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

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TRANSCRIPT OF RECORD

Supreme Court of the United States

OCTOBER TERM, 1935 |

_ No. 586

FARMERS RICE MILLING CO., INC., PETITIONER,

: ws.

RUFUS W. FONTENOT, INDIVIDUALLY AND AS

ACTING UNITED STATES COLLECTOR OF IN-

TERNAL REVENUE FOR THE DISTRICT OF .

LOUISIANA

ON WRIT OF CERTIORARI’ TO THE UNITED STATES CIRCUIT COURT

OF APPEALS FOR THE FIFTH CIRCUIT

PETITION FOR CERTIORARI FILED NOVEMBER 14, 1935.

CERTIORARI GRANTED NOVEMBER 25, 1935

PRIS RINE RE hyp ee

eS 2

reese bete avec

goer; Repress

_ SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1935 |

No. 586

FARMERS RICE MILLING CO., INC., PETITIONER,

VS.

RUFUS. W. FONTENOT, INDIVIDUALLY AND AS

ACTING UNITED STATES COLLECTOR OF IN-

TERNAL REVENUE FOR THE DISTRICT OF

LOUISIANA

ON WRIT OF CERTIORARI TO THE UNITED STATES CIRCUIT COURT

OF APPEALS FOR THE FIFTH CIRCUIT

INDEX

Page

Record from D. C. U. S., Eastern Louisiana...................45. 1

EE TTT PTT Ter ree eT TTT eT ETE TT ETP TTT 1

EE ee a ee 2

Exhibit “A”—Administrative Rulings Relating to the 1935

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

| PIED. MPP MOEN OOE oe acc ccc vcrseseveesecees Peer pe aee 38

‘ Pee ieervacedesve 48

CE ee Peer iC REEL ERT EEE RETO 54

Motion t6 dismiss ............... estevess a orerr Teri rrt rr Tt ee 56°

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

i i a: io ee eke 66-54 00-044 044000608 8 eee Cece es 60

BMGaeis OF Woman Th, TEC oo occ ccc ccccccccccccccceces ante 64

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

Ee Oe he CaM OW shed ot ue ed 600650000 0.4 40 04848 R KOO 88 78

Motion of plaintiff for injunction pending appeal and order de-

. . ££ _ Serrrerrrreery tener eee eee ee ee ewe eeeeeeeeees 79

Jupp & DETWEILER (Inc.), Painters, WASHINGTON, D. C., DECEMBER 6, 1935.

—7204-C

ii INDEX

P P Original

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

” Petition for appeal and order allowing same ................6..

- Assignment of errors ......... MET UAGAERLOLONOLVA SNe TCEN CESS

BEE HE bv e ctw ede doce vecebeedecdnrecedeescstéecesseaesds

POD cc ccccetesscececccoeceveeeceréeccesesnecoeyesseseecse

Ce ES icc decineereuasesueeeenesntectuauas vebeks

; Original

‘Proceedings in U. S. C. C. A., Fifth Circuit................ 86

Motion for preliminary injunction pending appeal.......... - we

Order denying m.tion for preliminary injunction pending ap-

| eT Te ee eT Teer Te eee eee eeee Neer s CeeKnee ee 97

SD ME. lec. ot cess seemenddeneteneees 98

Clerk’s certificate ..............005. (omitted in printing).. 100

Order allowing certiorari ...... $400000 000 Nase Setpenees ee 101

ee, SERS me PREY sate pe oneh ont orey eee a BERLIN RyeOsOn

UNITED STATES OF AMERICA.

DISTRICT COURT OF THE UNITED STATES,

EASTERN DISTRICT OF LOUISIANA, NEW

ORLEANS DIVISION.

No. 327 (In Equity). *

FARMERS RICE MILLING CO., INC.,

versus

RUFUS W. FONTENOT, INDIVIDUALLY AND

AS ACTING UNITED STATES COLLECTOR

OF INTERNAL REVENUE: FOR THE DIS-

TRICT OF LOUISIANA.

Appearances: |

Messrs. McCoy, King & Jones, Attorneys for

_Farmers Rice oe Co., Inc., ‘Plaintiff-Ap-

pellant.

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

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

ing on.behalf of Rufus W. Fontenot, Individual-

ly and as Acting United States Collector of

Internal Revenue for the District of Louisiana,

. Defendant-Appellee.

APPEAL from the District Court of the United States

for the Eastern District of Louisiana, to the

United States Circuit Court of Appeals for the

Fifth Circuit, returnable within thirty (30) days

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

of New Orleans, Louisiana.

TRANSCRIPT OF RECORD.

BILL OF COMPLAINT & EXHIBITS

’ ~ ANNEXED.

Filed .Oct. 28, 1935.

In the District Court of the- United States, Eastern

District of -Louisiana, New Orleans Division.

Farmers Rice Milling Co., Inc.,

vs. No. 327 (In Equity).

Rufus W. Fontenot, ode and as Acting United

States Collector of Internal Revenue for the Dis-

trict of Louisiana.

To the Honorable Wayne G. Borah, Judge of the

United States District Court, for the Eastern Dis-

trict of Louisiana:

Comes now Farmers Rice Milling Co., Inc., herein-

after referred to. as plaintiff and in the neuter singular,

complaining of Rufus ‘W. Fontenot, invidually arid

as @cting United States Collector of Internal Revenue

for the District of Louisiana, hereinafter called de-

fendant, and for cause of action shows to the Court

as follows:

Plaintiff is a corporation organized under the laws

of the State of Louisiana, with its principal office and

domicile at Lake Charles, in Calcasieu Parish, Louisi-

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

ana, residing at New Orleans, Louisiana, and is the

duly appointed, commissioned, qualified and Acting

United States Collector of Internal Revenue for the

State of Louisiana.

Se ih sda lie Nha aa eR eda a

3 ee

The grounds of jurisdiction of this Court in this

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

tion of the United States and the laws of the United

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

United States, in which the matters in controversy

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

suit is also one in which an injunction is sought against

an official of the United States to prevent him from

unlawfully collecting processing taxes levied by the

United States pursuant to certain acts of Congress,

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

valid and unconstitutional said acts of Congress ‘in so

far as they attempt to provide for the levy, assessment

and collection of said processing tax.

“

Plaintiff is engaged in the business of milling rice

and owns and operates a rice mill at Manchester, in

Calcasieu Parish, La. .The milling of said rice, which

constitutes’ processing of said rice under the terms of

the Agricultural 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 lirzits of said State wherein plain-

tiff’s rice mill is established and operated.

There was adopted by the 73rd Congress and ap-

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

ly known as the “Agricultural Adjustment Act,” but |

officially entitled:

“An Act to relieve the existing national Economic

emergency by increasing agricultural purchasing power,

to raise revenue for extraordinary expenses incurred by —

reason of the emergency, to provide: emergency relief

_with respect to agricultural indebtedness, to provide for

‘the orderly liquidation of joint stock land banks, and

. for other purposes.’

and oni Act wit) its amendments, for convenience

_ hereinafter, will be referred to by its popular title,

namely, the Agricultural a aaa Act.

Said Agricultural Adjustment Pa has been amended

several times,and particularly by an amendment, ap-

proved August. 24, 1935, which amendment is herein-

after referred to as the Athen ment of August 24, 1935.

The policy to be elociamed by the enactment of

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

» Was declared by Congress in Section 2 to be as foliows:

re i$ hereby declared to be the wiines 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-

“

es . : a ; 5

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

ine current consumptive demand in domestic and .

foreign markets.

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

ing farm production at such level as will not increase

- the percentage of the consumers’ -retail expenditures

for agricultural commodities, or products derived there-_

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

centage which was returned to the farmer 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

- 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

head following inserted i in. lieu thereof ::

(2) To protect the interest of the consumer by

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

clared to be the policy of Congress to establish’ in

subsection (1) of this section by ‘gradual correction

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

of Agriculture deems to be in the public interest and

feasible in view of the current consumptive. demand

in domestic and foreign markets, and (b) authorizing

no action under this title which. has for its purpose

‘ the maintenance of prices to farmers above the level

‘which it is declared to be the policy of. Congress to

establish in subsection (1) of this section.”

Plaintiff alleges that under no provision of the

Constitution of the United States is the Congress of

the United States authorized to provide for said pro- |

cessing taxes for the purpose of accomplishing any of |

EERO LEG OEE II, IS III, OL ELE SOME Va lar aN Al i alec i be OO NE ss >

. . ~ aa ” —————

; a

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

redsons the levy, assessment’ and collection of said?

:taxes are wholly illegal, unlawful and unwarranted

under the Constitution of the United States.

Section 8 of said Agricultural Adjustment Act pro-

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

clared policy of the Act, the Secretary of Agriculture

shall have power to provide for a reduction and ad-

. justment in the acreage and productidn for market, or

both, of any basic agricultural commodity, including |

‘ rice, through agreements with producers or by other -

voluntary methods, and to provide for rental or bene-_ -

fit payments in connection. therewith, in such amounts

as the-Secretary finds best calculated to effectuate the

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

hereinafter referred t to.

Section 9(a) of said Agricultural Adjustment Act

~ levies the processing taxes thereinafter provided. It

then provides that when the Secretary of Agriculture ~

determines that any. one or more payments (including

said rental or benefit payments) authorized to be made

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

respect to any basic agricultural commodity, he

shall - proclaim such determination and a_ pro-

cessing tax shall be in effect with respect to such

commodity from the beginning of the marketing -

year therefor next following the datt 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 1c

» 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 tag rice and the processing t@&& of Ic per pound

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

1, 1935. *. a

Section’ 9(b) of said (Agriciftural Adjustment Act

provides that the procgSying tax shall be at such rate

as equals the differestgé between the current average

farm price for the é ity 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

yéar 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-

_ such processings are done by or for a State or

a political subdivision or an institution thereof, except

that the processing tax on rice for the period above |

‘ mentioned should be at the rate of lc per pound of _

rough ricé- ———S

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

of quest, 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

a2) " ee Ary Lptes Me rOrs PRR ES EMO Fah SONS ELEM PIER Sey

ds eee Done zy ag eta TSE wen Rayer PEO ne are ms 33 EERE DS | Sal eer

« ba 3 . 8

and for payments authorized to ‘be miade under Sectign 7

8, including said rental and benefit payments made “°

with respect, to adjustment .and reduction in acreage

or production for market of basic agricultural com-

modities, including rice. .

tei

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

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

tion to said $100, 000, 000. 00, the proceeds derived

from. all processing taxes imposed under said Title .

1 were appropriated to be available to the Secre-

tary of Agriculture for expansion of markets and re-

moval of surplus agricultural products and adminis-

trative expenses, rental and benefit payments, and

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

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

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

sum was appropriated tc be available to the Secretary

_ of Agriculture ‘for paym*nts 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. mie 7

: |

7 ae Ss

Acting pursuant to the purported authority given

to him under: said Agricultural Adjustment Act, the

Secretary of Agriculture under date of April 18, 1935,

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

Agriculture, promulgated certain rulings relating to the

1935 Southern Rice Production Adjustment Program, ,

‘a copy of which, rulings is attached hereto as Exhibit A

. and made-a part'hereof as if fully copied herein at

this point. Under said 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 rice)

in the States’ of Arkansas, Louisiana and Texas as

follows: |

? | . Barrels.”

Arkansas 1,834,722

Louisiana .... 3,898,333

2,010,833

Said rulings provided for a State Committee appointed

by the Secretary of Agriculture for each State and

- for various forms and applications to be filled out by

Yhose desiring to produce rice and to be filed with the

said State Coinmittee. Said rulings provided that the

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

inclusive, and for Arkansas and Louisiana should be

the years 1929 to 1933, inclusive. Said rulings further

provided that the said State Committee should make

an allotment to a producer applying to the-Secretary

: of Agriculture through said State Committee for

permission to grow rice during the year 1935, by taking

the average acreage planted by such producer during ©

the base period applicable to him and by reducing

this result by 20% in Arkansas: and in Louisiana

and by 22%. in Texas; and should give an allot-

ment or permission to: said producer to plant said:

80% (in the case of Arkansas and Louisiana)

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

age acreage planted by him, during said base period.

Said rulings further provided for ‘said State Com- ;

mittee to allot to-each such producer a quota of barrels/

of rice that he might produce during the year 1935 by

allotting -to him 80% (if’in Arkansas or Louisiana)

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

rels of ride raised by him during said base period.

If a producer had produced rice during any of the,

years constituting his base: period, he was eligible t6

obtain an allotment and a quota from said State Com-

mittee, and if he should obtain such allotment’ and

i“

quota, the was then eligible to execute’ g } contract with

the Secretary of Agriculture in the form shown.’ by

Exhibit B attached hereto and made a part hereof for

all Surposes-as if copied in full at this point. If said

ome executed said contract and it: was accepted

y’ the Secretary, he was then eligible for the benefit

payments to be made by the Secretary as provided for

in said agreement. However, if a producer had not

produced rice during any of the years constituting ‘his

base period, he was not eligible to execute said contract

with’ the Secretary and was not eligible for the benefit

payments provided for therein. Likewise, if a producer

did not execute such contract, or if he executed such

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

was not eligible for the Sone payments as provided

for therein. . . ‘ ‘

Plaintiff alleges, that said processing taxes were not:

levied under the taxing power of the United States

-and for the purpose of raising revenue, but were levied

for the purpose of raising money with which the Secre-' .

tary of Agriculture could make rental or benefit pay-

ments to producers of agricultural 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.

Section 8 further provides that, in order to

effectuate the declared policy of the Act, the’ Sec- |

retary is empowered to provide for a reduction

in acreage Or a reduction in production of any |

basic ‘agricultural commodity through agreements with

producers, and to provide for rental or benéfit pay-

ments in connectién 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 thé Constitution. of the’ United States

which vests. all of the legislative power in. the Congress

of the. United Stateg and is an invalid and uncon-

stitutional delegation of legislative. power: by Congress

to the Secretary of Agriculture. | _

| ‘Plaintiff further 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.

Section 9(b) of said Act ptovides that if thé Secre-

tary of Agriculture has reason to believe that the pro-

cessing tax levied on any commodity will cause ‘such

reduction in the quantity of such production domestic-

ally consumed as to result in the accumulation of sur-

plus stock thereof or in the depreciation of the farm -

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

vestigation -to be made on due notice and opportunity

for hearing to interested parties, and if thereupon the

12 ©

Secretary finds that such result will occur, then the

| Processing - tax on such commodity shall be at such

rate as*will prevent sych accumulation of Surplus stock

and depreciation of said farm price.. Said provision

applies to the processing tax levied upon rice. Said

provision sets no proper standard by which the Secre-

tary shall be guided in ‘determining the rate of the

processing tax on rice or how long said tax of one

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

continuation of said processing tax being dependent

upon said action by the Secretary, said provision is an

unconstitutional delegation of legislative power to the

Secretary of Agriculture in violation ‘of Article 1 of

said Constitution vesting the legislative power in the »

Congress, and for said reasons the said Act in levying -

said ‘processing tax is void and illegal.

10. .

In addition to the foregoing reasons, the said Agri-

cultural Adjustment Act‘ and its provisions for the

levying; assessment and collection of said processing

taxes upon rice processed by this plaintiff are void,

illegal and in violation of the Constitution of the

United States for the following reasons:

1. They are an attempt and effort by the United

States to regulate, control and reduce the production of

certain agricultural commodities specified in said Act,

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

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

attempt and.effort of regulating, controlling and reduc-

ing the production of such commadities, which attempt,

effort and schéme 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 t imposed

under or in conformity with the power vested in the

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 thé debts or to

provide. for the common defense or the general welfare .

of the United States, but were imposed for the benefit

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

ducers of the various agricultural commodities speci-

fied in said Act who conform to the conditions laid

down i in said Act.

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

ment and collection of said processing taxes violates

the provisions: of the Fifth Amendment to the Con-

stitution since the so-called processing taxes constitute

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

zens, including the plaintiff, namely; processors of

_ said specified commodities, including ‘rice, without .

due process of law, in that such processing taxes

constitute the taking of the property of this class of

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

_pose but for a private purpose, to-wit, the payment of

gratuities or bounties or benefit payments to another

' class of nersons, 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

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

constitute merely an exactment and imposition by

the Government for the purpose, not of raising

revenue for .the support of the government, * but

of. raising the price for farm products and ad-

justing. farm incame. and for carrying out the

policy of said Act as hereinabove set forth and for the .

purdkee of enabling the government to carry out and

effectuate the said attempt, effort and scheme of the

United States as hereinabove set out.

MEV CW ERY TT EI NY OOS ERI A? =" ORT OED Day APP

5. -Wdnder 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 ¢on-

nection therewith in such amounts as the Secretary

may deem fair and reasonable; to determine how long

the said tax'of lc per pound upon the processing: of

“rice shall remain in effect, and if the Secretary changes

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

the said Act involves an invalid delegation to the

Secretary of Agriculture. by Congress of powers vested

exclusively in it by the Constitution and because of

said things the said Act delegates said legislative

powers to the Secretary of Agriculture and said powers

are conferred exclusively on Congress by said Article

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

Section. 1: ‘Article 1, Section 7, clause 1; and

Article 1, Section 9, clause 7 of the Constitution.

6. The said taxes if construed as direct, violate

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

clause 3 of the Constitution, because not apportioned

according to population. <

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

uniform throughout the United States as required by

Article 1, Section 8, clause 1.

8. The said 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 ricé done by plain-

tiff, is in interstate commerce and cannot be ‘regulated

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

its processing-of said rice is not interstate commerce 2

and cannot - regulated by Congress.

. > ‘ 41.

ele the hive of said Act and sin of the

‘Secretary of Agriculture. and the Secretary of the

~ Treasury, the plaintiff is required to file returns with-

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

1935, showing the amount of rice processed by the

plaintiff during the month ‘of September, 1935, and

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

count of said rice processed by the ewe

_ said month, and plaintiff is required to ~ said

amount to the defendant on- or before October 30,

1935. The amount of said processing taxes on account

of the rice processed by the plaintiff during said month

of September is $11,946.25. The defendant as said

Collector of Internal Revenue is charged with the duty

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

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

* defendant will assess said tax against the plaintiff and |

will serve upon the plaintiff notice and demand for

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

lowed ten days from the. receipt of such notice and

demand within which to pay said tax.. .In the event .

of failure to pay said tax within said time, the defend-

ant will assess against the plaintiff a penalty equal ,

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

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 collegt the tax, ©

penalty and interest by filing a notice of lien upon

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

selling such of plaintiff's property as may be necessary

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

‘interest. Additional processing taxes for the morths sub-

sequent to September, 1935, will accrue and will be

assessed agairist and collected from plaintiff, just as

the processing tax for the month of September will be,

in the manner described, unless the defendarit is re-

strained and enjoined from assessing and collecting said

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

paragraph 3 hereof with a large inventory of rough

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

Repeated levies upon and distraint of its property from

month to month will cause plaintiff irreparable injury.

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

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

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

tions of its plant and the sales of its product; and

will result in a permanent injury to its business and

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

plaintiff, will be irretrievably lost to Plaintiff, to its

great and irreparable injury.

12.

Plaintiff further shows that by the Amendment of

' August 24, 1935, Section 30, of said amendment added ~

a new section to the Agricultural Adjustment Act

designated as Section\21, a copy of whic Section 21.

is “attached hereto and marked Exhibit C. Plaintiff

does not have an adequate and complete remedy at

law as to taxes levied and assessed under said Act

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

| Agricultural Adjustment Act. Under Section 21(d) a

recovery will not be allowed to the plaintiff for*‘any

amount of the tax paid by plaintiff unless it shall be

established that the plaintiff has not directly or in-

directly included such amount in the price of the rice

with respect to which it was imposed or passed on any

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

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

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

was not reduced by any part of such amount.

Plaintiff states that it is an impossibility to prove

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

- cessing taxes paid by it has been either’ deducted from ©

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

ing price of clean rice for the following reasons:

% AS ‘ 4 .

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 dépress 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 cannot fix or make

»the price for clean rice, and cannot arbitrarily increase

. the price of clean rice in order to pass the processing

tax on to the purchaser of clean rice.

"ie addition, rough rice ‘wie wiliea 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 "orades

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 alfocated in any _

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

possible to tell with any. degree of accuracy: how

much the rice and rice products that have been pro-

duced from.any particular lot of rough rice have cost,

making it impossible to tell what amount of the_ pro-

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

‘chaser of. these articles.

Furthermore, the processing 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 occurred. On the other hand,

when a lot of rough rice has been processed in any

‘month, some of the grades may be sold immediately,

whereas some of the other grades produced from said

rice may be kept for several months before being sold,

and it is thus impossible to tell how much has been

oi iss ee ‘ .

; ;

: | 19.

received for the clean rice and its products that. are

produced from any month’s processing, and Jt 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.

Thete are many varieties of ricé, some of which have

longer grains than others. _ Different processes of

“milling must be used for each different kind and

variety of rice, and where the plaintiff and other:

millers have on hand varied and sundry varieties

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

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

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

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

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

other due to the varying amounts of moisture in the

rice, varying conditions under which the rice was

harvested, and- many other factors, which makes it

necessary to vary the operation of the rice mill in many

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

put of a mill in barrels per day varies because: of all

these factors very considerably. Under ali 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-

BERR rer ca cree, eee a) RT TS ORI INT ATS

. 3

ee yea hee

LPO CRT 2p oO RO epee %

. 29

mination of eleiitiee in ‘selling the clean rice it has -

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

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

products. ’

Noo

- Tn 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 character of clean rice out-turn from rough

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

ent kinds of rice. It has been found impossible to

make up such samples entirely of one kind of rice

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

in any appreciable quantity a sample of one lot of clean

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

on these samples and when an order is obtained

for a given amount of clean rice of a certain

- sample, the plaintiff and other rice millers then

find what different lots ‘of clean rice, they . have

on hand which by mixing will producé’ the sam-

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

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

by a mixture of clean rice which is made up from

many different lots of clean rice. These different

lots of clean rice have been milled from different lots

of rough rice for which different prices have .been

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

‘rice sale has come from many dither 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-tt is impossible to trace through the history

of rice pracessed 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 :n 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 musi,

under Section 21(d) be tablished 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

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

Courts. The effect of such section is therefore to

limit the function of the judicial review to the deter-

-mination of whether there was any evidence submitted |

to the Commissioner of Internal Revenue tending to

support the findings of the Commission. Said Section

21(d) therefore deprives. the plaintiff of its property

without due process of law in violation of.the Fifth

Amendment to the Constitution. . a

14:

Under said Section 21(d) de sala ise

Adjustment Act, if the processing tax has been either

‘passed on or passed back by the plaintiff, then. the ©

plaintiff cannot maintain any action to recover the

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

for its own account or for the account of the persons

to whom the processing tax has been thus passed on

_ or passed back by the plaintiff; nor can the persons

to whom the processing tax has been thus passed on

or passed back maintain such an action on their own

“account, but all right of action’ by anyone‘to recover -

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

has been wholly taken away by said amendments to

said Agricultural: Adjustment Act. Moreover, Section

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

Act of 1935 deprive the Courts of power to render

declaratory judgments with respect to such alleged

taxes. By reason of the impossibilities of proof here-

inabove referred to, the practical effect of said Act

will be to deny taxpayers and the plaintiff all means

of securing a judicial decision. as to the constitutional-

ity of the processing taxes, unless the Court grants

the relief herein sought.

15.

Plaintiff further shows that by ‘Section 30 of said

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

. @

added to said Act, which in substancé provides that

~ no suit to enjoin the collection of any tax imposed by

said Act shall be maintained. Plaintiff alleges that ©

said section is not intended to apply, and does not

apply, to the injunction prayed for by this plaintiff -

inasmuch as plaintiff has no adequate remedy at law.

Plaintiff alleges, however, that if said section should

be interpreted as providing that no injunction should

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

then the said section, together with the other provi-

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

Fifth Amendment to the Constitution of. the United

States, that no person shall be deprived of his property

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

constitutional taxes will be collected from the plain-

tiff and the plaintiff will have no remedy to prevent

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

ever deprived of the right in any manner to test the

constitutionality ‘of such taxes.

16.

Said. Section 21(d) further denies to the plaintiff

a complete and adequate remedy at law, because a

multiplicity of claims and suits would be required to

enforce such rights as are granted thereunder and

because’ said. subsection requires that the facts re-

quired to be proved thereunder be established to the

satisfaction of the Commissioner.of Internal Revenue

and makes no provision for a judicial review of his

‘decision.

17.

‘A refund of processing taxes paid by. the plaintiff

could not actually be obtained even: if it were possible

for the plaintiff to prove the negative facts required

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

not appropriated funds for the payment of such refunds

_and plaintiff believes, that in view of the aggregate

amount involved, there is a reasonable doubt whether

such appropriation would ever be made.

‘

18.

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 shall direct the said sums

claimed to be due from plaintiff for processing taxes on

account of the ricé processed by plaintiff during the

month of September, .1935, and the .plaintiff further

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

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

ant as required by existing laws and regulations and that

as and when processing taxes under said returns become

due and payable according to existing laws and regula-

tions or any extension lawfully granted to the plain-

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

manner as the Court may direct, all such deposits to

abide the final decree in this cause. .?

Wherefore, plaintiff being without an adequate

remedy .at law prays: | |

1: That process issue ‘and be served upon the de-

fendant requifing him to appear and answer this bill,

but wot under oath, and answer under oath being here-

by expressly waived;

2. That pending the hearing of the application for

a preliminary. injunction hereinafter. prayed for, a

temporary restraining order issue immediately enjoin-

ing and restraining the defendant until the hearing

of its application for a preliminary injunction or until

the further 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 of otherwise, any processing taxes under

and pursuant to said ‘Agricultural Adjustment Act

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

failure to pay. said ° processing tax, and from im-

posing or giving notice of intention to impose any

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

of the plaintiff ;

3.° That notice issue to the defendant advising him

that plaintiff is hereby applying for a preliminary

injunction. and that plaintiff’s 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, ~iocggerd |

by lien or jeopardy or’ by distraint proceedings,

Court or: otherwise. any processing taxes under a

pursuant to said Agricultural Adjustment Act and

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

to pay said processing tax, and from imposing or giving

‘notice of intention to impose any lien for said taxes

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

4. That at the final. hearing of this cause said

preliminary injunction shall not have been granted,

then that a permanent injunction be granted per-

manently restraining and enjoining the defendant from

assessing or collecting or attempting to assess or collect

from the plaintiff in any manner whatsoever, whether

by lien or jeopardy or by distraint proceedings, in

Court or otherwise, any. processing taxes under and

pursuant to said Agricultural Adjustment Act and any

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 a it Me 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, invalid and unconstitu-

tional; and that the defen@ant 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 sei) be

justly entitled.

(Sed.) FARMERS RICE MILLING

- Ce Ia.

By W. P. WEBER, President,

(Sed.) McCOY, KING & JONES,

. By C. A. McCOY,

Attorneys for Plaintiff.

State of Louisiana, .

Parish of Calcasieu. 7

Before me, the undersigned authority on this day

personally appeared W. P.. Weber,: wro having been

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

President of Farmers Rice Milling Company, Inc.,

a corporation, plaintiff in the above cause, and. that

he has been: duly authorized by said corporat*cn to

make this affidavit for and in its behalf; that he has

ee at Ai do ten aces ee a

read the foregoing and above bill and knows the con-

tents thereof and that the facts therein. set out are

true, except as to such facts as are therein stated on

information and belief, and that %s to those facts so

stated to be on information and telief; he believes

them to be true.

_ (Signed) W. P. WEBER.

Suboutbes wed Sworn to before me this 26th day

of October, 1935. )

(Signed) RUBY RAINS,

Notary Public in and for

(Seal) Calcasieu Parish, La.

EXHIBIT “A.”

Filed October 25, 1935.

Issued .April 18, 1935.

United States Department of Agriculture,

Agricultural Adjustment Administration.

Administrative Rulings Relating to the 1935 Southern

Rice Production ‘Adjustment Program.

Explanation.

These Administrative Rulings apply to and are part

of the Southern. Rice Production Adjustment Contract

and. documents pertaining thereto.

If any of the provisions are not understood, the

Community or County Committee should be consulted.

No producer should make out and submit to his

Community or County Committee an Application or a

Contract . or other documents pertaining thereto with-

~ 28

out knowing. exactly what he must do in ordér 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.

ating their own farms; tenants operating farms rented

for cash; tenants operating farms under a crop-share

lease, contract, or agreement; landlords leasing to share

tenants; corporations, copartnerships, or individuals

furnishing water for production of rice on a share

basis; and such other persons or classes of persons .

as the Secretary may determine to be eligible to sign

Southern Rice Production Adjustment Contracts.:.

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

sharing as a producer in any manner in the produc-.

tion of rice on a farm.

, _(e) “Farming Operation” means the production of

rice or the participation in the production of rice by

a producer.

(f) “Application” means any Application for Rice

Acreage Allotment (forms Rice 1 and 2) heretofore

or hereafter executed by any producer. “Application

i a tn i

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.

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

1935, to December 31, 1935. |

. (k) “1934” means the -period from January 4. |

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

Louisiana .means the period of -the calendar years

eo ”

1929 to 1933, inclusive, and 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.

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. . _ 1

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

II. Determination of Allotments and Quotas.—1.

The ment.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 ‘obtaifed 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. a

‘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 basé 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.

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 agént, 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-

eae Nee ert trees cena eer iepiese rie tenes on. ansnamannntin

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-.

tidns in 1934,

tion for an allotment and quota has been executed

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

production for the base period shall be divided among

the partners in such proportions as is agreed upon

by. the partners or their authorized representatives in

writing submitted to the State Committee.

5. In all figures representing final determination

of individual allotments and quotas, fractions amount-

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

fractions amounting to more than one-half a unit

shall be considered a whole unit.

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

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

allotment and quota to the State Committee of each

state in which he had farmed during the base period.

Only the history earned by the producer in that state

shall be presented to the State Committee in his

Application. No producer shall be assigned Allot-

ments and Quotas in two or more states, larger in

the aggregate, than the Allotments and Quotas assign-

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

‘ tions been confined to that one state.

7. The sum of all Allotments and a all . Quotas

within a State shall not in any event exceed the State

Allotment and Quota, respectively.

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

ducer’s Allotment and Quota shall not be. transferred —

except as the State Committee shall in writing approve

transfers made pursuant to the provisions. of sub-

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

shall the: State Committee approve the transfer of an

Allotment or Quota by reason of foreclosure, execution,

or any forced sale. All-<requests for transfer shall be

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

ducer by his duly authorized agent, and approval there-

of shall be.in writing signed by at least two members

of the State Committee,

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

competent by a Court of competent jurisdiction after .

executing an Application but before executing a Con-

tract, his allotment and quota may be transferred to

such heirs, devisees, or such members of the family

of such deceased producer or such members of the

family. of such incompetent producer as are continuing

the farming operations.of the deceased. or incompetent

producer, upon. their furnishing proof of such relation-

ship and succession to the producer’s farming opera-

tion. :

(b) If a producer voluntarily withdraws, either

wholly or in part, from. the production of rice

after executing an Application but. before exe-

_cuting a Contract, he may transfer all or part of. his

Allotment and Quota to such persons as are continu-

ing his farming operation, upon proof of such with-

drawal and succession.

retired from the production of rice after executing an

Application but before executing a Contract, he may

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

person as is continuing his farming operations upon

proof of such disability, retirement, and succession.

(d) Upon dissolution of a partnership, after an

Application has been executed by or on behalf of the

partnership,: but 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 partners or their

duly authorized representatives in writing submitted

to the, State Committee.

IV. Use of Allotment aie 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 as a fur-

nisher of water on a share crop basis.

V. Signing of Application, Déclaration, Contracts,

and Other Documents by a Person. in a Representative

Capacity.—

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

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

of the Corporation by an officer of the Corporation,

who shall state his title, and affix the corporate seal

to the Contract, (If the Corporation has no cor-

porate seal, the following statement in writing shall

appear over the signature, “No corporate seal re-

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

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

thorized by the corporation to execute the. contract

by power of attorney, under seal, duly executed on

behalf of the corporation on a prescribed form and

filed with the Comptroller of the Agricultural oe .

justment Admiristration at Washington, D. C.,

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 cony

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

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

nished.

(4) If the producer is a Governmental body or

agency, there shall be attached to’ the document a

certified copy of a resolution of the Board or other

authority authorized by statute to lease and contract

in regard to the land and personal property covered

by the contract, authorizing the. execution of such

document by the person executing the document on

its behalf.

(5) When one producer has several documents to

be signed by the same agent or attorney; a properly

executed. power of, attorney may be filed with the

Comptroller of the Agricultural Adjustment Adminis-

tration to cover all such cases, and shall be considered

as a part of each document so signed.

(6) A document to be signed for a partnership

shall be executed in the name of the partnership and

of each partner as an individual, by each member of

the partnership, or on behalf of each partner who

does not personally sign, by an agent duly author-

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

form.

VI. Pledge of Adjustment, Payments.—Adjustment

payments may pot be assigned under any condition.

This is forbidden by the Contract, as well as prohibited

by law.

However, the producer’s right to adjustment pay-

ments under the Contract ‘may: be pledged in

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

‘current operation of the farm. The expression “funds”

(or credit) for carrying onthe current operation of

the farm and “current production credit” means funds

or credit to meet any“necessary expense of preparing

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

marketing of the rice crop grown in the year 1935;

‘Without in any way limiting the exclusiveness of the

above definition, the expression shall not include cash

rent or debts incurred in 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.

EXHIBIT “B”.

Filed Oct. 25, 1935.

Form Rice 36,

U.S. Department of Agriculture,

Agricultural Adjustment Administration,

Rice Section.

Form approved by Comptroller General, U. S.,

May 1, 1935. -

1935 Southern Rice Production Adjustment Contract.

(Pursuant to and to effectuate the purposes of the

Agricultural Adjustment Act, approved May 12,

1933, as amended, hereinafter referred to as the

_ Act. )

I. Performance by Producer:

1. The undersigned producer (and each and all

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

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

of Agriculture (hereinafter referred to as the “Secre-

tary”) upon the terms and conditions hereinafter set

forth and subject to such regulations or administra-

tive rulings (which shall be part of the terms and

conditions of this contract) as have been heretofore or

may hereafter be prescribed by the Secretary relating

to 1935 Southern Rice Production Adjustment Con-

tracts. This contract shall apply to every farm upon

which the producer participates in any manner in the

production of rice in 1935 (hereinafter referred to

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

offer shall become a binding contract upon its accept- /

ance by the Secretary.

2. The producer,

(a) Represents that he has allocated to each farm

upon which he will participate in any manner in the

‘production of rice in 1935 some part of his allotment

and that i) total acreage allocated by the producer

to all such’farms does not exceed his allotment;

| .

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

any manner in the production of rice in 1935 on any

farm to which he has not allocated a portion of his

allotment;

pliance and making payments under this contract “the

producer’s share of the acreage planted to rice in

1935” on each farm covered by this contract shall be

that acreage actually planted to rice on such farm

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

age planted to rice on such farm in 1935 that the

acreage allocated by the producer to such farm bears

to the total acreage allocated thereto by all persons

participating in the production of rice thereon;

(d) Agrees that his total share of the acreage

_ Planted 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 shall be farmed

in a workmanlike manner throughout 1935;

(f) .Applies for membership in the Rice Production

Control Association organized pursuant to Form Rice

-35 in each Cqunty or Parish in which a farm covered

by this contract is located;

(g) Agrees to permit access by any. authorized

agent of the Secretary to the farm(s) covered by\,this

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

ments, regardless of where located, pertaining to the

' production and/or sale of rice on or from any and all

of such farms, and expressly waives any right to have

such records kept confidential ;

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

1m 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-

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

in paragraph 5 hereof and accepts such payment, then

such payee if notified in writing of the pledge, shall

receive the adjustment payment in trust to pay there-

‘from to the pledgee the amount of the obligation owing

for current production credit secured by such pledge,

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

If a payee other than the producer is named in para-

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

notified of any pledge of the adjustment payments

for current production credit made pursuant to the

terms of this numbered paragraph, such payee shall

receive such payments in trust to pay the whole amount

thereof to the producer, it being expressly understood.

and agreed that the Secretary shall have no duty or

obligation to see that distribution is made in accord-

ance with the foregoing provisions, but shall have the

right to enforce the performance of said trust by the -

payee;

(i) Represents that the statements contained here-

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

Without limitation of any other right or remedy of

the Secretary conferred by law: or this contract, a

material misstatement herein or in any information

.furnished by the producer'in connection with this

contract or any noncompliance by the producer with

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

tion or administrative ruling which has been or may:

hereafter be prescribed by the Secretary with reference

to 1935 Southern Rice Production Adjustment Con-

tracts shall.be grounds for termination of this contract

by the Secretary. The determination of the Secretary

that any such misstatement or noncompliance has

occurred shall- be final and conclusive. In the event

of termination of this contract by the Secretary, the

ptoducer shall return to the Secretary all payments

theretofore made under this contract, together with all

costs incident to the collection thereof.

II. Performance by Secretary:

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

a consideration for the performance by the producer

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

the manner and at the times specified in paragraph 4

hereof, make

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

cents per-barrel of rice, and

P 4

(2) <A second ‘liiciesaaesl payment at a rate per

barrel of rice, uniformly applicable to all such con-

tracts, to be determined by the Secretary,

upon an amount of rice determined in the manner

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

bered paragraph, whichever shall apply:

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

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

this contract is not more than 100 per cent nor less

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

ments shall be made upon that number of barrels of

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

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

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

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

allotment, such payments shall be made upon that

number of barrels of rice which bears the same ratio

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

of the acreage planted to nice 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.

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 me

such payments be made to the person so named,

which event the payments shall be made by check anne

payable to the person so named who shall receive them

subject to the provisions of this contract, and particu- |

_ larly subject to the provisions of subparagraph (h) of

paragraph 2 hereof. If the person so named shall have

died or shall refuse to accept such payment, or shall

for any reason be unable to receive and distribute such

payment subject to the provisions of this contract then

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

wise shall receive such payments subject to the pro-

visions of this contract and particularly subject to the

provisions of subparagraph (h) of paragraph 2 hereof.

(Stamp State and County code above.)

ie ape Parish ).......... eae

| County §

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

Serial No.{........ aes | :

(Address of payee)

III. Signature(s) of Producer(s). ‘

6. In Witness Whereof,. each of the undersigned has

hereunto set his hand on the date indicated opposite

his signature.

pee Ruhwusoaey ereeeontg eee a

SePVsSCe CBee SOS SHOVES Cee ese. OB Oe CCE OSes OPCs oe: ee ae 2 8

(Signature of Producer) (Application No.)

| “4 |

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

No.) .... (Post Office) ........ — Sepa ee

ee ee eel et aa

(Witness) (Date of Producer’s signature)

-. (Signature of Producer) (Application No.)

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

Pe) 5s GONE Gee. 6x5 sss s5. 6) ae

IV. - Certification of Committees. .

We Hereky Certify that we have examined the fore-

going offer and that, to the best of our information

and belief, the total acreage allocated by the producer

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

exceed the producer’s allotment, and hereby recom-

mend that the foregoing offer be accepted by the Sec-

retary.

eUeU_CPPeCeavsec<cseseveescenu0 96408 €

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-

sentations made by the producer in and in connection

with this contract, this offer is hereby accepted, this

bees OOS haesixicces eee

: HENRY A. WALLACE,

Secretary. of Agriculture, for

and on behalf of the United

States,

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.

BaRERAREeERERASR PRE Pwe eae ee SS

EReRRU@ePREBMEAR MOR RAR RR RAT eR SSS

(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

a LTE NETL ON! PRAY IEP EN ROE LIONEL IIE OF EE LLL EEO YE y

rice doés not exceed his allotment, that his allotment

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

rice in 1935 on all farms on which he is participating

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

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

part VIII of this contract, and further certifies that

he is not sharing in the production of rice on any

farms covered by this Contract are being farmed in

-. a workmanlike manner, and that he has fully complied

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

‘ regulations and administrative rulings issued by the

Secretary, applicable up to and including the date of

this certification. |

ee a ae , 1935.

(Producer. )

VIII.. Certified Basis for Determining Payments.

moh

Producer’s allotment .......... (acres) «2.5.7.

‘Proagucer’s GU0td ..... ec enceae CBRL) ..00-5-.

Producer’s share of ——— measured ........

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

~Number of barrels for payment (item 4 ;

' times item 2) ...... Shia eae eee Pree

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

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

Do not write in this blank; for use by Comptroller’s

Office.

Computation of payments:

1935 first adjustment payment Item 5 times

££. 2 ere rer sd kaw es

1935 second adjustment payment, Item 5

times ....¢ per - SA ie eg eo eu ee ts

Do Not Write in Space Below.

Certificate of Comptroller.

" Mdited’ and . approved for 1935 first: adjustment

payment in the amount of .............. Re aye

JOHN B. PAYNE,

Comptroller,

WE Way a eo ea ee 8 are ae

Auditor.

Schedule No. ........

eee eee rer

SE eas an eed by check on Tredsurer of the -

United States in favor of payee: or payees named

thereon. ,

Check Me............. A eee ee

Certificate of Comptroller.

Audited and approved for 1935 second adjustment

payment in the amount of ....... eels ene as

, ‘JOHN B. PAYNF,

Comptroller,

Oe vale sors sees oh oa

Auditor

Schedule No. ........

Peer er ee re

Be Pa by check on Treasurer of the

United States in favor of payee or payees named

thereon.

(Any intentional misrepresentation of fact made in

.this contract for the purpose of defrauding the United

States will be subject to the criminal provisions of the

United States Code.)

EXHIBIT “C”,

Filed October 25, 1935.

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

ing probate, administration, receivership, and bank-

ruptcy proceedings) shall be brought or maintained 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 coliection | 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

er penalty, in the amount assessed by the Conimis-

sioner of. Internal Revenue, shall be allowed and

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

or credit thereof and to maintain such claim pursuant

to the applicable provisions of law, including sub-

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

Court’s order.

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

termined, prescribed, proclaimed and made effective by

the proclamations and certificates of the Secretary of

Agriculture or of the President and by the regulations

of the Secretary with the approval of the President

prior to the date of the adoption of this amendment,

are hereby legalized and ratified, and the assessment,

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

gether with penalties. and interest. with respect there-

- to)-prior to said date are hereby legalized and ratified

and confirmed as fully to all intents and purposes as

if each such tax had been miade 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 illégal-

ity to any act, determination, proclamation, certifi¢ate,

or regulation of the Secretary f Agriculture oref 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 such date, and the adoption of other.voluntary

-méthods 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.

eda ges aki eee tee tae eae

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

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

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

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

the date of the adoption of this amendment under this

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

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

in addition to all other facts required to be established,.

to the satisfaction of the Commissioner of Internal

Revenue, and the Commissioner shall find and declare

of record, after due notice by the Commissioner to such .

claimant and opportunity for hearing, that neither the

claimant nor any person directly or indirectly under

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

indirectly, included such amount in the price of the

article with respect to which it was imposed or of any

article processed from the commodity with respect to

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

amount to the vendee or to any other person in any

manner, or included any part of such amount in the

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

the claimant or such person was not reduced by any

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

lating to such claim, a transcript of the hearing before

. the Commissioner shall be ‘duly certified and filed as

the record in the case and shall be so considered by

the Court. The provisions of this subsection shall not

apply to any refund or credit authorized by subsection

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

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

tax paid by him with respect to the provisions of. sec=

tion 317 of the Tariff Act of 1930.

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

is finally held invalid by reason of any provision of

‘the Constitution, or is finally held invalid by reason

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

exercise any power conferred on him under this title,

there shall be refunded or credited to any person (not

§1 >

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

would have been entitled to a refund or credit pur-

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

‘section 16, had the tax terminated Ly proclamation

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

thereof, a sum in an amount equivalent to the amount

to which such person would have been entitled had

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

particular commodity terminated immediately prior

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

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

ant shall establish to the satisfaction of the Commis-

’ sioner, and the Commissioner shall find and. declare

of record, after due notice by the Commissioner to the

claimant and opportunity for hearing, that the amount

of the tax paid upon the processing of the commodity

used in the floor’ stocks with respect ‘to which

the claim is made was included by the _ pro-

cessor or other person who paid the tax in

the price of such stocks (or of the material from

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

ceeding relating to such claim, a transcript of the

hearing before the Commissioner shall be duly certi-

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

considered by the Court. Notwithstanding any other

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

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

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

which. is based upon the invalidity of such tax by

reason of any provision of the Constitution or by

reason of the Secretary of Agriculture’s exercise or

_ failure to exercise any power conferred on him under

this title, shall be maintained in any Court, unless

prior to the expiration of six months after the date on

which such, tax imposed by this title has been finally

held invalid a claim therefor (conforming to such regu-

lations as the Commissioner of Internal Revenue with

the approval of the Secretary of the Treasury, may

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

no such suit or proceeding shall be begun before the

expiration of one_year from the date of filing such

claim unless the Commissioner renders a - decision

thereon within that time, nor after the expiration of

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

penalty, or sum, unless suit or proceeding is begun

within two years after the disallowance of the part

of such claim to which such suit or proceeding re-

lates. ‘The Commissioner shall within $0 days after

such disallowance notify the taxpayer thereof by mail.

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

have’ jurisdiction of cases to which this subsection

applies, regardless of the amount in controversy, if

such Courts would have had jurisdiction of such cases

but for limitations under the Judicial Code, as

amended, on jurisdiction of such Courts based upon

the amount in controversy.

(e) In connection with the establishment, by any

claimant, of the facts required to be established in

subsection (d) of this section, the Commissioner of

Internal Revenue is hereby authorized, by any officer

or employee of the Bureau of Internal Revenue, in-

cluding the 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 atténdance

of the claimant or of any officer or employee of the

‘claimant, or the attendance of any other person having

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

taken, his testimony with reference to any such matter,

with power to administer oaths to such person or

‘persons. It shall be lawful for the Commissioner, or

any collector designated by him, to summon witnesses

on behalf of the United States or of any claimant to

appear before the Commissioner, or before any person

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

Ra arnt ee ne

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

respondence, memoranda, or other records as

the Commissioner may deem relevant or ma-

terial, and~ to give testimony or answer in-

terrogatories, under oath, relating to any matter affect-

ing the findings to be made by the Commissioner pur-

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

of Revised Statutes 3174 and of Revised Statutes 3175

shall te applicable with respect ‘to any summons

issued. pursuant to the provisions of this subsection.

Any witness summoned under this subsection shall. be

paid, by the party on whose behalf such witness was

summoned, the same fees: and mileage as are paid

‘witnesses in the Courts of the United States. All in-

formation obtained by the Commissionér pursuant to

this subsection shall be available to the Secretary of

Agriculture upon written request therefor. Such in-

formation shall be kept confidential by all officers and

employees of the Department, of Agriculture, and any

such officer or employee who Violates this requirement

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

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

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

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

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

“or section 17, unless, within one year after the right

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

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

ing to such regulations as the Commissioner of In-

ternal Revenue, with the approval of the Secretary of

the Treasury, may prescribe) is filed by the person

entitled to such refund, credit, or abatement, except

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

ment accrued prior to the date of the adoption of this

amendment, then such one year period shall be com- |

puted from ‘the date of this amendment. No interest

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

with respect to any such claim for refund or credit.

(g) The provisions of section 3226, Revised

‘Statutes, as amended, are hereby extended to apply to

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

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

the date of the adoption of this amendment under this

- title (whether an overpayment or otherwise), and to

any suit for the recovery of any amount of tax which

results fram an error in the computation of the tax or

from duplicate payments of any tax, or any refund

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

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

refund or credit to the processor of any tax paid by’

him with respect to articles exported pursuant to the

provisions of section 317 of the Tariff Act of 1930.

RETURN TO RULE TO SHOW. CAUSE WHY

TEMPORARY ang es ION SHOULD NOT

ISSUE. ;

Filed Oct 28th; 1935.

(Title Omitted.)

To the Honorable the Judge of the District Court of

the United States in and for the Eastern ‘District

of Louisiana:

Now into Court comes Rufus W. Fontenot, Acting

‘Collector of Internal Revenue, Defendant in the above ©

entitled and numbered cause, through Rene A. Viosca,

United States Attorney in and for the Eastern District

of Louisiana, and Robert Weinstein, Assistant United

States Attorney for said District, his attorneys, and.

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

quiring the defendant in rule to file all defenses to the

rule on the date set for the hearing on the application

for a temporary injunction, and with full reservation

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

answers the rule by stating that for lack of sufficient

information to justify a belief he denies all of the

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

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

teen, fifteen, sixteen, seventeen and eighteen of the

Bill of Complaint, and also denies the allegations of

paragraph one with the exception of the statement

relative to the defendant, which statement‘is admitted.

Your Respondent further avers that the proceedings

should be dismissed for the reasons that this Honor-

able Court has no jurisdiction and that the Agricul-

tural Adjustment Act is constitutional, valid and .

enforceable. :

Wherefore, your Respondent prays this Honorable

Court to dismiss the Bill of Complaint at Complain-

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

these proceedings, ‘and for all.general and equitable

relief.

(Signed) RENE A. VIOSCA,

United States Attorney.

(Signed) ROBERT WEINSTEIN,

Asst. United States Attorney.

(Verification. )

State of Louisiana,

Parish of Orleans.

Before me, the undersigned authority, personally

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

torney for the. Eastern District of Louisiana, who in

his oath says: That in his aforesaid official’ capacity

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

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

that all the allegations of fact therein are. true and ~

correct to the best of his knowledge, information and

belief.

(Signed) RENE A. VIOSCA.

een to and subscribed = me this 28th day of

October, 1935.

(Signed) CLAUDE D. SHAW,

Deputy Clerk, U. S. District

Court, Eastern District of

Louisiana.

MOTION TO: DISMISS:

Filed. Oct. 28, 1935.

(Title Omitted.)

To the Honorable, the Judge of the District Court of

the United States in and for the Eastern District

of Louisiana:

Comes now ‘Rufus W. Fontenot, Acting Collector

of Internal Revenue, defendant in the above entitled

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

Attorney-in and for the Eastern District of Louisiana,

and Robert Weinstein, Assistant United States At-

torney for said: District, his, attorneys, with full re-

servation of his rights to further plead in this cause,

‘and moves the Court to dismiss the Bill of Complaint

filed herein, with costs to be paid by the Complainant

-upon the following grounds and for the following.

reasons: ;

That this Court is without jurisdiction to restrain

or enjoin the collection of taxes herein involved, or to

hear and/or determine the issues presented by said

bill of complaint because:

‘1. Section 3224 of the Revised Statutes of the

United States prohibits the maintaining in any Court

- of a suit for the purpose of restraining the assessment °

and/or collection of Federal Tax.

2. Section 21-A of the Agricultural Adjustment

Act, as amended, prohibits the maintaining in any

Court of a suit for the purpose of restraining the

assessment and/or collection of any processing tax

under the said Agricultural Adjustment Act.

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

if true, would entitle complainant to the relief prayed

for in a Court of Equity.

4. Complainant-has a plain, adequate and complete

remedy in the ordinary course of law.

Il.

That the United States of America is the real party

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

sent.

ITT.

That there is no actual controversy between com-

plainant and defendant or between any parties over

which this Court has jurisdiction within the purview

of the Declaratory Judgment Act.

IV.

That the Declaratory Judgment Act was not intended

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

tions arising under the Revenue Laws, and _particu-

larly was not intended as a means: for obtaining in-

Junctive relief.

This proceeding is prohibited by the provisions of.

the Declaratory Judgment Act, as amended, and can-

not be maintained. (Revenue Act of 1935, approved

August 31, 1935, Section 405).

Dated: this 28th day of. October, 1935.

(Sgd.) RENE A. VIOSCA,

: United States Attorney.

(Sgd.) ROBERT WEINSTEIN,

| | Assistant United States

Attorney.

ORDER OF COURT CONSOLIDATING ALL

CASES FOR TRIAL, ETC.

Filed Oct. 28, 1935.

United States District Court, 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, Revenue.

Docket No. 322—In Equity:

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

Dore Rice Mill,

versus

Rufus. W. Fontenot, Indigidually and as porn

Collector of Intgnal Revenue.

Docket No. 323—In Equity:

United Rice Milling Products Co., Inc.,

' _- versus

Rufus W. Fontenot, Individually and as Nene

Collector of Internal Revenue.

oo a

Docket No. 324—In Equity:

Baton Rouge Rice Mill, Inc.,

versus ,

Rufus W. Fontenot, Individually and as Acting

Collector of Internal Revenue. |

Docket No. 325—In Equity:

T. Simon ; ®

versus

Rufus W. Fontenot, * Tuidividually and as Acting

Collector of Internal Revenue.

Docket No. 326—In Equity.

Levy Rice Milling Company, Inc.,

vers

Rufus W. Fontenot, Individually and as Acting

‘Collector of Internal Revenue.

Docket No. 327—In Equity:

Farmers- Rice Milling Company, Inc.,

| . versus :

Rufus. W. Fextenot, Individually and as Acting

Collector of Internal Revenue.

Docket No. 328—In Equity:

Noble-Trotter Rice Milling Co., Inc.,

; versus

Rufus W: Fontenot, Individually and as Acting

Collector of Internal Revenue.

Considering the stipulation and agreement of coun-

‘sel for all parties made this day in open Court;

It is Ordered that the above numbered and entitled

cases be and they are hereby consolidated for the

purpose of trial and that the affidavits and evidence

offered in one Casi be considered to apply to all.

(Signed) JOHN McDUFFIE, Judge.

. >!

‘>

New Orleans, Louisiana, October 28, 1935.

State of Louisiana,

Parish of Orleans. -

Before me, the undersigned authority, on this day

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

being by me first duly sworn in terms of law deposed

and said on his oath as follows:

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

Louisiana, and am Executive Secretary of the Rice °

Millers’ Association. My principal duties are the

preparation and interpretation of statistical and econ-

omic data with regard to the rice milling industry. I

have been engaged in the rice milling business since

1909, and from 1916 to 1928, I personally operated

a rice mill; I am thoroughly familiar with the rice

milling industry in all of its phases.

I have read all of the allegations contained in Sec-

tion 12 of Plaintiff’s bill of complaint and 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 idle rough

rice, consider the fact that they will have to pay a _

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

ever, this is simply one of the many factors entering

into the miller’s determination of what he ought to

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

rice miller negotiates for the purchase of a given lot

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

for such rice after milling on the existing market for

clean rice and rice products. He then estimates what

he thinks it will-cost him to process the rough rice

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

mate is included the amount of the processing tax, as

well as other taxes. Having made these. estimates,

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

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

cause each individual miller is buying in competition

with other millers. Thus, if other millers are paying

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

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

rice. No individual miller makes the rough rice

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

chasing of all millers in the particular terri-

tory. While the estimates above referred to

are made with regard to the market for clean

rice and rice products at the time of the purchase of

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

sarily control since rough rice is not ordinarily milled,

and the clean rice and products sold until several

months after the purchase of the rough rice.

Since the market for clean rice and rice products

fluctuates from day to day and month to month, the

prospects of the future market has a bearing on what

the miller may have to pay for rough rice. Optimism

with reference to the future market for clean rice on

the part of a sufficient number of rice millers will

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

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

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

may be pessimistic as to the future. market.

For example, the present market price of rough rice

is quite high with reference to the present market

prige for clean rice and rice products. In _ other

words, using the estimates above referred to, the cost

62 4

of rough 1 rice on today’s market plus wandocsaied cost

of milling. (including the processing tax) is more than

the miller ‘could reasonably expect to procure for the

rice and rice products made from such rough rice on

the existing market for clean rice and rice products.”

This present. day market for rough rice is not made

_ by any individual mi‘i-r, but is made by .the com-

posite of purchases by all millers in the territory.

_ Thus, ‘as I have previously said, while the processing

tax is considered by the miller in detefmining what

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

many factors entering into such determination, and |

is. by no means controlling.

Furthermore, it is impossiblé to“tell on any given .

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

has been affected by the existence of the Processing

tax.

I am ‘familiar with acounting and statistical

methods, and I know of na possible method of keep-

ing books and records in, the rice business which would

accurately reflect the fn or loss from.the purchase,’

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

tinguished from the gain or loss: from the aggregate

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

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

use’ of .averageés, predictions and arbitraries.

The rice milling business is. seasonal; the

season beginning on. August Ist and ending

on July 31st, the operations gradually — in-

creasing until the peak is reached during the months

of October, November and December, and decreasing

to the’end of the season. For this reason as well as

others, the cost of milling varies greatly from time to

time during. the season. The estimated cost of milling

which millers use in budgeting and determining what

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

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

when used to estimate a profit or loss on a given -

transaction, could never be exact, and might be very

ae ‘ 63

. ; my) . 6 A

much too high. or very ’‘much too low when applied to

that particular transaction. © a

Under. these circumstances, when a miller purchases

a particular lot of rice, he may“believe that all, or a

part of the processing ‘tax to be assessed on such rice °

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

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

absorbed by himself. However, he can never even

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

' and rice products made from the~paiticular lot of

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

or the purchaser, or all of them together has borne the

ultimate economic.burden of the tax. This is because -

any belief he may have had as to_whether thé burden

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

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

on averages, which are never accurate with respect to_

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

. also be based in part on ‘assumptions as to market

conditions on clean rice and rice products, which may

or may not be correct. .The rough rice’ may go

‘through the mill on a day when large amounts are

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

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

rice was being milled resulting in a unit cost higher

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

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

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

the market on clean rice and rice products remains ~

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

eventually sells the clean rice and rite products may -

be substantially less or. substantially more than the

sale price on which he based his presumptions.

_/ There is no necessary relation between the market

for clean rice and for rice products, since they are

sold for different purpos: 3, and this is an added reason

why the miller cannot possibiy allocate the cost of a

given lot of rough rice among-the clean rice and rice

products produced from it.

PARE OREN OS AST RE LOBE Rey SONAR

‘

. ‘ -

, : : 7

For example, it is entirely possible for the market

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

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

The rough rice market is affected by the clean rice

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

‘impossible to determine their. relative affect on each

- other as it is to determirie whether the hen or the ‘egg

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

either the rough rice or clean rice marked would be

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

that the individual. miller cannot force down the price

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

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

the burden of the tax. The individual miller simply

pays the market price for rough rice which has been

fixed by the composite action of all millers, and it -

would be impossible to prove whether a lowering of

- the rough rice market was the result of the assessment

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

such as a drop in time clean rice and rice products

market, a composite pessimism on the part of rice

_-millers as to the future market or other factors. The .

same thing is true with regard to the market for clean

rice and rice products, and no individual miller can

arbitrarily force that aan upwards in order to pass .

on the tax.

——_—{Sed.}- Ww. M. REID.

Sworn and subscribed to before me, the undersigned

authority, this 28 day of October, 1935.

~ (Sgd.). HARRY R.. CABRAL.

(Seal) Notary Public.

State of Texas, ?

County of Harris. ~

Before me, the undersigned eatin. on: this day

personally appeared Homer L. Bruce, who, having

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

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

duly licensed arid practicing attorney at law. He is

65.

familiar with the bills of complaint that are ‘being pre-

sented: to the United States. District Court at New

‘ Orleans, Louisiana, on behalf of ‘certain rice millers

of Louisiana seeking an injunction against the collec-

tion of progessing taxes on _ rice, havi@g worked with.

his partner Mr. John P. Bullington in the preparation

of said bills*of complaint, and is familiar with the

. general practice of the rice industry of selling rice on

samples and-the filling of (order§’ for clean rice by °

mixirig: rice from differe iy lots of clean rice in the

i Biot complaint.

manner set outin the biff ;

This. affidavit is Wadefannection with the allega-

tions ‘in said bills that it is impossible for the plaintiff B

rice millers to comply with the requirements of Section : >

21 (d) of the Agricultural Adjustment At that they -_

shall establis#that no part of the processing tax has

bten passed on to the consumer or taken out of the

pricé paid the producer before they are allowed to re-

cover any, processing taxes paid. - ’~ .

Section/8“(3) of the Agricultural Adjustment Act

gave..thesSecretary of Agriculture authority to issue

-licenses” to Processors, including processors of rice,

and provided that the Secretary should have the right

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

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

to -enter into marketing agreements with processors,_-_-_—

+—~—~~ “In ‘the fall of 1933,° the Secretary entered into a

' marketing agreement with members of the southern

rice milliig industry, and at the same time issued a

license applicable to all mills. This marketing agree-

ment and thé“license were in substantially the same

form. Later various amendments were made to both

the marketing agreement and the license. |

In the marketing agreement and in the... license,

the. Secretary of Agriculture fixed the price to be paid.

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

Article III of the marketing agreement and license

hereinafter referred to, namely, the: one effective on — °

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

aK espe CR a RS eal a he hk ae ure a LEI ECR ASAI

' 66

e . .

effective July 21, 1934, set out the minimium price

that millers might sell’ clean rice for in the domestic

market and that section is as follows:

“Section 1. To effectuate the purposes of this

Amended license and to aid in the carrying owt and

enforcement of the provisions hereof, no miller shall

offer for sale, sell or deliver for domestic consumption

. any quantity of clean rice for an amount’ per pocket

- less than the sum of

(a) the minimum price, determined pursuant to

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

quantity of the rough rice ‘from which such ‘clean ricé

was milled,

(b) the “conversion charge for such quantity of |

rough rice and prevailing at the ume of such omer,

sale or delivery, and .

_(c) the publishtd car lot rail rate for transporting

such rough rice from thé customary point of delivery

to the miller’ S mill, and ;

(d) the pdevdnkihaptbve assessment for such quan-

tity of rough. rice and prevailing when such rice, was

milled ;

_ Provided, however, that 3 any sites 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.taaximum

discount. The determination of the Millers Commit-—

tee as to whether or not clean rice is actually éxported

"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. 0.’ b.

the-miller’s mill. ; i

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 ricé, ‘and (c) if

cotton or paper inner linings. or regular burlap outer

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

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

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

voice price for the container used. The-Sectetary may

‘at any time and from time to time during the effective

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

change the basis of computation of, the conversion

charge.” Ae

One of the main purposes, if not actually thé 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 pricg. 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 Jn the Matter of W.

* ATLA 14 PU Is PeCoN Oe A ered: pela estive mee re 2 19 OO RB MEMS OT TENS ONS i

M: Lesion, R. Q. eee 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: 11, which charged in general terms. that

the Mill had sold clean rice for domestic consumption.

- for an amount less than the price fixed for the sale of

the clean-rice pursuant tg this license. This nerge 11

was later made. more ‘specific as follows:

“11, That the said Licensee since the effective date

of said License has violated Section 1 of Article V of

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

M. Eastern Standard Time, and Section 4 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 €. E. Everitt;

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

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

Everitt; clean rice lot numbered 123 on-the books

of the respondent derived: ‘from rough ..rice lot.

numbered 153. on: the books - of~ the respondent:

and purchased from <A. —~P: Powers clean - rice

lot’ numbered 124 on the books of the respond-

ent. derived from rough rice lot .numbered 154

J. R. Reed; for’ an .amourtt per pocket less than the

price fixed for the sale of such’ clean rice pursuant to

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

ard Time, and pursuant to said Section 1 of Article

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

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

spondent derived from rough rice lot number 33 on °

on the books of the respondent and purchased from’

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

The affiant, together with Mr. W. E. Davant of Bay

City, Texas, represented the Bay Cfty Rice Mills in

this hearing before the representatives of the Secretary

of Agriculture on these charges, which hearing was

held in Houston, -Texas, and again on. December 27,

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

The Bay City. Rice Mills in that proceeding took

the position, and so advised the Secretary of Agricul-

ture’s representatives, that it was utterly impossible,

. owing to the manner in Which the rice industry is con-

ducted, through the sale of clean rice on samples made

up of mixes of different lots of clean rice, aS. more

fully ‘set out in the bills of complaint presented ‘to the |

United States District Court at New Orleans in the —

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

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

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

amount above the cost ‘of the clean rice that the

Secretary required under Section 1 of Article IV.

_ The Secretary of Agriculture’s representatives had

access -to all-the books, vouchers and records of the ’

Bay City Rice Mills, both in connection with its

rough rice-purchases and its clean rice «sales and had

several auditors continuously working on ‘those re-:

cords. The amount paid for the rough rice purchased

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

* Charge II was established. The clean rice derived

from the rough rice purchased from these three pro-

ducers was traced at the hearing into the sales of

clean rice into which they entered and the price of

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

the fact that each quantity of clean rice that went

" into a sale was made up of a mixture from various |

lots of clean rice, which were in turn produced from

_ Various lots of rough rice bought from different pro-

ducers, and owing to the fact that there was, as is

usual ip the rice-business, an alniost infinite variation

in the combinations of these mixes of clean rice lots, .

and owing to the fact that rough rice. when milled

produces different grades ‘of clean rice, as set forth in

_ the above mentioned bills of complaint, the Secretary of

Agriculture was never able to show in that case whether

or not the Bay City Rice Mills had obtained for the

clean rice derived from the Evoritt, Powers, and Reed

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

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

to require the mill to get. Although that was one

of the charges most vitally affecting the entire rice

program in affiant’s belief; and although the Secretary

of Agriculture through his two attorneys who prose-

cuted the case and through hjs 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 proveh and did not find that

the Bay City Rice Mills had violated-the license in the

manner set forth in Charge ld. ines

Affiant believes, and on that belief states, that the

reason the Secretary of Agriculture did pot find that

Charge 11 had been supported by any evidence was

because it was utterly impossiblé 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 inyeach 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.) ero

Clean Rice Lot 36: : : =

This rice came from rough rice lot 33 from C. E.

Everitt., It was mixed with various other lots of rice

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

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

6634, 6639, 6645, 6767, 6770, ort 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.)

Invoice 6622 consisted* of the following :. as:

75 pockets from lot 26, fancy

' 250 pockets from ‘lot 35, fancy

175 pockets from lot 36, fancy

(R. 475.)

' Invoice 6634 consisted of the following:

148 pockets from lot 34 EP .

75 pockets from Jot 35 EP

75 pockets from lot 36 EP

_ 81 pockets from lot 37 EP

68 pockets from lot 38 EP

‘150: pockets from lot 43 EP

201 pockets from lot 45 -EP

(R. 478.)

There was no evidence whatsoever as to the different

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

_invoices heretofore or hereafter referred to, but each

invoice represented a mix from various lots. |

Clean Rice Lot 43: . |

' This lot went into inyoices 6634, 6639, 6644, T-126,

T- 127, T-128; and P-1006 (R. 327- 329). No. evidence

ae ApS er ON itty cnn gegRREOc ne omeingty Fs 0m

| R

was iociead as to the component part of those in- b

voices, except 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-188, 6840, T-195, |

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

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

duced as to the lots going into these invoices but they

were al] .mixes.

Clean Rice Lot 124:

Affiant does not have the record at this time as to

what invoices this lot went into but it was mixed into

a number of mixed invoices.

To have traced the cost of the various lots of clean

rice that went into each invoice would have been long

involved and in fact practically impossible, and then

to trace the cost of all. rice going into all invoices into

which any one of these clean rice lots went would

have involved further and: innumerable records and

evidence.

This is further illustrated when it is noticed that

a large number of rough rice lots and clean rice lots

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

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

rice lot as high as No. 124.

~ No charge was made that Bay City Rice Mills did

not keep accurate and complete records of its opera-

tions.

P i Son BD MS 4 rf . = = vai

ey ee RES ‘ .

SRST Pe PR LIE TSO REL Bont SINT IU OPT RISEN T IIR I Pa CIE RE RARE RRL oat eu —

* ia . - s rae * 9 L2G

;

‘

]

ee eee

Nor was any issue made as to the fact that the

selling of rice by samples and mixing rice was usual

and customary: < .

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

witness for the Secretary of Agriculture, and who is the

| Manager of Stahdard Rice Company, one of the largest -

rice milling companies in the’ United States, testified

as follows:

Mr. Farda:

Well, it is not commoa 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 composite mix-

ture and your lots match aed sample. That is a

common practice.

“Mr. Davant:

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

tically in the beginning of. the season and to send

them out as types? ;

“Mr. F orem

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

samples, and when you sell on the sanuples you make

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

“Mr. Farda: :

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

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

“Mr.-Farda:

You never make a mix until you have a sale

made, because it would not be of material ad-

vantage to ‘do so because you may not find another

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 vot whatever the trade ‘or

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

In connection with the above lots of clean rice, the

Secretary’s attorneys tried to make some allocation

of the cost of rough rice to the different grades of

clean rice produced as between fancy rice and head

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

allocation of cost w ithout any real or sound basis for

the same.

The above proceeding against Bay City Rice Mills

‘ was a proceeding before the Secretary of Agriculture

to forfeit the license of Bay City Rice Mills for alleged

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

a representative of the Secretary of Agriculture.

In the foregoing affidavit the figure of 79c above

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

was used only roughly. Under the license, the price

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

plus the conversion charge plus the carload raif 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.

(Sed. HOMER L. BRUCE.

Subscribed and Sworn to before me, the undersigned

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

ber, 1935.’ |

(Sgd.) RAYMOND REILSON,

(Seal) Notary Public in and for.

. ; ‘Harris County, Texas.

own tha bte eo hn at ne en a —

. 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:

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 7

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. Each miller has

his buyer, who makes the competitive bid on the basis

outlined to him by the management of the mill. The

basis is as follows: Rice millers determine the price

to make their bid to’ a producer for his rough rice

based on the prevailing market price for milled rice

\ , 76

> 3

computing the values to the different grades. and by-

products obtained from: the processing of the rough

rice being bid upon. For example:

A lot (parcel) of rough rice, estimated to puedes

(per barrel of 162 pounds) the following articles,

’ grades, classes, etc., when processed, with estimated

values as set out for each of the respective grades,

classes, ‘etc.:

Fancy Head Rice—100 pounds at Ate 2. $4.50

Second Head Rice—4 pounds at 3c :....... oF

Screenings Rice—6 pounds.at 2%4c ........ 15

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

Total yield per barrel—112 pounds.

Wee We 8 bic ae ere $4.81 plus

Approximate revenue from by-products

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

Total revenue Se 06

Competitive bidding basis prior to the ‘processing.

_ tax law requiring payment of a processing tax in cash:

The above $5.06 is the gross value of milled

rice articles and by-products resulting- from a

"162 pound barrel. of rough rice. The mill.

would deduct’ from this gross figure the conversion’

charge, this conversion figure including the mills ex--

pense for processing the rough rice, and the estimated

profit. Assuming that this conversion would be 60c

per barrel, the mill would then bid the producer $5.06,

less the 60c conversion, or $4.46 per barrel for the

rough rice. The affiants solemnly swear that they

have used and. seen. records of various rice mills estab-

lishing the basis as outlined above.

Competitive Bidding Basis after the Processing Tax

Law requiring Payment of a Processing Tax in Cash:

Since the beginning of the 1933 croy movement, which

_ become available for market during the month of July,

and on.which the processing tax applies, the rice millers

use the same basis to determine values; however, in

‘addition to deducting the conversion charge, the rice

millers deduct: also the 1c per pound processing tax

on the rough rice, or $1.62 per barrel, and submits his

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

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

illustrated, estimated to produce milled rice and by-

products with gross values of $5.06 per barrel, the rice

miller deducts the following: Conversion 60c and pro- ~

cessing: tax $1.62, or a total of\$2.22 per barrel, and

makes bid to the producer of $2.84 per ‘barrel for that

particular lot of rough rice. |

The affiants further solemnly swear that in their

practical experience they have prepared, and have seen

prepared profit and loss statements for certain given

periods other than the entire season; further that these

profit and loss statements are prepared on particular

lots of rice, which is essential and necessary in their —~

accounting procedure. Should the Agricultural Ad-

justment Act be held unconstitutional, the affiants

state that.the rice processors should enjoy the remedy

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

cultural Adjustment Act, as amended August 27th,

1935, because the records of buying processing and

selling kept by the rice mills are adequate enough to

' properly allocate the cost of various grades of milled

rice and its by-products, resulting from the processing

of the rough rice; also to properly allocate in this cost,

the processing tax, proportionately to the various grades

of each lot of milled ‘rice sold by itself aloné or

mixed. The greater portion of the milled rice sales are

straight mill run lots without blending.

78 a

_ The. affiants further solemnly swear that they have

kept or have seen rice millers’ records which reflect —

correct cost of production, profits from sales, etc.,

prgperly.. allocated to milled rice of various varieties,

and grades, and by-products, and similarly allocated

_as to profits in selling prices, and should the Agricul-

tural Adjustment Act be proven unconstitutional, each

rice processor has sufficient records to enable him to

recover in accordance with Section 21 (d) of the Agri-

cultural Adjustment Act, as amended.

———

Summed up, the introduction of the rice processing

tax has in no wise ‘altered the customary manner.or.

procedure followed’ by the-rice milling industry in

conducting their business.

(Sed.) L. J. BARTEL,

. (Sgd.) R. F. GOULD,

(Sed.) JAMES J. MAYER.

Subscribed and sworn to before me his 28th day of .

October, 1935.

(Sgd.) HOMER R. ROBINSON,

Deputy Collector.

DECREE.

Filed October 28, 1935.

(Title Omitted.)

This cause came on hie to be heard upon the:

application of the plaintiff for a preliminary injunc-

tion, as well as ypon the motion filed on behalf of the

defendant to dismiss the bill of complaint,’ and was

argued by counsel for the respective parties ;

Whereupon, and upon consideration thereof, and for

‘the reasons orally assigned; ae

It is Ordered, Adjudged and Decreed that the ap-

plication for the Preliminary Injunction be and: the

same is hereby denied;

It is Further Ordered, Adjudged and Decreed that

the plaintiff’s petition and bill of complaint in all re-

spects be dismissed.

(Signed) | JOHN McDUFFIE; Judge. -

New Orleans, Louisiana, October 28, 1935.

MOTION FOR INJUNCTION PENDING APPEAL. —

Filed Oct. 29, 1935.

(Title Omitted.)

Comes now the plaintiff in the above entitled and

numbered cause and moves the Court to grant plain-

tiff an injunction pending appeal for the reason that,

unless such injunction pending appeal is granted plain-

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

ferred to in plaintiff’s petition before plaintiff’s appeal

can be determined by the Circuit. Court of Appeals,

thus causing it great and irreparable injuries. Plain-

tiff offers to furnish good and sufficient bond by a

solvent surety company in an amount to be fixed by

PO a LINO OIE HAMEL RONIGOY LOT LEH ALAN) PPD NP ’ oe ee ee

. ~N:

<nte . ~

the Court, if the Court should grant ‘its aye for

injunction | pending appeal.

(Sgd.) McCOY, KING & JONES,

By C. A. McCOY,

Attorneys for Plaintiff.

a *

Motion denied.

(Signed) JOHN McDUFFIE, Judge.

- ORDER ALLOWING SAME.

Filed Oct. 29, 1935.

(Title Omitted.)

On motion of plaintiff in the above cause, and on

suggesting to the Court that plaintiff is aggrieved

by the decree entered by the Court herein on the 29th

day of October, 1935, granting defendant’s motion to

dismiss, and that plaintiff desires to appeal. therefrom

with. a ’ supersedeas and a stay of proceedings in the

District Court, pending appeal to the United States

Circuit Court of Appeals fer the Fifth Circuit, and

bad

On further suggesting to the Court that said decree

is contrary to the law and the evidence for the reasons

set forth in the assignment of errors filed in plaintiff’s

behalf herein; and

On further suggesting to the Court that this motion

being filed in open Court on the entry of such decree

and in the presence of counsel for defendant, no cita-

tion of appeal is necessary or need issue herein;

' - It is Ordered by the Court that the appeal of. plain-

tiff from the decree entered herein tothe United States

Circuit Court of Appeals for the F ifth Circuit be and

the same is hereby allowed with supersedeas, on appel-

Fant’s furnishing bond with good and solvent surety,

conditioned as required by law and to be approved by

the Court in the sum of $250.00 said bond to act as a

supersedeas, as well as a bond for costs and damages;

It is Further Ordered by the Court that the appeal

of plaintiff from the decree entered herein be made

returnable to the United States Circuit Court of Ap-

peals for the Fifth Circuit at New Orleans, Louisiana, |

on or before November 27th, 1935, and that a certi-

fied copy of the record -herein be transmitted to said

Court of Appeals by the Clerk of this Court, and that

no citation of appeal is necessary or need issue herein. .

(Signed) — JOHN McDUFFIE, Judge.

ASSIGNMENT OF ERRORS,

Filed October 29, 1935.

~ .. . (Title Omitted.)

_ Comes now plaintiff and says: that, in the record in.

the proceedings of the said Court in the above entitled

cause and in the decree made and entered therein on

the 28th day of October, 1935, there is manifest error

and for error the said plaintiff assigns the following:

(1). The Court: erred in sustaining defendant’s

motion to dismiss plaintiff’s Bill of Complaint, because

such action was contrary to the law and the evidence.

(2) The Court erred in Over-ruling and not sus-

taining plaintiff’s motion for a preliminary injunction

because said ruling was contrary to the law and the »

evidence. |

ry Son eer ae ro rw sa ida ee ne eee

Te LES LPS. er eee Rees . 2 oe

Wherefore, plaintiff prays that said Decree be,

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

trict Court to grant‘plaintiff a preliminary injunction.

McCOY, KING & JONES,

By C. A. McCOY,

Solicitors for Plaintiff.

APPEAL BOND.

_ Filed October 29, 1935.

Know All Men By These Presents that we Farmers

Rice Milling Company, Inc, as principal, and United

States Fidelity and Guaranty Company, as surety,

are held and firmly*bound unto Rufus W. Fontenot,

in. the full sum of, $250.00; to be paid to- the said

Rufus W. Fontenot, his attorneys, executors, adminis-

trators or “assigns, to which payment well ‘and: truly

to be made we bind ourselves, our heirs, ‘executors

and administrators, jointly and: severally by these

day of October, 1935.

Whereas, lately, in the District Court of the United

States for the Eastern District of Louisiana, judgment

was rendered against Farmers Rice Milling Com-

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

ing plaintiff’s application for a Preliminary injunc-

tion and dismissing plaintiff’s Bill of Complaint, and

the said Farmers Rice Milling Company,’ Inc.,

having obtained an. appeal to reverse’ said judgment,

citing and admonishing the said Rufus W. Fontenot

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

cuit ‘Court of Appeals for the Fifth Circuit to be

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

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

- 83

.. Now the condition of the above obligation is such

that if the said Farmers Rice Milling Company,

JInc., shall prosecute its appeal to effect and’ answer

all damages and costs, if it fail to make-its plea good,

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

full force and effect. ; Sone

-. FARMERS RICE MILLING

COMPANY, ING, ';

By C. A. McCOY, Principal. :

UNITED STATES FIDELITY

-_ & GUARANTY COMPANY, :

By M. L. ARRAS, Surety,

' Its Attorney in Fact (Seal)

Approved October 29th, 1935. | i

(Signed) RUFUS E. FOSTER; Judge.

PRAECIPE.

Filed October 31, 1935.

(Title. Omitted.) , |

To the Honorable H. J. Carter, Clerk of the United

States District Court for the Eastern District

of Louisiana: ,

You will please include in the record upon appeal

in the above entitled cause the following documents

and procedures:

1. Plaintiffs original ‘bill of: complaint. |

2. Defendant’s motion to dismiss and answer.

Order of Court consolidating causes for trial

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

Baton Rouge Rice Mill, Inc., vs.) Rufus W. Fontenot,

etc., to be considered. as evidence in this cause.

in.

Affidavit of W. M. Reid.

Affidavit of Homer L. Bruce.

‘Joint affidavit of L. J. Bartel, R. F. Gould and

. Mayer. 3

| Py

Deeree of the District Court.

Plaintiff’s motion for injunction pending appeal

and order denying same.

9. _ Motion and order for appeal.

10. Plaintitfs assignment of error.

11. Appeal bond.

12: This Praecipe.

13. Clerk’s certificate.

McCOY,. KING &. JONES,

By C. A. McCOY,

Attorneys for Plaintiff and

Appellant.

Approved: :

(Sed.) | ROBERT WEINSTEIN.

Asst. U. S. Attorney, Counsel

for defendant.

Clerk’s Office: .

I, HENRY J. CARTER, Clerk of the District

Court of the United States for the Eastern District of

Louisiana, do hereby certify that the foregoing. 50.

pages contain and form a full, true and complete

transcript of the record, assignment of errors and all

proceedings in the cause entitled “Farmers Rice

_ Milling Co., Inc., vs. Rufus W. Fontenot,. Individual-

ly and as Collector’of Internal Revenue for the Dis-

trict of Louisiana,” No. 327 In Equity of the Docket

of this Court, as made up in accordance with the

Praecipe for Transcript copied herein. |

‘Witness my Hand and the seal of the said Court at

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

ber, A. D. 1935. "

H. J. CARTER, Clerk,

| By H. W. NIEHUES,

(Seal) 3 - Deputy Clerk.

[fol. 86] In Unrrep States Crecurr Court OF APPEALS FOR

. THE FirtrH Circuit, at New OrLEans, Lovistana

No. 7950

Farmers Rice Minung Company, INc., Appellant,

Rurus W. Fontenot, Individually* and as Acting United

States Collector o Internal Revenue for the District of

Louisiana, Appellee

Motion ror PRELIMINARY InguNctTIon Penpinc Apprar—

Filed November 4, 1935 =

_ Comes now: Farmers Rice Milling Company, Inc., appel-

_lant in the above numbered -and entitled cause, and after

due notice ziven to the appellee above named, respectfully —

states to the Court that the said appellant on the 28th day

ana, New Orleans Division, entitled Farmers Rice Milling

Company, Inc., plaintiff, v. Rufus W. Fontenot, individually

and as Acting United States Collector of Internal Revenue

for the District of Louisiana, defendant, and numbered 321

in equity, in the New Orleans Division of said United States

District Court. In its bill of complaint in said cause appel-

lant prayed for a temporary restraining order to be issued

(fol. 87] immediately, and for a preliminary injunction

_ after notice to the appellee, and for a permanent injunction

on the final hearing of said cause, enjoining the appellee

from assessing or ollecting or attempting to assess or col-

1—586

Pe nee Ra TLE YS OM Nec astra ey eect iap ne mar tesphysecoe vy

impose any lien for said taxes upon the property, real or

personal, of appellant. That said application for a prelim-

inary injunction was set down for hearing before the Judge

of said District Court at New Orleans on Monday, October

28, 1935. The notice thereof was duly waived by the appel-

lee. Prior to said hearing the said appellee filed his motion

to dismiss and answer to said bill of complaint, copies of

which motion and also of appellant’s bill of complaint are

contained in the record in this cause filed in this Court.

After a hearing had on appellant’s motion for a prelim-

inary injunction and on the said motion to dismiss, the

Honorable John McDuffie, acting judge of said District

Court on October 28, 1935, refused appellant’s motion for

a preliminary injunction, eranted the motion of the appel-

lee to’dismiss the said bill of complaint and dismissed the

said bill of complaint, to which appellant herein duly ex-

[fol. 88] cepted. Thereafter, on the 29th day of October,

1935, the appellant herein in open court and in the presence

of counsel for appellee filed its petition for an appeal, which

was duly allowed by the said judge of the said United |

States District Court who tried said cause, and filed at the

same time its assignments of errors, and also a cost bond

was duly filed and approved by the said Judge of said Dis-

trict Court. At the time appellant presented its said peti-

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

Court to grant it an injunction enjoining the appellee in the

- manner set out in its request for a preliminary injunction

in its bill of complaint, pending the appeal of appellant’ to

this Honorable Court, but the said judge of said District

Court: on October 29, 1935, refused appellant’s said peti-

~ tion and refused to grant appellant said injunction pending

said appeal.

Appellant has therefore perfected its appeal to the Cir-

cuit Court of Appeals for the Fifth Circuit, making said

cause returnable at New Orleans, Louisiana, as provided

by law. Appellant has duly caused to be prepared a tran-

script of the record in said cause and has filed the same,

in accordance with law, and within the time allowed by law,

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

Orleans, Louisiana. .

In said bill of melaink minal alleged that the

amount of processing taxes on account of the rice processed

_by the appellant during the.month of September, 1935, was

eee

oe meet . “

$11,946.25, and that under said Agricultural Adjustment

Act appellant was required to pay said amount to appellee

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

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

[fol. 89] tax were not paid on or before October 30, 1935,

appellee would assess said tax ‘against. the appellant and

serve upon appellant notice and demand for the payment

thereof and would allow appellant ten days. from receipt

of such notice within which to pay the same; that in the

event said tax should not be paid within said time, appellee

would assess against appellant a penalty equal. to 5% of

the amount of the tax and interest on the tax at the rate

of 1% per mo from the due date of the tax until paid;

that if the appellant failed to pay the tax within said ten

days, appellee would proceed to collect the tax, penalty and

interest by filing a notice of lien on all of appellant’s prop-

erty and by distraining upon and selling such of appellant’s

property as might be necessary to realize the amount of

said tax, penalties and interest; and that additional proc-

essing taxes for months subsequent to September, 1935,

will accrue and be assessed against and collected from the

appellant in the same manner as the tax for the month of —

September.

. Appellant alleged that the said processing tax was illegal

and unconstitutional, and violated various provisions of the

Constitution of the United States in many particulars, more

fully set forth in appellant’s bill of complaint. The appel-

lant also alleged that under an amendment to said Agricul-

tural Adjustment Act approved.on August 24, 1935, a Sec-

‘tion 21 (d) was added to said Act, which section provides

in substance that appellant should be allowed no recovery

of any of said taxes paid, if the same should be illegal or

unauthorized, unless appellant established to the satisfac-

tion of the Commissioner of Internal ‘Revenue, and the

[fol. 90] Commissioner should: so find, that neither appel-

lant nor any person directly or indirectly under appellant’s

_* control or having control over appellant, has, directly or

indirectly, included such amount in the price of the rice

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

essed from the rice with respect to which it was imposed,

_ or passed on any part of such amount to the ‘vendee or to

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

such amount in the charge or fee for processing rice, and

2—586 | > 3

that the price paid by the appellant or such person for said

rice was not reduced by any part of such amount. Appel-

lant in said bill of complaint, alleged, as more fully set out

in said bill of complaint, that under said Section 21 (d) it

had no adequate remedy at law by which it could recover

any part of said taxes if same were unconstitutional and

_ illegal, and that it was impossible, owing to the peculiar

conditions existing in the rice milling industry and in the

purchase, milling and sale of rice, for appellant to dis-

charge the burden placed upon it by said Section 21 (d),

all as more fully set out in appellant’ s bill of complaint.

Appellant further alleged that: in said amendment of

August 24, 1935, a new section known as Section 21 (a)

was added to said Agricultural Adjustment Act, which in

substance provided that no suit to enjoin the collection of

said processing taxes should be maintained in any court:

Appellant further alleged that said section was not in-

tended to apply, and did not apply, to the injunction prayed

for by appellant, inasmuch as appellant had no adequate

remedy at law. Appellant-further alleged that if said sec-

tion should be interpreted as prohibiting the injunction

- prayed for by appellant, then the said section, together with

[fol. 91] the other provisions of said Act, was invalid. and

in violation of the Fifth Amendment to ‘the Constitution,

that no person shall be deprived of his property without

due process of law, in that said illegal and unconstitutional

taxes would be collected from appellant and appellant

would have no remedy by which he could recover taxes and

would have no remedy to prevent the collection of said un-

lawful taxes and would be forever deprived of the right to

test the constitutionality of said taxes.

Appellant further alleged that said Section 21 (d) de-

nied the appellant a complete and adequate remedy at law

for the various other reasons s set forth in said bill of com-.

plaint.

’ At the hearing before the District Judge appellant intro-

duced in evidence the affidavit of W. M. Reid, Executive

Secretary of The Rice Millers Association, a man of twenty-

six years experience in the rice business, in which affidavit

he set out fully and in detail the methods of conducting the

rice business and the manner in which the rough rice mar-

ket and the clean rice market is. made, showing that it

would be utterly impossible for any rice miller to accu-

PER I aN mR Rt md Ag TENE eh OOP EINER MD CHR: —

‘ : ti

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

any given transaction, much less prove whether he had

passed the tax, or any part thereof, on. Appellant also _

introduced in evidence the affidavit of Homer L. Bruce, a

practicing attorney at the bar at Houston, Texas, setting

out in detail the proceedings under a complaint brought’ by

the Secretary of Agriculture to revoke the license of a rice

mill under the Act in effect prior to the present Act. The

Secretary of Agriculture sought to revoke the license of

[fol. 92] this mill for failure to sell clean rice and rice

products processed from rough rice at a price approxi-

mately 79¢ higher than the price paid for the rough rice.

The affidavit showed that although the Government was

able to prove the cost of the rough rice and to trace the

particular rough rice into various ‘‘mixes’’ of clean rice

and the price procured for these ‘‘mixes’’ of clean rice it

was never able to prove that the price procured for the

clean rice processed from the particular lot of rough rice

was: not 79¢ more than the price paid for the rough ‘rice

because of the fact that clean rice is customarily sold in

‘‘mixes’’ of various lots of rice and there was no way to

allocate the price procured for the mixéd rice sold to the

various lots of rough rice which went into the mix.

In the meantime, appellant alleges that for the foregoing

reasons and those set forth in its said bill of complaint in

said cause, and because the judge of said court in his said

order dismissed said bill of complaint and refused to grant -

appellant the injunction prayed for pending the appeal in

this case, the appellee herein will, to the irreparable dam-

age and loss of the appellant herein, proceed to collect the

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

unpaid, from appellant, and said taxes for subsequent

months, unless restrained by a preliminary injunction

granted by this court. - The appellant alleges that not only

has it no complete remedy at law, but in fact no remedy at

law at all, for the reasons hereinabove set forth and set

forth more in detail in said bill of complaint, that it is faced

with the alternative of paying the tax with the certainty

that no remedy at law exists for its recovery in case it be

held that it was uncéonstitutionally assessed, or of refusing

(fol. 93] to pay and running the risk of becoming liable for _

the heavy civil and criminal penalties provided in the Act,

and that. the said judge of said District Court should not

ish 5 act tae ESAS ORY ab pS Freeza SOO At Rtas A CSCO RS, LTTE A AE ANT A ET RATS sak

EE NRA gS

ota i Sn cb De PO a EE

have dismissed said bill of complaint, but should have over-

ruled the same, and upon the hearing should have granted

the preliminary injunction as prayed for in said bill of

complaint.

Appellant would further show that there is now pending

in the Supreme Court of the United States a case involving

the constitutionality of the said Agricultural Adjustment

Act, being the same case in, which the Circuit Court of Ap-

peals: for the First Circuit declared the Act to be unconsti-

tutional, and that the Supreme Court, according to press

dispatches, has set said cause for oral argument on Mon-

day, December 9, 1935; that a ‘decision by the Supreme

Court of the United States upon the validity of the said

Act may be expected within a reasonable time thereafter ;

that the first benefit payment to farmers provided for in

said Act has been made, and that under the standard form ~

of contract between the Secretary of Agriculture and rice

farmers no further payment is due until such time after -

December 1, 1935, as the Secretary shall determine and

declare what further amount of benefit payments shall be

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

lected under said Act are for the purpose of making these

‘benefit payments and that since the Secretary of Agricul-

ture need make no further benefit payments until such time

after December 1, 1935, as may be fixed by him, the delay

of the Government i in. collecting these taxes which might be

occasioned by the granting of the injunction prayed for

[fol. 94] herein will not occasion any injury to the .Govern-

ment nor will it unduly interfere with the achievement of _

the program set out in said Act if the Act be held constitu-

tional. On the other hand, as hereinabove alleged, great

and irreparable damage will be done to plaintiff in the event

the,law is held unconstitutional unless the injunction here-

inafter prayed for is granted.

Appellant further shows that unless an injunction pend-

ing appeal be granted so as to preserve the status quo, the

subject-matter of the suit will be lost and the jurisdiction

of this Honorable Court defeated. Such injunction is .

necessary to preserve the jurisdiction of this Honorable

Court, and in order that appellant may enjoy the just, fruits

of a favorable decision on this appeal.

The appellant states that itis ready and willikig to give

any reasonable bond or other security that may be required

by any order of this Court, including the deposit from

month to month of the amount of tax due, in a depository

to be designated by the court; and therefore prays that this

Court make an order granting appellant a preliminary in-

junction enjoining and restraining the appellee from as-

' , sessing or collecting or attempting to assess or collect from

appellant in any manner whatsoever; whether by lien or

jeopardy or by distraint proceedings, in court or otherwise, |

the said processing taxes for the month of September and

subsequent months and any other processing taxes under

. and pursuant to said Agricultural Adjustment Act upon

rice processed by appellant, and any-interest or penalty on

account of appellant’s failure to pay said processing taxes,

and from imposing or giving notice of intention to impose

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

personal, of the appellant, pending ‘the hearing of appel-

lant’s appeal in this case and upon such conditions and

terms as to this Court may seem just.

C. A. McCoy. McOoy, King & J ones, of Counsel.

(fol. 96] Duly sworn fa by C. A.-McCoy. * Jurat: omitted

im printing. ‘

[fol. 97] Iw Unitep States Circurr Corr or APPEALS

~ No. 7950

Farmers Rice Mitiine Company, Inc.,

versus

Rurus W. Fontenot, Acting Collector of Internal Revenue

OrpverR Denyine Motion For PRELIMINARY INJUNCTION.

Prenpine Apprat—November 5, 1935

Upon the authority of Rickert Rice Milling Company,

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

Junction in the above numbered and entitled case is denied.

[fol. 98} In Unrrep States Crrcurrt Court or APPEALS FOR

THE Firta Crmcvuir

No. 7937

Rickert Rice Mituine Company, Inc., Appellant,

versus

Rurvus W. Fontenot, Acting Collector of Internal Revenue,

_ Appellee

Appeal from the District Court of the Unijed States for

the Eastern District of Louisiana

Motion. for Preliminary Injunction Pending Appeal

Before Foster and Sibley, Circuit Judges, and Strum, .

District Judge

Orrnion—November 5, 1935

By the Court:

On consideration of the application for an injunction to

stay collection of taxes levied under the provisions of the

Agricultural Adjustment Act, as amended by the Act of

August 24, 1935, the Court is of the opinion that the tax-

payer has a remedy at law to recover back any taxes jl-

[fol. 99] legally exacted and, further, that the previsions

-of the Act as amended deprive the Court of jurisdiction to

grant injunctive relief.

It is ordered that the application be denied.

[fol. 190} Clerk’s certificate to SOREGHRG transcript

omitted in printing.

[ fol. 101] SupreMeE Court or THE UNITED StTaTEs

Onper ALLOWING Cenrtorani—Filed November 25, 1935

The petition herein for a writ of certiorari to the United

States Circuit Court of Appeals for the Fifth Circuit is

granted, and the case is assigned for argument on Monday,

December 16, next.

And it is further ordered that the\duly certified copy of

the transcript of the proceedings below which accompanied

the petition shall be treated as though filed in response to

such writ. , \

Endorsed on cover: File No. 40,140. U.S. Circuit Court

of Appeals, Fifth Circuit. Term No. 586. Farmers Rice

Milling Co., Ine., petitioner, vs. Rufus W. Fontenot, Indi-

vidually and as Acting United States Collector of Internal

Revenue for the District of Louisiana. Petition for a writ

of certiorari and exhibit thereto. Fited November 14, 1935.

Term No. 586, O. T., 1935. oe

Pad

TEN AER de ARID RTL GE IP AE ta RA CA ORIN cd RRR

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