ais ‘ :
Me ABET EET AVL LENNIE ROLE LYE INST Gh a see EOE

55.

: answers the rule by stating that for lack’ of sufficient .

information to justify a belief he denies, all of thé ©
‘allegations -of paragraph two, three, four, five, six,
‘seven, eight, nine, ten, eleven, twelve, thirteen, ‘four-
teen, ‘fifteen, sixteen, seventeen and eighteen of the
Bill of Complaint, and also denies the allegations of
paragraph one with the exception of the statement

relative to the defendant, which statement is admitted..

Your Respondent further avers that the proceedings
should be dismissed for the reasons that this Hgnor-
able Court has wo jurisdiction and that the Agricul-
tural Adjustment Act is constitutional, valid and
enforceable. ae
_ Wherefore, your Respondent prays this Honerable
Court to dismiss the Bill of Complaint at Complain-
ant’s costs ‘and to refuse granting any injuriction in
these proceedings, and for all general and equitable

relief.
(Signed) RENE A. VIOSCA,.
ae United States Attorhey.
(Signed) ROBERT WEINSTEIN,
Asst. United States Attorney:
Verification.)
State of Louisiana, | oe v;

Parish of Orleans.

- Before me, the. undersigned authority, personally :

-came Rene Ad Viosca, who is the United States. At- °
torney for the Eastern District of Louisiana, who in
his oath says: That in his aforesaid: official capacity
he is of counsel for defendant in the above case; that
he has drawn the return to the rule to show-cause and,
that all the allegations of fact therein are true me
correct to the best of -his knowledge, information and
belief. . ¢
(Signed) RENE A. VIOSCA.

OPI oy PE PEIN EN POET I PONE REAP TOR A Tick abe eet

a

" 56
Sworn to and subscribed before me this 28th day of
October, (1935.
(Signed) CLAUDE D. SHAW,
. ee 0 uty Clerk, Us S. District
Court, Eastern District . of
Louisiana.

? .
> ° -

MOTION TO DISMISi&

Filed Oct. 28, 1935.
ie - (Title Omitted. )

To the Honorable, the Judge of the District Court of
the United States in and for the Eastern District
of Louisiana?

Comes now Rufus W. Fontenot, Acting Collector
of Jnternal Revenue, defendant in the above entitled
.and numbered cause, ‘by Rene A. Viosca, United States
- Attorney in and for thé Eastern District of Louisiana, ©
and Robert™Weinstein, As$istant 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 thé Bill. of Complaint
filed herein, with costs to be paid by the Complainant
upon’ the following ‘grounds and for the following
reasons : is

i
. That this Court’ is without jurisdiction to restrain
or enjoin the collection of taxes heréin involved, or to |
hear and/or determine the issues presented by Saig
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.

S72 ee

~2. Section. 21-A of the Agricultural ‘ Adjustment .
_Act; as amended, ‘prohibits the mainta aining 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.

7

+, 3, The bill of complaint sets forth no ‘facts which,
_ if true, would entitle complainant to the relief prayed
JY ‘for in a Court of Equity. ~ ag ie
\ ; e.,
4. .Complainant has a plain, adequate and complete .
remedy: in the ordinary ‘course of law.

>

« i.

That the United States of America is the real party’
in interest, which may not be sued without its con-
sent. : :

4 | ar ITT.

@

-
~

That there is no actualScontroversy ‘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- |
junctive relief.

AN

f

Vv.

This. proceeding is prohibited by the provisions of
the Declaratory Judgment Act, mended, and can- -
- not be -maintained. ( Revenge aetot 193 1935, niki
August 31, 1935, Section 405). °

6

BN RES SIAR TELS EWE RAD ATEN RR RE we ; Se ‘ -
a ciao ch SE SO OUD TI YE Pee Se OE ee Ne WE eRe See ie nee

58 ©

Dated: this 28th day of October, 1935.
(Sgd.) RENE. A. VIOSCA,
! . United ‘States . ‘Attorney.
| (Sed.) 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:

Rickert Rice Mills, Inc.,
versus
Rufus W. Fontenot, Individually and as Acting
Collector of Internal Revenve. | i

Docket No, '322—In Equity:

A. B. Dore, doing businésseunGer the name of The’
. Dore’ Rice .Mill,
versus .
Rufus W. Fontenot, Individually and | as | Acting
Collector ‘of Internal Revenue. |

Docket No. 323—Tv Equity:
* United Rice Milling Products Co., Iid,, ’
. versus

‘Bae W. Fontenot, Individually- and as Acting
Collector of Internal Revenue.

~*~

) / e
NPN RNRN ERR ers sen Me a a

ay You

594
. Docket No. 324—In Equity:

ad .
. Baton Rouge Rice Mill, _inc.,
versus
Rufus W. Fotftenst, Individually and as Acting
Collector of Internal Revenue.

Docket .No. 325—In Equity:
T. Simon

. » versus
Rifus W. Fontenot, Individually ‘affd as Acting
Collector of Internal Revenue. |

‘Docket No. 326—In Equity.
‘ Levy Rice Milling Company; Inc.,

‘ versus —
+ Rufus W. Fontenot, Individually and ‘as. Acting
ts Collector of Internal Revenue.
Docket No; 327—In Equity: m
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. Fontendt, Individually and as Acting . .
, Collector of Internal Revenue. .

Considering the stipulation and agreement of coun-
sel’ for all parties made this day i in open Court )

It is Ordered that the above ween and ‘entitled |
cases be. and they are hereby consolidated for the

Y

- 2
SE RN LR RENEE MET AIL CONTE RT Fey rt at le ade RR nee OPI POPOL ARM SE. eA ENS RHINE RCE ats
. . ro .

\ 60

" purpose of trial and that the affidavits and evidence :
— in one case be considered to apply to all. -

(Signed) JOHN McDUFFIE; Judge.

4 r i . oa
Seika peel OEE PT ES Pee Sle ASR Sy adele bake ora
SFE Cee PIE A Syne hie os Fo tae sh cis
° os ‘ - roe

New Orleans,: Louisiana, October 28, 1935.

State of Louisiana,
Parish of Orleans.

Before me, the undersigned ‘spbiiiiioe: 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 foltows:.

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:

. | have read all of the allegations contained in Sec-.
tion 12 of Plaintiff’s bill of complaint and Equity 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 fies to pava =-
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

Bashi Li ae eke ete ee Tene
TOK at Sie es PK eg tS Te, SPEEDS RRT AS grt ets 8 oo

61

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 roughrite. -
However this is not necessarily what he does pay, be=
cause each individual miller is buying in competition:
with other millers.- Thus; if other millers are paying
more’ than he thinks he ought to pay, he has to meet Zz
t rice the others are paying, if he is to get any
rice. o~tndividual miller makes the rough rice
market. .It is a market made of the composite pur-
chasing of ali 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 severa
.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 réference to the future-market for clean rice on
the part of a sufficient numberof 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 mar
price for clean rice and rice products.
words, using the estimates above referred to| the cost

62

.

effective July 21, 1934, set out the minimum price
that millers might sell clean rice for in the domestic
market and. that section is as follows:

a

“Section 1. To effectuate the purposes. of this
Amended license and to aid in the carrying out and
' enforcement of thé 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 from which such clean rice
was milled, ;

_ (b) the conversion charge for such quantity of
rough rice and prevailing at the time of such offer,
sale or delivery, and

(¢) the published car lot rail rate:for transporting
such rough rice from the customary point of delivery
_ to the miller’s mill, and

(d) -the administrative assessment for such quan-
tity of rough rice and prevailing when such rice was
milled ; | ia

—_—ay 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 said basis less said maximum
discount. The determination of the Millers Commit-.
tee as to whether or not clean rice is actually exported

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. | a

Sec. 2.. The conversion charge per barrel of rough
rice shall, until: and except as changed by the Secre-
tary, be an amount equal to the sum of (a) seventy
(70) cents per barrel of rough rice, (b) nine (9). cents
per barrel of rough rice if standard one-hundred pound
single packages are used for the clean rice, and (c) if
_cotton or paper inner linings or regular burlap outer
lips are use@ for the clean rice, an additional five (5)
cents per barrel of rough rice, or (d) if any other type.
of container is used for the clean rice, the actual in-
voice price for the container used. The Secretary may
at any time and from time to time during the effective
period, increase or decrease the amount of, and/or
change the basis of computation of, the conversion.

9 @ * ’

charge. | ee

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.

68

M. .Loving, R. Q. Pegram, S. M. Clements and L. D.
Clements, Individually and as Co-partners ‘trading

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

inal charges against the Bay City Rice Mills was
Charge’ No. 41, 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 ——_

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 rough rice lot numbered 33 on the books
of the respondent and purchased from C. E. Fveritt;

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.. F.
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 fice

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. Fastern Stand- -

ard Time, and pursuant to said Section 1 of Article
IV of said License as in effect from July 21, 1934,
12:01 A. M. Eastern Standard Time on.”

69

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 ai;
1934, and ran through January 2, 1935. oe.
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 thé 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 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

‘\

+ 3 -

70

produces different des of clean rice, as set forth in
tthe above mentioned bills of complaint, ‘the Secretary of
Agriculture was never able to show in that case whether
> or not the Bay City Ricé Mills had obtained for the
>’ clean rice derived from the Evoritt, Powers, and Reed
rough rice the “amount (roughly 79¢) 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 i in the
manner set forth’ in Charge 11. ‘ |

Affiant behieves, 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:

Fhis. rice came from rough rice lot 33 from C. EF.
Everitt. It was mixed with various other lots of rice
and went in as a part of the rice sold. and represented

lcnsieieneineeasiarbischiesemmmtnnitememenaaiies mee pee Oech Ree snore

P 71 |
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
200 pockets from lot 36, fancy
26 pockets from lot 33, heads
26 pockets’ from lot 31, heads -
(R. °472.) | 2

Invoice 6622 consisted of the following:

75 pihiien from . lot -26,. fancy
-250 pockets from.lot 35, fancy |
175 pockets from lot 36, fancy fe

(R. 475.)

Invoice~6634 consisted of the following:

&

. 148 pockets from lot 34 EP . -
a . 75 pockets from lot 35 EP.
' . 75 pockets from lét 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
lets going to make up the rice on amy of the other
invoices heretofore or hereafter, referred to, but each
invoice represented a_mix from various lots.:

Clean Rice Lot 43:
This lot went into invoices 6634, 6639, 6644, T-126, .
T-127, T-128, and-P-1006 (R. 327-329). No evidence

ee ee — Oe TT YT, A OG ren Sere ertRgrt oe Rate’ rr eran
‘ e ~———

rt, a 7 Bl Sig oS 6S awit Se PA Ih oo A tag > eee A Sa are ae Se ~
PIS GEE MARL BES NAA IS ER SEY TASER REALE The SIS PLR aA alas Se is Beda ia

72

was introduced as to the component part of those in-
voices, ex€ept invoice 6634 above set forth, but they all
consisted of mixes.

Clean Rice Lot 123:
This rice went into the following invoices:

Invoices Nos. 6832, 6833, T-187, T-iss, 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 intfo-
duced as to the lots going into these invoices but they
were all mixes. . e

Clean, Rice Let 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, arid 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 illustrated: when it is noticed that
a large number of rough rice lots and clean rice lots
were involved, as, for example, in Charge 11 it re-
ferred to rough rice lot as high as No. 154 and clean
rice lot as high as No. 124.

a

No charge was made that Bay: City Rice Mills did

not keep .accurate and complete records of its opera- .

tions.

PEC lr eee

73

Nor. was any issue made as fo 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: din | ,

“Mr. Farda:

Well, it is not common practice, in fact, it is ‘not
a practice to make a mixture just in order to put it in
a warehouse and keep it. You make the -mixture
when you sell your rice, get ready to sell it, you sell it
on a sample and then you make your compésite 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 mesetang of the season and to send.
them out as types? es

“Mr. Farda: a Oh St
The practice is to make hand mixes, ani send them
samples, and when you sell on the samphss you make
your actual mixture, make it up.” (R. 420-421.)
* * * *

“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, bécause it. would not be of material ad-

74

‘vantage to do so because you may not find another
market for that particular blend that you make. - You
therefore keep your rice in the original lots to be in
a position to make a blend of whatever the trade or
market requires at that time.” (R. 430.)

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

Secretary’s attorneys tried to make some allocation
of the cost of rotigh 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. s

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

bery 1935. .
(Sed.) RAYMOND REILSON,
(Seal) Notary Public in and for
Harris County, Texas.

;
8! aie
- cs
~~

75
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:

e

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;
‘operation of rice milling plants, and the distribution
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 one-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. Fach miller has
his buye

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_0294%3A05. Public record. Not legal advice.