Amicus Curiae Brief — Maryland & Virginia Milk Producers' Ass'n v. District of Columbia

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IN TIL

. 4

Supreme Court of the United States

Ocrosner Term, 1941.

MaryLaANp AND Virointa Mitk Propucers’ AssocraTion,

Incorporaten, Petitioner,

Vv.

District or Cotumbia, Respondent.

BRIEF OF THE NATIONAL COOPERATIVE MILK

PRODUCERS’ FEDERATION AS AMICUS CURIAE.

Cuarces W. WILson,

Attorney for Amicus Curiae.

July 17, 1941.

Press or Byron 8. Apams, Wasn'neton, D. ©.

_- Ask , - “ - a ae

INDEX. i

: e

Page i

Foreword ........ Spanien neces enes vebkene ey ee 1

Statement of Interest ...... 02.5. . ccc scereesececnens 1

Question of General Tnportance Presented. .... 0.5 3

Ore ere ere cee GN Rav ced a Meee See 3

Opinion Below ...........ccee cece secon ee eenenees 3

Facts ....

bcass Ba 610) 6 66.2. Oe 8 RAS BOO OSE Oe Se Sb. EE OR eS 8S

Specification of Krrors

Jk i PASE SOS 8S eS Ue SS

Argument... s)

1A. Peririoner-Association 1s A Non-Srock, Non-

Prorit, Farmen-OwNnep AND FanmMer-Con-

TROLLED CoorerRATIVE Dairy Marketing Asso-

CIATION, OrGANIZED AND LixistinG UNDER THE

CooreRative ASSOCIATIONS I]NABLING ACT OF

THe Stare or Maryianp, Domesticarep UNDER

rug Suminar Srarere of tue Srare or Vir-

GUNIA, AND IXnGAGeD IN MAnKeTING THE MILK OF

Irs Farmen-Mempers, Aut Non-REsSIpDENTS OF

rie District of COLUMBIA, AND AS Sucu ts Dis-

TINGUISHABLE From A) Proprinrary Corrora-

TION AND IS, IN Fact, THE ANTITHESIS OF THE

CoMMERCIAL CoRrPokKATE SYSTEM

1. The fundamental ditference between capi-

talistic and cooperative enterprise is one

which has been commonly accepted by legis-

latures and courts alike ................- 6

B. Pevrrioner-AssociATION Is THE AGENT OR OTHER

Fipuciary oF Irs Farmer-MemBers AND, THERE-

rorE, THE Revontving Funp REPRESENTED BY

INVESTMENTS IN INTANGIBLES Carrigep IN’ Its

Name. anp Accounts Receivable From MILK

DraLers, COLLECTIBLE BY It, Hacnt Arising Our

or THE Sate or Mink Propucep py anp Mar-

KETED For Irs Farmer-MembBers, Betonc, Nor

ro tHe Association, Bur ro THE Farmer-MEM-

WHE Gos a eres NL A Ke Race eS HES 9

Index Continued.

DEER EN AAT IEP NR RIN AE le fa a

Page

1. The great weight of authority, with which

the opinion of the Court is in direct con-

flict, is to the effect that the relation between

a cooperative association and its members is

that of trustee to beneficiary or principal to

a ee ee ee PET ee Oe Ee Tae piets

2. The decision of the Supreme Court of New

York, Appellate Division, in People v. Shoe-

maker, 228 App. Div. 314, 239 N.Y. Supp. 71,

178 N. i. 869, relied upon by the Court below

for the proposition that when a cooperative

association’s contracts with its milk-produe-

ing members have been phrased clearly in

terms of agency, it has been conceded that

title to the milk passed to the association and

that the association is the actual seller of

Cine ee, OF TE OE NE ois nec s cas ns

“_

The fact that petitioner-association, in the

marketing contract between it and its farm-

er-members guarantees its farmer-members

against loss in the disposal of their milk in

nowise changes the relationship of consign-

ment to sale ........ Se ere ee

PeTITIONER-ASSOCIATION NEITHER CARRIED ON A

Business ror Gain or Nconomic Benerir, Nor

Was ir Excacep in Business in THE District

oF CoLumBia, Wrriinxn tur INTENDMENT OF

Tite 20, Supe. [11, Seerions 970 ro 970(15) Ly-

CLUSIVE, AND SECTIONS 702, ET SEQ., CODE OF THE

Disrricr or CouumBia, 1929, so as To RENDER

ir Liasie ror Taxation ix THRE Manner Ap-

JUDGED BY THE CourT BELow ...............

1. The Act of Congress imposing a tax on the

privilege of carrying on or exercising, for

gain or economic benefit, any business in the

District does not embrace petitioner-associ-

ation within the class subject to said tax...

a. Under no circumstance was petitioner-

association liable to taxation under said

Il. A.

Index Continued. ili

Pa ge

Act except for the commissions or broker-

age deductible by it under the terms of

the marketing contract........ cineaicatek'y ae

2. The Act of Congress which imposes a per-

sonal property tax only on the moneys and

credits, ete., of any association or corpora-

tion resident of or engaged in business with-

in the District of Columbia does not embrace

the properties taxed as the Court below held 22

Tue irra AMENDMENT to THE CoNSTITUTION

AND CLause 3, Section 8 or Arvicie 1 Lyurpirs

THE AppPLicATION oF Tire 20, Parr V, Sxc-

TIONS 792, Ev SEQ., AND TrrLe 20, Supp. II], Src-

TIONS 970 vo 970(15), IncLusive, Cope or THE

District oF CotumBia, 1929, to Perrrionrr-

Association IN THE Manner Hewp spy THE

RO MRS eee oe ma ie ot) ee ee

1. The extra-territorial application given these

statutes by the Court below to petitioner-

association is in direct conflict with the 5th

Amendment to the Constitution.......... 23

2. It is not beyond comprehension that consti-

tutional restraints encompass acts of Con-

gress, When legislating for the District of

Columbia, which burden commerce emanat-

ing from within-out of, or without-in to, the

District of Columbia ............. bas wah 26

3. Whether the statutes in question be chal-

lenged as violative of the 5th Amendment or

the commerce clause, their application by

the Court below is contrary to the prior de-

cisions of this Court in Stoutenberg v. Hen-

nick, 129 U.S. 141, and Cohens v. Virginia,

19 U.S. (6 Wheat.) 264, and the prior de-

cision of the Court below in Beitzell vy. Dis-

trict of Columbia, 21 App. D.C. 49........ 97

Conclusion ... 2.2... Aes winks seats wth ota aca ace iale x —

F. $.

iv Index Continued.

Page

pr Mee TPP a ees rey ares Cry ec 32

Title 20, Part V, Code of the District of Columbia,

Cae, PONOUD Fe OE OE. nace sens cassasen cane 2

Title 20, Supp. III, to the Code of the District of

Columbia, 1929, Sections 970 to 970(15), inclusive. 32

TABLE OF CASES CITED.

J. D. Adams Manufacturing Co. v. Storen, 304 U.S.

S07, 89 I. od. 1960, 96 BOON, Bis. ee cc ces 2s

Alpha Portland Cement Co. v. Massachusetts, 268 U.S.

906. 00 1, od, GIG, 48 B. CR 497. eine esc ccs 28

Appeal of Beaver County Co-op, Ass’n., 118 Pa. Super.

ee ee er ree ee eo er rea rier se 19

Arkansas Cotton Growers Co-op. Assn. v. Brown, 168

ae A”. eee Pere eee se ree 8

Asher vy. Texas, 128 U.S. 129, 32 L. ed. 368,98. Ct.1.. 28

Barns v. Dairymen’s League Co-op. Assn., 220 App.

ee, Ge. Sa, 3, BOE ho oi vas bie ne sukees 8

Beitzell v. District of Columbia, 21 App. D.C. 49 2.2.00 27

Blodgett v. Silberman, 277 U. S. 1, 72 L. ed. 749, 48

eC i x06 oe wk ke oes oa Ok ea bk eae 30

Board of Trade v. Olsen, 262 U.S. 1, 67 L. ed. 839, 48

Re Tee MP le Jandy aX i ai RAE RO Mae RE 8

Brown v. Georgia Cotton Growers’ Assoc., 164 Ga. 712,

CRM MEE. ie va Naa wee eet eee aa as eee 1)

srushaber v. Union Pacific Railroad Company, 240

iS. 1, GO i. OG, $54, 36 BUT. B56. ok weve 8, 25

Burley Tobacco Growers Co-op. Assn. v. Rogers, 88

bod. Avia, S00 E00 WM, BOG ey ccc sedi cas 8

California Bean Growers’ Association v. Williams, 82

Ce, ee a ee es POE, ee ies vues an ea ae uO 13

California Raisin Growers’ Association v. Abbott, 160

Ce AEE FE hears ose eae wea eeescenn oe 13

City of Owensboro vy. Dark Tobacco Growers’ Assn.,

Oe EY: FO, Oe ee We Se ck Kas Kees tae ees 13, 19

Clear Lake Co-op. Livestock Asso. v. Weir, 200 Towa

Se a ee vac eco Ree ee a eee Ke 9

Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 5 L. ed. 257 9 27

Colegate-Palmolive Peet Co. vy. District of Columbia,

Ae. B04: 110 Fed: EAN SOs ny asec as 27

Index Continued. Vv

Page

Colorado-New Mexico Wool Marketing Assn. v. Man-

ning, 96 Colo. 186, 40 P. (2nd) 972 .............. 13

Connecticut Valley Tobacco Ass’n. Ine. v. Inhabitants

of Town of Agawam, 261 Mass. 110, 158 N. eh. 506 19

Coolidge v. Long, 282 U.S. 582, 75 L. ed. 562, 51S. Ct.

OE ce Cat ee ECdn La ee ONCE eK CECE Oe CUI 23

Dark Tobacco Growers Co-op. Assn. v. Dun», 150 Tenn.

Day. BO eee A na ees ak h ea Sh Se we 8

astern Livestock Corporation v. Dickinson, 107 Fed.

Cee Fi Ne Re as Pec ee vk eho keane 1]

Kdwards Shoe Factory v. Stewart, 107 Fed. (2nd) 123

G0 are Cosette ee See ee 11

Kmigh v. Marling, 134 Wis. 565, 115 N. W. 128, 27

Sac ee i Cs DA a ic a Sake eee ee ad cote 14

Mugenia Fruit Growers Association v. Commissioner,

Bi Bee Ks Feu SONU BOTs him x) o's cs oda ces beanies 18

Mariners Loan and Trust Co. ¥. teammate 280 U.S

ms, T4 5s,.0m. S71, GOR, Ch, BB eck 29 30, 31

First National Bank of Boston Vv. af rc of Int. Rev.,

Go Ped. (ud) GB3.(C. OC. A. Int) oo. ein din canoer 25

lint v. mete Tracy ¢ 1, 2900. S. 107, 55 L. ed. 389, 31

Ae eas Oaks Ve Peat es PERL Ore kneee Clbeel 8

Krost v. ¢ ‘orporation Commission, 278 U.S. 515, 73 L.

CH; GOO IG: ON AS eis oe veh keds 7,8, 20

Gibbons v. District of ¢ Sian. 116 U.S. 404, 29 L. ed.

GO, 0 te PEE sy Sakis Ha vaeGenwes bei ei ak eel cnc rf i

Haarparinne v. Butter Hill Fruit Growers’ Ass’n., 122

ES Ry SA is BOE ero oes bis bck ees 13

Hazen v. National Rifle Association of America, Ine.,

69 App. D. C. 339, 101 F. (2nd) 482 ............. 29

Heiner v. Donnan, 285 U.S. 314, 76 L. ed. 772, 52 S. Ct.

TOR si haa Fs ca ae ARS eu Ok ae Ke 25

In re Re nfro-Wadenstein et al, 47 F. (2nd) 238, 53 Fed.

(2nd) 884 (C. C. A. th) LADETREREDE ERROR ES 17

Johnson vy, Staple Cotton Co-op. Ass’n., 142 Miss. 312,

OE fe eg tae e aaa en dsnateeul ee ce as 8

Kansas Wheat Growers’ Ass’n. v. Board of Commnis-

sioners, ete., 119 Kan. a ie 241 Gh PROC ET rere 19

Kirtland v. Hotchkiss, 100 U.S . 491, 35 L. ed. 558 .... 30

Lake Charles Rice Milling Co. v. Pac ifie Rice Growers’

Asso. BG Ped. 266 (C0. C. A. Gh)... .. oc nn ncn 13

Lambert = Military Ridge Cheese Co., 179 Wis. 359,

SOE Fe Ws AE 6a 5 ixteNa Vein ek es eer 14

CLS Rt RARE RID

hee kdrae:

SAeee Saat APL

SUT AN HIPS.

vi Index Continued.

Page

Lee v. Clearwater Growers Assn., 93 Fla. 214, 111 So.

BESS i ee Tae) er PE ee eee y eee eee 5

Lennox et al v. ‘Lexas Cotton Co-op. Assn, oo S. W.

CE IP OND ice awn escicenweeecedewens+s 5

Liberty Warehouse Company v. Burley tobacco Grow-

ers’ Co-operative Marketung Association, 276 U.5.

4h, 42 bat. Sid, 40 BS. U0. ZOE nw. cee ccceeess Ss

List v. Burley ‘Lobacco Growers Co-op., 114 Olno St.

Ry De Ws We EN oe Ga aah neasSnspernwenseess v

Local Dairymen’s Co-operative Assu. v. Potvin, 0+

i a EE Bl a ew aways 8

Loughborough v. Blake, 5 Wheat. 317, 5 L. ed. 98 2... 27

Louis K. Liggett Co. v. Lee, 288 U.S. ols, 77 Le ed. 929,

iG Wi Se SE deh paandNe Chm wed oom bee eks se» y

Ludvigh, Trustee, ete., v. American Woolen Company

of New York, 231 U.S. 022, 08 L. ed. 3540, 54.8. Ct.

Ee Be a he GRA Se oe nose Sa ones he 17

Manchester Dairy System v. Hayward, 82 N. H. 193, 152

Ee rae Lie o kp agn ed aclee kamen a 8

Mattingly v. District of Columbia, 97 U.S. 687, 24 L. ed.

EASES 5 Ree ne ener ye eee ee eee Zt

Minnesota Wheat Growers Coop. Marketing Asso. v.

tiuggins, 162 Minn. 471, 203 N. W. 420 .......... )

Mountain States Beet Growers Marketing Assi. v. Mon-

ee ree 12

Nebraska Wheat Growers* Ass’n. v. Norquest, 113

a BN SE Ba a A oa dsc awedes vndecns res 9

Neild vy. District of Columbia, 71 App. D. C. 306, 110 F.

(2nd) 246 (U.S. C. A—D. C.) ............. 23, 24, 27

Neith Co-op. Dairy Products Assn. v. National Cheese

Federation, 217 Wis. 202, 257 N. W. 624 ........ 14

Nichols v. Coolidge, 274 U.S. 551, 71 L. ed. 1184, 47 S.

NE a a ere Ua ae ewig 4 a Wawa « 5 pws» 25

Northern Wisconsin Co-operative Tobacco Pool v. Bek-

modes, 302 We. Sek, 397 WOW. S06... .. 2 505..... 8

O*Donoghue v. United States, 289 U.S. 516, 77 L. ed.

ee A Se a uns wen hhoxlax whose sis 24

Oregon Growers Co-op. Ass’n. v. Lentz, 107 Ore. 561,

BE eek ce dn eae aden e Naw cease wens aa 9

People v. Shoemaker, 228 App. Div. 314, 289 N.Y. Supp.

Mg ER OS SR Ree eer ee ee 14, 15, 16

Phez Co, v. Salem Fruit Union, 103 Ore. 514, 201 P. 222,

a Shan Ek s baked Cosi was ab ne Memes bes 12

Index Continued. vii

Page

Philips v. United States, 59 Fed. (2nd) 881 (U.S. C. A.

PE TL Ta Wak Tere RN ae Aen OMe ene we ae 11

Potter v. Dark Tobacco Growers Co-op. Assn. 201 Ky.

AS Sec bh ih broek cis Rs ee ess 8

Pyrke, Commissioner, etc. v. Brudno et al., 248 App.

Div. 493, 278 N. Y. Supp. 393, 200 N. KH. 42 ...... 13, 16

Rhodes v. Little Falls Dairy Co., 2830 App. Div. 571,

oS ay Oe are ie nee 12

Robbins v. Sheiby County Taxing District, 120 U.S.

ee ee, ae OF OR cs 28

Safe Deposit and Trust Co. v. Virginia, 280 U.S. 83,

eg Ee Se eee 28, 30

Sims v. Rives, 66 App. D. C. 24, 84 Fed. (2nd) 871,

cert. denied 298 U.S. 682, 80 L. ed. 1402, 56S. Ct.

oo AL ERE EER Oe eT eee ee CTE eT ee re 24

Spencer Co-op. Livestock Shipping Asso. v. Schultze,

ee ae, ee, Ne a We esis vcs cadacdeoacices 12

Stark County Milk Producers Asso. v. Tabeling, ete.,

De Tee Oe. hs Be Pee a nok ce ckc seine, 9

State v. Dairy Distributors, Inc., 217 Wis. 167, 258

re Bi iia Lo eas kp A Wah berms Aa se 13

State Tax on Foreign Held Bonds, 82 U.S. (15 Wall.)

RN a les ies gin Gv wa Eb aw 28, 30

Stewart Machine Co. v. Davis, 301 U.S. 548, 81 L. ed.

a oe Ce au wals heak se Khe weweeas 25

Stockard v. Morgan, 185 U. &. 27, 46 L. ed. 785, 22 S. Ct.

Ae Ae ee rg CAE A Nea Ew Eo AY a 28

Stoutenbere v. Hennick, 129 U. S. 141, 32 L. ed. 637,

CIR ye eae ale Wa Lak dnd weleiw keno 6 ooo 26, 27

Sturm v. Boker, 150 U. S. 312, 37 L. ed. 1107, 14 S.

ea a eR Eo a a 10, 11

Texas Certified Cottonseed Breeders’ Ass’n. v. Al-

dridge, 122 Tex. 464, 61S. W. (2nd) 79, 59 S. W.

td cca ied WAU ainid Wok OM A b+ ORs Bowel We 12, 14

Texas Cotton Co-op. Assn. v. Lennox, 37 8. W. (2nd)

ieee eek Wiein wks RSA LEE RO o's 8

Texas Farm Bureau Cotton Ass’n. v. Stovall, 113 Tex.

i ce NN Nig Sg 6 y's. ond v6 an Sie oe 0.5.9 14

Tobacco Growers’ Co-op. Ass’n. v. Jones, 185 N.C.

a65. 447 @. © 174, 30 A. f. BR. 281.............5. 9,18

Union Refrig. Transit Co. v. Kentucky, 199 U.S. 194,

ns ee Se a A Bao cee e da wes ay eae se 28

shaw

ae BY

ie el

~Loae

vill Index Continued.

Page

United States v. Mattingly, 52 App. D. C. 188, 285

Me IN cor or ibe oh Ok weet keke oak nae 24

United States v. Moreland, 258 U. S. 433, 66 L. ed.

7, Se 0, OR, ey SA Bn Das TE FOE on eis kivcss ces 24

United States as _ Rock Royal Co- operative, Ine., et al,

307 U.S. : 3, 8 83 L. ed. 1446, 59 S. Ct. 993........ 7

Vail v. Pena 7’ Allan 408, 83 Am. Dec. 695 (Mass.). 11

Warren v. Fildes Farm Bureau Cotton Assn., 215

ek A Se i Ee ioe ek eey ay etkn ewusaee 8

—_— Alexandria and Mt. Vernon Railway Co.

Downey, 40 App. D. C. 147, appeal dismissed

336 U. & 200, OO b. 0G, G38, 3o-S. Ct. 406... 0554; 26

Washington Cranberry Asso. v. Moore, 117 Wash.

ge oe ae ae eee renee 9

Wheeling Steel Corporation v. Fox, 298 U.S. 193, 80

Di ee: BO We Uke 8 i ek i os bce ne cas ee

Wieht v. Davidson, 181 U. S. 371, 80 L. ed. 1402, 21

i ee Se hehe Wa Cees so ee

TEXT BOOKS AND DIGESTS CITED.

American Law Reports, Volumes 33, p. 253; 47, p. 946;

OFy Bh ESS Oy We ee. Fes ee 5 dees Oran Bees 14

American Jurisprudence, Volume 2, Title ‘‘Agency’’,

97 12

ED Sb Axas LEA E ees COCA EH SS ERLE ANSELM DERE) 3

American Jurisprudence, Volume 22, Title ‘* Factors’’,

Se 3d oe ik nok i he a a Rk ors Sear eee ye wh 17

Columbia Law Review, Volume 28, Article entitled

‘‘Law of Cooperative Marketing’’, G. 1. Hender-

SOM, Fe Oe WOR eka rade Cdeeks Baamaerian sees 18

Corpus Juris, Volume 25, Title ‘*Factors’’, p. 348.... 17

The Law of Cooperative Marketing, Evans and Stok-

dvk, The Lawvers Co-operative Publishing Com-

pany, Rochester, New York, 1937, pp. 3 to 5, inelu-

SENG, Der Wh ay OPE ee Sea Maceo eckev net 6,7, 18

STATUTES CITED.

Agricultural Marketing Act of 1929, 46 Stat. 11, 12 U.

a ry SO RE I a rans as Aa wee Rae Rk BSS i)

Amendments to: 49 Stat. 317, 12 U. S. C., Sections

BE WEN oo 2050 d eels Ux nKe eoeahawe eae 5

SPIE AIL Ee SEIT FOR MASAI NSS LOTR Se AR TE BK ENO OPA SARE AN WERE 3 Rg

Index Continued. ix

Page

Bituminous Coal Act of 1937, 50 Stat. 72, 15 U.S. C. &

i Te i Gs a ak ek ce cass 5

Business Privilege Tax Act, Title 20, Supp. III, to the

Code of the District of Columbia, 1929, Sections

970 to 970(15), inel. (Appendix ae. ae 4, 5, 17, 18, 21, 23

Capper -Volstead Act, 42 Stat. 388, 7 U. ‘S C. 291,

Clayton Act, 38 Stat. 731, 19 U. 8. C. 17............. 5)

Commodity Exchange ens 49 Fhe 1491, 1496, 7 U.S.

yO SC okt, he eal oo ee ta de 6

Cooperative Associations Law, Article 23, Flack’s An-

notated Code of Maryland, 1939, Vol. 1 ..... 9, 10,17

Cooperative Marketing Act, 44 Stat. 802, 7 U. S.C.

Beret as OG MMM Sinatra onek accesses ca 5

Cooperative Marketing Law, Title 14, Chapter 53A,

Sections 1265 (3), 1265 (29), 1265 (30), Virginia

CG OE RUNG ibe ca 6 ate hae is oe en ce wk 5, 10

Farm Credit Act, 48 Stat. 257, 12 U. S. C. 1134...... 6

Grain Futures Act, 42 Stat. 1000, 7 U.S. C. Section 7.. 6

Internal Revenue Code, 1939, Section 101 (12) and

(13), 43 Stat. 253 to 355, inclusive, 52 Stat. 480, 26

Bi atc le UN das aaah as bd Pa Rae gene a oa eS 6,18

Packers and Stockyards Act, 42 Stat. 164, 7 U.S.C.

BE is ine eink cA ae CO Re Te ica ces 6

Personal Property Tax Law, Title 20, Part V, See-

tions 752, et seq., Code of the District of Colum-

bia, 1929 {Appendix “*A’’) ....<.... 4, 5, 17, 22, 23, 2

eee" oe in Act, 49 Stat. 1526, 15 U.S. C., Supp.

a ee We gee ang te ca Shek RIES. 0 co oa 5

x GLENS AREAL,

IN THE

Supreme Court of the Anited States

Ocroser Term, 1941.

No. 248.

MaryLANp AND Virginia Mik Propucers’ AssociATION,

Incorporaten, Petitioner,

Vv.

Disruicr or CoLumBia, Respondent.

BRIEF OF THE NATIONAL COOPERATIVE MILK

PRODUCERS’ FEDERATION AS AMICUS CURIAE.

FOREWORD.

The National Cooperative Milk Producers’ Federation,

hereinafter referred to as the Federation, by its counsel, re-

spectfully submits herewith its brief as amicus curiae, in

the within cause, having first secured permission of the

Petitioner and Respondent in this case.

STATEMENT OF INTEREST.

The Federation is a non-stock, non-profit corporation,

organized and existing under the laws of the State of Illi-

nois and is composed of fifty-nine farmer-owned and farm-

er-controlled cooperative dairy associations which are en-

gaged either in marketing, or manufacturing and market-

ing, the milk and other dairy products of their farmer-

—_—

members throughout the continental United States and

in several foreign markets. These member associations of

the Federation are bona fide farmer cooperatives incor-

porated under the cooperative cnabling statutes of the

several States and conform to the specifications of the Cap-

per-Volstead Act, 42 Stat. 888, 7 U.S.C. 291, 292. They are

organized for the mutual benefit of their members who are

either farmers producing milk or cooperative creameries

in turn owned and controlled by farmers producing milk,

They are located in forty-one States of the Union and the

majority of them, in respeet to marketing the milk produc-

tion of their members, are engaged in interstate commerce

including the District of Columbia.

The within proceedings involves the character of organi-

zation and method of operation of one of such member

associations, viz. the Maryland and Virginia Milk Produe-

ers’ Association, Ine., the Petitioner in this cause. The

decision of the Court below, as we believe, brings into ques

tion the fundamental concept of agricultural cooperation,

namely, the non-profit motive of cooperative enterprise and,

if permitted to stand, bids fair to destroy this way of agri-

cultural self-help which through the years has found mutual

encouragement in the enactments of Congress and the legis-

latures of the States as well as in the interpretations placed

upon them by the courts.

The decision of the Court below is a challenge to coopera-

tion and it is in the interest of the member associations of

the Federation whose character of organization and method

of operation parallels those of the petitioner-association

herein and who, under facts similar to those in the case at

bar, may be confronted with the adverse ruling of the

United States Court of Appeals for the Distriet of Columbia,

that this brief amicus curiae is submitted in aid of this

Court’s determination respecting its jurisdiction in this

case,

In so doing, counsel for amicus curiae is not unmindful

of the fact that he will be confronted with the contention

‘a <7

that each case must turn necessarily on its own peculiar

facts and circumstances and that the precedent of the deeci-

sion below may be unavailing in another jurisdiction but, as

he has advised amicus curiae, the opinion of the Court below

as to the character and method of operation of petitioner-

association is contrary to the great weight of authority,

federal and state, and that as to the application of the tax-

ing statutes involved is contrary to the prior decisions of

this Court and repugnant to the Fifth Amendment and the

Commerce Clause of the Federal Constitution.

QUESTION OF GENERAL IMPORTANCE PRESENTED.

Since this decision, as we believe, casts into doubt the

legal status of agricultural cooperative associations and is

contrary (o the judicial precedents of this and other forums

as well as to the concept of agricultural cooperation as ex-

pressed in federal and state statutes, we respeetfully sub-

mit, that it presents a question of general importance and

the Petition for Writ of Certiorari should be granted.

JURISDICTION.

The judgment of the Urited States Court of Appeals

for the District of Columbia was entered on April 21, 1941.

(R. 168.) The jurisdiction of this Court is invoked under

Section 240 of the Judicial Code, as amended by the Act

of February 13, 1925 (48 Stat. 938, 28 U.S. C. Section 347),

and Section 975 (a), Title 20, Supp. V., Code of the District

of Columbia, 1929 (52 Stat. 371, C. 223, Section 8).

OPINION BELOW.

The opinion of the Court below and the opinion of the

Board of Tax Appeals for the District of Columbia from

which the appeal was taken in the first instance are as re-

cited in the Petition for Writ ef Certiorari. (p. 3.)

RI RAAT IN a EET ER OY A Ga FCT

FACTS.

The facts, counsel for amicus curiae believes, are as set

forth in the Petition for Writ of Certiorari, as are the ques-

tions presented here for review. (p. 3 to 11.)

SPECIFICATION OF ERRORS.

Those errors which we believe inhere in the decision of

the Court below, to which amicus curiae addresses itself in

its brief and at the risk of being repetitious, are as fol-

lows: We believe the Court erred—

1. In failing to hold that petitioner-association was the

agent of its farmer-members in respect to the marketing

of their milk and the collection and disbursement of the

proceeds arising from the sale thereof.

2. In holding petitioner-association, as a corporate en-

tity, was engaged in business for gain or economic benefit

in the District of Columbia within the purview of the Act

of Congress (Title 20, Sections 970 to 970 (15), Supp. II to

the Code of the District of Columbia, 1929).

3. In holding that petitioner-association had a commer-

cial domicile and was engaged in business in the District

of Columbia within the purview of Section 752, et seq., Title

20, Part V, Code of the District of Columbia, 1929, per-

taining to the taxation of personal property in the District

of Columbia.

4. In holding that the revolving fund representing excess

brokerage deducted from the net proceeds of the sale of

its farmer-members’ milk not depleted ad interim for the

lawful and authorized expenditures of the association, in-

cluding the establishment of reserves, was the property of

petitioner-association rather than the property of its farm-

er-members held in the custody of the petitioner-association

under fiduciary obligation.

5. In holding that accounts receivable from dealers repre-

senting uncollected proceeds for the sale of its farmer-

members’ milk and collectible by the association was the

property of the petitioner-association and not its farmer-

members.

6. In holding said revolving fund and accounts receivable

from dealers subject to taxation by the government of the

District of Columbia under the authority of the Act of Con-

gress (Title 20, Part V, Sections 752, et seq., Code of the

District of Columbia, 1929).

7. In holding that the measure of tax amenability of

petitioner-association under the Act of Congress (Title

20, Sections 970 to 970 (15), Supp. LL to the Code of the Dis-

trict of Columbia, 1929) was the gross receipts derived from

the sale of all of its farmer-members’ milk.

ARGUMENT.

A. Petitioner-Association is a Non-Stock, Non-Profit, Farm-

er-Owned and Farmer-Controlled Cooperative Dairy

Marketing Association, Organized and Existing Under

the Cooperative Associations Enabling Act of the State

of Maryland, Domesticated Under the Similar Statute

of the State of Virginia, and Engaged in Marketing

the Milk of Its Farmer-Members, All Non-Residents

of the District of Columbia, and as Such is Distin-

guishable from a Proprietary Corporation and is, in

Fact, the Antithesis of the Commercial Corporate Sys-

tem.

Seemingly in conflict with the concept of agricultural

mre bs

cooperation as expressed in various acts of Congress! and

'Capper-Volstead Act, 42 Stat. 388, 7 U.S. C. 291, 292; Seetion

6, Clayton Act, 38 Stat. 731, 15 U.S. C.17; Cooperative Marketing

Act, 44 Stat. 802, 7 U.S. C. 451 et seg.; Agricultural Marketing

Act of 1929, 46 Stat. 11, 12 U.S. C. See. 1141; Amendments to

Agricullural Marketing Act of 1929, 49 Stat. 316, 12 U.S. C. 1141e,

1141}; Bituminous Coal Act of 1937, 50 Stat. 72, 15 U.S. C. 828

et seq., particularly Section 833 (i) 13; Robinson-Patman Act, 49

contrary to the prior decisions of this Court, the overwhelm-

ing weight of authority, federal and state, and the cooper-

ative association enabling statutes of the States of Mary-

land and Virginia, the United States Court of Appeals for

the District of Columbia holds petitioner-association to be a

proprietary corporation and owner of the proceeds arising

from the sale of its farmer-members’ milk, rather than their

agent or other fiduciary in respect to the marketing of their

milk and the collection, investment and distribution of the

proceeds of the sales thereof, (R. 162.)

In consequence of this holding, the Court sustained the

tax assessment of petitioner-association as owner of certain

accounts receivable and revolving fund representing pro-

ceeds from the sale of its farmer-members’ milk. (R. 160-

164.)

1. The fundamental difference between capitalistic and co-

operative enterprise is one which has been commonly

accepted by legislatures and courts alike.

The importance of a well recognized fundamental distine-

tion between a cooperative association and the ordinary

proprietary corporation? may not be minimized in the in-

Stat. 1526, 15 U.S. C., Supp. IV, 13-13b, 21a; Internal Revenue

Code, Sections 101 (12) and (13), 48 Stat. 253-355, 52 Stat. 480,

26 US. C. 101; Grain Futures Act, 42 Stat. 998, and Commodity

Eachange Act, 42 Stat. 1000, 7 U.S. C. 7-10a; Packers and Stock-

yards Act, 42 Stat. 164, 7 U.S. C. See. 207; Farm Credit Act, 48

Stat. 257, 12 U. S. C. 1134.

2 com

he basie legal and economic principles of the cooperative

scheme are limitation upon the voting power and restrictions upon

alienation of voting stock or membership interests, thus preserving

the dispersion of control and keeping the control within the class

affected; limiting the use of proxies, thus fixing the responsibility

upon the cooperators ; the limitation of earnings upon invested eap-

ital, thus insuring the non-profit character of the scheme; and the

distribution of earnings or savings upon a patronage basis, that is,

according to the quantity or value of the products marketed through

the association by ihe respective members * * * Ownership and

control of the association resides in the member, not on the basis

of invested capital, but as one of the rights or incidents of member-

stant case. The vulnerability of the opinion of the Court

below rests in its failure to recognize this distinction. Not

only did the Court fail to recognize the distinction, but it

held the petitioner-association to be a proprietary corpora-

tion Which necessarily carried with it certain tax amenabili-

ties. In fact, it held petitioner-association to be that which

it is not,—to be that of which it is the antithesis.

The record is clear that petitioner-association is a coop-

erative marketing association, (R. 1, 2, 24-43, 86.)

In holding petitioner-association to be a proprietary cor-

poration and owner of these funds, the Court below ignored

completely the prior decisions of this Court which recognize

the fundamental differences alluded to supra between a

non-profit cooperative association and the ordinary cor-

porate concern organized and operated for profit.

That such a distinction exists was recognized by this Court

in Frost v. Corporation Commission, 278 U.S. 515, 523, 73

L. ed. 483, 49S. Ct. 235. The distinction is alluded to again

in United States v. Rock Royal Cooperative, Inc, et al., 307

U. S. 533, 563, 83 L. ed. 1446, 59 S. Ct. 993. Vide, also:

ship, each member having limited voting rights. The voting con-

trol thus decentralized permits, however, through the agency of

the association, a centralized economie control of the product * * *

customarily accomplished by use of the Marketing Contract which

provides for the marketing of the products of the members exclu-

sively through the Association.

66% * *

“* * * The association does not engage in the operation common

to the profit enterprise, namely, to buy low and sell high. * * *

There is no ‘profit’ as such to the legal entity—the association.

There are no dividends in the ordinary sense, but merely remittances

fo members on a pro-rated basis of any accumulated funds on hand

in excess of operating costs and necessary or legally required re-

serves,

“* * * The association, ordinarily, acts essentially as an agent

of its members in ascertaining or developing markets, and in the

selling and distributing of the products. The marketing transaec-

tion is not complete until the proportion due each member from the

proceeds of sales has been remitted. In the true sense, there is no

‘profit’? involved.’”) The Law of Cooperative Marketing, Evans and

Stokdyk, The Lawyers Cooperative Publishing Company, Ro-

chester, New York, 1937, pp. 3 to 5, inelusive, 30 to 32.

SPOILS FV SH

sates

FS be

Dissenting opinion of Mr. Justice Brandeis, concurred in

by Mr. Justice Holmes and Mr. Justice Stone, in Frost y.

Corporation Commission, 278 U.S. 515, 536, 73 L. ed. 483,

49 §. Ct. 235; Board of Trade v. Olsen, 262 U.S. 1, 40, 67

L. ed. 839, 43 S. Ct. 470, sustaining the Grain Futures Act,

42 Stat. 998, 7 U. S. C. 1-17; Flint v. Stone Tracy Co., 220

U.S. 107, 173, 55 L. ed. 389, 31 S. Ct. 342, and Brushaber y,

Union Pacific Railroad Company, 240 U.S. 1, 21, 60 L. ed.

493, 36 S. Ct. 236, sustaining the income tax exemption of

cooperative associations under federal revenue measures,

The Court below ignored further the many statutes, fed-

eral and state, which similarly recognize this distinction

and wherein, unlike the ordinary commercial corporation,

cooperative associations, their activities and contracts, are

afforded peculiar protection. One of such statutes has re-

ceived the favorable consideration of this Court. Liberty

Warehouse Company v. Burley Tobacco Growers’ Co-oper-

ative Marketing Association, 276 U.S. 71, 72 L. ed. 473, 48

S. Ct. 291.

It is respectfully submitted, therefore, that in failing to

draw this distinction between petitioner-association and the

ordinary corporate enterprise, the Court below has decided

a question contrary to law and adverse to the legal, social

and economic interests of cooperative as distinguished from

capitalistic enterprise.* In holding as it does, the Court has

*See cases infra this brief, p. 13. See also: Potter v. Dark

Tobacco Growers Co-op Assn., 201 Ky. 441, 257 S. W. 33; Northern

Wisconsin Co-operative Tobacco Pool v. Bekkedal, 182) Wis. 571,

197 N. W. 936; Arkansas Cotton Growers Co-op Assn. v. Brown,

168 Ark. 504, 270 S. W. 946; Manchester Dairy System v. Hay-

ward, 82 N. Hf. 198, 182. A. 12; Burley Tobacco Growers Co-op

Assn. v. Rogers, 88 Ind. App. 469, 150 N. E. 384; Barns v. Dairy-

men’s League Co-op Assn., 220 App. Div. 624, 222 N. Y. Supp.

294: Dark Tobacco Growers Co-op Assn. v. Dunn, 150 Tenn, 614,

266 S. W. 398; Warren v. Alabama Farm Bureau Cotton Assn.

213 Ala. 61, 104 So. 264; Lee v. Clearwater Growers Assn., 93 Fla.

214. 111 So. 722; Local Dairymen’s Co-operative Assn. v. Potvin,

54. R. 1. 480, 178 A. 535; Johnson v. Staple Cotton Co-op. Ass’n.,

142 Miss. 312, 107 So. 2; Lennox et al. v. Texas Cotton Co-op.

Assn., 55 S. W. (2nd) 549, reversing Teras Cotton Co-op, Assn.

decided a question which threatens the continued existence

of a form of social and economic control recognized by Mr.

Justice Brandeis in his dissenting opinion to the majority

of this Court in Louis K. Liggett Co. v. Lee, 288 U.S. 517,

579, 77 L. ed. 929, 53 S. Ct. 481, 85 A. L. R. 699, as a ‘Sway

** * which leads directly to the freedom and the equality of

epportunity which the Fourteenth Amendment aims to se-

cure.”’

B. Petitioner-Association is the Agent or Other Fiduciary

of Its Farmer-Members and, Therefore, the Revolving

Fund Represented by Investments in Intangibles Car-

ried in Its Name, and Accounts Receivable from Milk

Dealers, Collectible by it, Each Arising Out of the Sale

of Milk Produced by and Marketed for Its Farmer-

Members, Belong, Not to the Association, but to the

Farmer-Members.

Under the decision of the United States Court of Appeals

for the Distriet of Columbia, accounts receivable represent-

ing the purchase price of milk sold to milk dealers and owing

by them were held properly assessed as the property of the

petitioner-association. In like manner, the decision of the

Court upholds the assessment of the revolving fund, com-

prised of stocks, bonds, bank deposits, ete., into which the

unexpended brokerage deducted from the proceeds from

the sale of the farmer-members’ milk was converted, as the

property of petitioner-association. (R. 160-164.)

In so holding, the Court has decided a question of law

contrary to the prior decisions of this Court, the great

v. Lennar, 37 8S. W. (2nd) 331; Tobacco Growers’ Co-op, Ass’n.

v. Jones, 185 N. C. 265, 117 S. E. 174, 33 A. L. R. 231; Nebraska

Wheat Growers’ Assn. v. Norquest, 113 Nebr. 711, 204 N. W. 798;

Minnesota Wheat Growers Coop. Marketing Asso. v. Huggins, 162

Minn. 471, 203 N. W. 420; List v. Burley Tobacco Growers Co-op.,

114 Ohio St. 361, 151 N. EB. 491; Clear Lake Co-op. Livestock Asso.

v. Weir, 200 Towa 1293, 206 N. W. 297; Oregon Growers Co-op.

Ass*n. vy. Lentz, 107 Ore. 561, 212 P. 811; Stark County Mik Pro-

duecrs Asso. v. Tabeling, ete., 129 Ohio St. 159, 194 N. E. 16; Wash-

ington Cranberry Asso. v. Moore, 117 Wash. 430, 201 P. 773.

‘EN RETR A IG SAMRAT EEE REND

POC 2

PRA LEE NP GIP IAAI RODE TAGS BID LN LE Ah IR DOP IEV RE OO Rhy PIES AOE PORTIA LEN LEON LAIIH EOL AE ARR LP

weight of authority, federal and state, and the statutes of

the States of Maryland and Virginia, under which peti-

tioner-association is incorporated in the one instance, and

domesticated, in the other.

That the terms of the marketing contract, read by itself,

or in conjunction with the by-laws of petitioner-association

and the cooperative laws of the States of Maryland and Vir-

ginia, belie the conclusion that ownership of the accounts

receivable and revolving fund is in the petitioner-associa-

tion may not be gainsaid under the prior decisions of this

Court. The Court’s decision, in this regard, is in seeming

direct conflict with the decision of this Court in Sturm y.

Boker, 150 U. 8. 312, 326, 37 L. ed. 1107, 14 8. Ct. 99, cited

in the dissenting opinion of Chief Justice Groner. (R. 167.)

There as here, the letters in that instance, the contract in

this, were couched in terms of consignment and not terms

of sale.

Going beyond the consignment stipulations in the market-

ng contract, it is absolutely devoid of any language import-

ng a passage of title to the milk or cream to the petitioner-

association, (R. 20-29, 86.)

Petitioner-association’s by-laws in no wise portend a pur-

chase and sale arrangement as between it and its farmer-

members. (R. 30-43, 86.)

The appropriate provision of the Maryland statute under

which petitioner-association is incorporated, viz., Section

441, Article 23, Flack’s Annotated Code of Maryland, 1929,

Volume 1, provides: ‘‘Any association, organized under

this Act, as agent to sell the products of members may

operate upon a non-profit basis by contracting to pay the

members, for products sold by said members to or through

the association, the resale price minus uniform charge to

cover the expenses in the handling of said products * * *”.

(R. 123.) (Appendix ‘‘B’’, Petitioner’s Supporting Brief,

p. 38.)

Thus, when the marketing contract in the instant case on

its face imports a consignment relationship between the

petitioner-association and its farmer-members, and when

that is believed to be the unmistakable intention of the par-

ties in the light of petitioner-association’s by-laws and the

cited provision of the Maryland code under which it is in-

corporated, it is erystal clear that the pronouncement of

this Court in the Sturm case supra, applies. The decision

of the Court below, on the other hand, is in apparent con-

flict with and contrary to the decision in the Sturm case,

supra.

As is pointed out by Chief Justice Groner in his dissent

from the majority opinion—*The manner of operation or

co-operation is more clearly disclosed in two instruments—

| petitioner’s charter and the contract of membership. In

neither is there any mention of title passing to petitioner

*** The agreement clearly points to the relation of factor

or agent * * *’? (R. 166.)

We submit, whatever be the correct description of the

fiduciary relationship existing between petitioner-associa-

tion and its farmer-members, the holding of the United

States Court of Appeals for the District of Columbia is not

only contrary to the decision of this Court in the Sturm

case, supra, but to the great weight of authority, federal

and state.

As to the relationship created by the marketing contract

it is in apparent conflict with the decisions of the Fifth Cir-

cuit Court of Appeals in Edwards Shoe Factory v. Stewart,

107 Fed. (2nd) 123, 126; Philips v. United States, 59 Fed.

(2nd) 881, decided by the United States Court of Appeals

for the District of Columbia, Cert. denied, 287 U. S. 639, 77

L. ed. 553, 53 S. Ct. 88; Vail v. Durant, 7 Allan 408, 83 Am.

Dee. 695 (Mass.) Vide, also: Eastern Livestock Corporation

v. Dickinson, 107 Fed. (2nd) 116.

PELE WE LOD,

TONES ARS

1. The great weight of authority, with which the opinion of

the Court is in direct conflict, is to the effect that the

relation between a cooperative association and its mem-

bers is that of trustee to beneficiary or principal to

agent,

Tt is generally held that a cooperative marketing contract

creates between the association and a member the rela-

tion of principal and agent, the association being a sales

agency operating for the benefit of its members. 2 fa. Jur,

p. 27, citing Phez Co. v. Salem Fruit Union, 103 Ore. 514,

201 P. 222, 205 P. 970, 25 A. L. R. 1090; Spencer Co-op. Live

Stock Shipping Asso. v. Schulz, 209 Wis. 344, 245 N. W. 99,

That the relation between a cooperative association and

its members is that of trustee to beneficiary or principal to

agent was held in J/ountaim States Beet Growers Market-

ing Association v. Monroe, 84 Colo, 300, 269 P. 886. And in

Rhodes v. Little Falls Dairy Co., 230 App. Div. 571, 245

N. Y. Supp. 452, the court held that the contract between

a member and his cooperative marketing association rela-

tive to the marketing of his crops partakes of a trust or

fiduciary character.

The Supreme Court of Texas in Tewas Certified Cotton-

seed Breeders’ Ass’n, v. Aldridge, 122 Tex. 464, 61 S. W.

(2nd) 79, reversing Same, 59S. W. (2nd) 320, in construing

a cooperative marketing contract entered into under the

Texas cooperative statute, and wherein were used terms of

purchase and sale, nevertheless held the contract to be one

of agency. The court noted particularly (p. 83 of 61S. W.

(2nd)):

‘Tt being the clear intention of the members to create

a true co-operative marketing association, under the

powers enumerated by law and by the contracts, to

perform certain services exclusively for its members,

and to hold in the face of this intention that the deliv-

ery of the seed to the association was an absolute sale

would destroy it as a cooperative marketing associa-

tion. The members have conferred on this association,

as their selling agent, such title to the cottonseed with

Oe er ee ce

i a RRR eS

plenary powers to handle and dispose of same, but the

association handles the proceeds thereof for the benefit

of itself and its members * * *”

In City of Owenshore vy. Dark Tobacco Growers” Assn,

2 Ky. 164, 3800S. W. 350, the cooperative marketing con.

tract involved included a provision authorizing the associa-

tion to hypotheeate the tobacco to be delivered to it by

erowers, and the Kentucky Court of Appeals held that this

provision of the contract and another requiring the asso-

ciation to account to the grower for the full proceeds of his

tobacco less costs and expenses, made it convincing that it

was the intention of the parties to effect an ageney relation

ship and not one of buyer and seller. As the court pointed

out (p. 302 of 800 8S. W.) 8* * * it was essentially a sales

contract of agency made by each grower with an associa-

tion of his own creation primarily and essentially for his

own benefit, and in no event for the benefit of the non-profit-

earning association which the several growers had organ-

ized.””

In Pyrke, Commissioner of Agriculture and Markets vy.

Brudno et al, 243 App. Div. 493, 278 N.Y. Supp. 353, affirmed

in 269 N.Y. 652, 200 N. KE. 42, it was held that a cooperative

dairy association which contracted to sell milk to a dealer

to whom each producer of the association made delivery,

was a mere agent, notwithstanding the fact that the dealer

was to pay the association and that payments were to be

mingled with funds belonging to other members and cer-

tain deductions were to be made before distribution. Wide,

also: Haarparinne vy. Butter Hill Fruit Growers” Ass’n., 122

Me. 138,119 A. 116; Brown v. Georgia Cotton Growers’ Co-

op. Association, 164 Ga, 712, 1389 8. KE. 417; California Bean

Growers’ Association v. Williams, 82 Cal. App. 484, 255 P.

791; California Raisin Growers’ Association vy. Abbott, 160

Cal. 601, 117 P. 767; Colorado-New Mexico Wool Marketing

Assn. v. Manning, Sheriff, 96 Colo. 186, 40 P. (2nd) 972;

State v. Dairy Distributors, Inc., 217 Wis. 167, 258 N. W.

386, 3889, 390; Lake Charles Rice Milling Co. v. Pacific Rice

Growers’ Association (C. C. A.), 295 Fed. 246; Notes to re-

ported cases, 33 A. L. R. ‘a0. 203; 47 A. L. R. 936, 946: 77

A. L. R. 405, 412, and 98 A. L. R. 1406, 1413. Contra: Neith

Co-op Dairy Products Ass'n. v. National rsa Producers’

Federation, 217 = 202, 257 N. W. 624; Teavas Farm Bu-

reau Cotton Ass’n. v. Stovall, 113 Tex. O73, 253 S. W. 1101,

decided in 1923 and relied upon by the Court of Civil Ap-

peals of Texas in Texas Certified Cottonseed Breeders’

Assn.v. Aldridge, 09S. W. (2nd) 320 and reversed in, Same,

61S. W. (2nd) 79.

In Fmigh v. Farling, 184 Wis. 565, 115 N. W. 128, 27

L. R.A. (N.S.) 248, it was held by the Wisconsin Supreme

Court that the legal title to the milk, to the products thereof,

and to the proceeds arising from the sale thereof, under a

contract similar in respects to the one involved in the case

at bar, but not involving a cooperative association and its

members, was at all times in the patrons of the company,

and the moneys arising from a sale of the cheese were held

by the company in a fiduciary capacity for the beneficial use

of the patrons of the company, and the trust character of

the fund was not changed by the fact that it was deposited

in the bank to the personal account of the company. Cf.

Lambert v. Military Ridge Cheese Co., 179 Wis. 359, 191

N. W. 555.

The decision of the Supreme Court of New York, Ap-

pellate Division, in People v. Shoemaker, 228 App. Div.

314, 239 N.Y. Supp. 71, 178 N. BE. 869, relied upon by

the Court below for the proposition that when a coop-

erative association’s contracts with its milk-producing

members have been phrased clearly in terms of agence Y,

it has been conceded that title to the milk passed ta the

association and that the association is the actual sel-

ler of the milk, is not in point.

The Court below relies to great extent upon the Shoe-

maker case, supra, to support its conclusion that the peti-

tioner-association, and not its farmer-members, is the owner

of either the milk or the proceeds arising from its sale, thus

making it amenable to taxation of such proceeds.

It is respectfully submitted that the Shoemaker case,

supra, has been misapplied by the Court. That case in-

volved the proposition of whether a milk dealer should be

licensed as required by law under circumstances where he

bought his total supply of milk from a cooperative associa-

tion, viz., the Dairymen’s League Co-operative Association,

organized under the Membership Corporations Law of New

York and continuing as such by virtue of the Co-operative

Corporations Law. The question presented was whether

the defendant dealer was buying milk and cream from pro-

ducers so as to subject him to the license and bonding pro-

visions of the New York Agriculture and Markets law. The

case turned on facts substantially as follows: The associa-

tion received milk and cream from many producers, com-

mingled it and delivered same to the defendant dealer. The

League received payment for the milk and cream thus de-

livered and in turn conumingled it with other funds, from

which deductions were made before it was pro-rated among

all who delivered milk to the association. While the court

conceded that the League’s contracts with its producers

were of the nature of an agency contract, vet it called atten-

tion to a provision of the ‘o-operative Corporations Law

under which the association existed directing that ‘‘all con-

tracts, made by the corporation with third parties, for the

sale or other disposition of products which the corporation

had contracted with members or non-members to market

for them, shall in all respects be deemed to be the obliga-

tions of the corporation within the meaning of this section,

whether made by the corporation as principal or as agent

for such members or non-members.’’ It pointed out that

the contraet between the League and the defendant dealer

was ‘fa direct contract for the sale of nilk’’ by it; that the

League was not in and of itself a producer. In addition,

counsel admiited that title to the milk passed to the associa-

tion. The Court concluded that in view of the character of

the League, its method of doing business, and the pro-

vision of the statute alluded to, that the defendant dealer

was not buying milk or cream from producers and was,

therefore, not subject to the licensing provisions of the

Agriculture and Markets law.

Thus, the case turned, not on the relationship of the co-

operative association there involved to its farmer-members,

under the marketing contract existing between them, but on

the particular method of doing business and the technical

language of a statute making the association’s contracts

with third parties, the association’s obligation. flere no

similar statute is involved.

It is submitted that the Court below should more prop-

erly have applied the decision of the same New York Court

in Pyrke, ete. vo Brudno, supra, than the decision in the

Shoemaker case, supra, for the reason that in the Brudno

‘ase, the Court directly passed upon the marketing con-

tract between the same Dairymen’s League Co-operative

Association and its farmer-menbers and held such contract

to be one of agency and not of purchase and sale and dis-

tinguished the case, justifiably, we submit, from the Shoe-

maker case on the facts involved.

3. The fact that petitioner-association, in the marketing con-

tract between it and its farmer-members quarantees its

farmer-members against loss in the disposal of their

milk in no wise changes the relationship of consignment

to sale.

In reaching its decision, the Court below placed consider-

able emphasis on the fact that under the marketing contract,

the petitioner-association guarantees payment to its farmer-

members for their milk consigned to and agreed to be dis-

posed of by petitioner-association. (R. 161.)

To hold this contract stipulation inconsistent with the

creation of the relationship of principal and agent or con-

signor and consignee and as an important factor in con-

struing the marketing contract as a sales contract, is con-

trary, we submit, to the decision of this Court in Ludvigh,

— Vleck eh APE IND BOI IRE Bh DN LE PAA LEE LEE LIII ELI PLEDGE PLLA AEE ATE ee PIE WE IRR PEN ORT EY 1

Trustee in Bankruptcy of Horowitz v. American Woolen

Company of New York, 231 U.S. 022, 58 L. ed. 345, 34S. Ct.

161. Vide, also: In re Renfro-Wadenstein et al., (C. C. A.)

53 Fed. (2nd) 834, affirming with modifications, Same, 47

Fed. (2nd) 238, 244.

The net effect of the contract stipulation whereby the as-

sociation guaranteed payment to its farmer-members for

their milk delivered pursuant to the marketing contract,

was simply to make of petitioner-association a del credere

agent or factor, 25 Corpus « Juris, 343; 22 Am. Jur., 309, et

seq.

C. Petitioner-Association Neither Carried on a Business for

Gain or Economic Benefit, Nor Was it Engaged in Busi-

ness in the District of Columbia, Within the Intend-

ment of Title 20, Supp. III, Sections 970 to 970(15) In-

clusive, and Sections 752, et sey., Code of the District of

Columbia, 1929, so as to Render it Liable for Taxation

in the Manner Adjudged by the Court Below.

1.The Act of Congress imposing a tax on the privilege of

carrying on or exercising, for gain or economic benefit,

any business in the District does not embrace petitioner-

association within the class subject to said tax.

To contend, as the Court below held, that petitioner-asso-

ciation is a corporation or association, carrying on a busi-

ness for gain or economic benefit within the District of

Columbia, does violence not only to the express language of

the statute imposing the tax on such activity, but to the

purpose and objective of petitioner-association as reflect ted

in Section 419 of the Maryland Code (Appendix ‘*B’’, Pe-

fioner’s Supporting Brief, p. 38), made a part of its by-

laws (R. 24, 86), its by-laws and the marketing contract

between it and its farmer-members,

The character of petitioner-association as a non-stock,

non-profit cooperative association, organized for the mutual

benefit of its farmer-members within the letter and spirit

of the Cooperative Associations law of the State of Mary-

AWOL GE LS nb EAN SOO D AMEN NGS ALLMAN TEI EOE LITT IN ARS IES GE AAIYSOCA LED IESE AO CEES AK AG ALUT GN PST TD

land and the method of its operation each distinguish it

from the type of business that it was the intent of Congress

to reach in the enactment of the ‘‘business privilege tax

law’’ (Title 20, Supp. I11, to the Code of the District of

Columbia, 1929, Sections 970 to 970 (15), inclusive.)

Certainly it was not so engaged by virtue of the limited

transactions wherein it secured milk from others than

farmer-members in order to supply distributors’ needs (R.

99), for here again no gain or profit inured to the benefit

of the corporation, This necessary operation of petitioner-

association was but incidental to its main purpose and in

aid of that purpose, namely, to market its farmer-members’

milk at cost on a cooperative basis. This incidental opera-

tion would not have denied it exemption from payment of

federal income taxes on corporations under Section 101

(12), Internal Revenue Code, 1939. Eugenia Fruit Growers

Association v. Commissioner, 37 B. T. A. Reports 993.

‘‘There is no ‘profit’ as such to the legal entity—the asso-

ciation. There are no dividends in the ordinary sense, but

merely remittances to members on a pro-rated basis of any

accumulated funds on hand in excess of operating costs and

necessary or legally required reserves.’ That quotation

from the text cited sums up the fact that while the ‘‘ profit

incentive is the mainspring of commerce, * * * [it] is the

antithesis of co-operation.’? Tobacco Growers’ Co-op, Ass'n.

v. Jones 185 N. C. 265, 117 S. Ki. 174, 182, quoting 23 Col.

L. RB. 91, 111.

‘«* * * the association not only was the creature of the

growers, but by its charter it had no right to make a profit

out of the handling or sale of their products. The whole

conception of the organization was that it was a marketing

association created and organized for the purpose of ad-

rantageous marketing of the growers’ product, not for the

benefit of the association, but for the benefit of its mem-

*The Law of Cooperative Marketing, Evans and Stokdyk. The

Lawyers Co-operative Publishing Company, Rochester, New York,

1937, p. 31.

bers * * *.2? City of Owensboro et al, v. Dark Tobacco

Growers’ Ass’n., 222 Ky. 164, 300 8. W. 350, 352, holding

agricultural products in the hands of the producer or his

agent exempt from taxation and that the contract between

association and member was an agency contract.

Petitioner-association under the facts, we submit, fits, in

all respects, these concepts of agricultural coope ‘ation, and

is not a corporation carrying on a business for gain or eco-

nomic benefit in the District of Columbia.

The statute here in question does not impose the tax on

the privilege of doing business in the District on a business

corporation, but rather, a corporation engaged in business

for ‘‘gain or economic benefit’’.

In Connecticut Valley Tobacco Ass’n. Inc. v. Inhabitants

of Town of Agawam, 261 Mass. 110, 158 N. E. 506, it was

held that while a foreign corporation, organized as a coop-

erative association without capital stock was subject to an

ad valorem property tax on tobacco stored in its warehouse

within the State of Massachusetts, yet it was not subject to

an excise tax, in the nature of a business privilege tax, for

the reason that ‘‘it has no capital stock, and no corporate

excess or net income on which an excise may be laid’’ under

the statute imposing the tax.

And the Supreme Court of Kansas in Kansas Wheat

Growers’ Ass'n. v. Board of Commissioners of Sedgwick

County et al., 119 Kan. 877, 241 P. 466, under a tax statute

which required a corporation to pay taxes on any property

which it owns or holds subject to its control within the state

and which is purchased by it with a view of being sold at an

advanced price or profit, or which has been consigned to it

for the purpose of being sold, held that a non-profit coop-

erative association was not a merchant within the meaning

of the taxing statute and not subject to taxes on account of

holding wheat grown by its members.

Unlike the mereantile license tax held applicable to a

cooperative purchasing association in Appeal of Beaver

County Co-op. Ass’n., 118 Pa. Super. 305, 180 A. 98, where

Dt MERLIN ESE NIE IER DY PRE EEE ORG LION LEN I NEEL OER GOL A VII PO TIE SNA GEL OAL 5 AAA EAA A ORI WAD NED

the practice of buying to sell again and to non-members

constituted the association a dealer within the meaning of

that term as used in the taxing statute, the ‘‘ business privi-

lege tax act’’, is directed to a business operated for gain or

economic benefit.

These decisions, it is submitted, while in nowise binding

on this Court, give an insight into the construction other

courts have placed upon precise definitions in other, and

sometimes, similar statutes to the one here involved. At

the risk of being too detailed, amicus curiae, cites them in

support of the contention that petitioner-association, as a

corporate entity, does not come within the purview of the

‘*business privilege tax act’’.

Further, it is difficult to reconcile the decision of the

Court below in this regard to the language of this Court in

Frost vy. Corporation Commission, supra, p. 523, 524,

wherein a distinction was made between the types of cor-

porations authorized under two different statutes of the

State of Oklahoma. Under one, the corporation became

subject to certain state licensing provisions on cotton gins,

while a corporation organized under the other, was not so

subjected. The distinction there recognized was based upon

the non-profit, mutual character of the latter type corpora-

tion and this Court was of the opinion that as to such non-

profit cooperative association, the apparent discrimination

in the licensing law would be valid.

It is submitted that petitioner-association is beyond the

pale of the ‘‘business privilege tax act’? as a corporation

engaged in business for gain or economic benefit; that to

hold it subject to the tax does violence to the express lan-

guage of the Act as well as the purpose and objective of

petitioner-association’s corporate existence as reflected by

its by-laws and marketing contract.

a. Under no circumstance was petitioner-association liable

to taxation under said Act cacept for the commissions

or brokerage deductible by it under the terms of the

marketing contract.

Section 970 (5), Title 20, Supp. HI, to the Code of the

District of Columbia, 1929, in force at the time, provided :

“* * * the tax imposed by this section shall be payable only

upon the gross commissions of any person engaged in the

business of a broker or agent, and shall not be payable upon

the funds of his principal, of which he is a mere conduit.”’

As Chief Justice Groner pointed out in his dissenting

opinion to the majority opinion below (R. 167)—‘** * * the

eross proceeds of all milk sold for members in the year in

question is not the basis on which taxes for license purposes

may be assessed as ‘gross proceeds of operation’. * * * this

is obvious from the language of the business privilege tax

section in whieh it is expressly provided that the license tax

shall be computed and payable only, in the case of a broker

or agent, upon gross commissions and shall not be taxable

or payable upon funds of the principal of which the agent is

the mere conduit * * *”’

If, as we contend, petitioner-association was acting at all

times as the agent of its farmer-members in respect to the

marketing of their milk and in the collection and disburse-

ment of the proceeds of the sale thereof then, in any event,

if assumed to be within the provisions of the Act in question,

it is only within the law as it relates to agents and the

measure of its tax liability would be its ‘‘gross brokerage’”’

and not gross receipts derived from the sale of all of its

farmer-members’ milk. The holding of the Court below is

believed to be contrary to the express provisions of the Act

in question providing for the assessment of the business

privilege tax, in the case of an agent or broker, on gross

commissions.

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2. The Act of Congress which imposes a personal property

tax only on the moneys and credits, etc., of any asso-

ciation or corporation resident of or engaged in busi-

ness within the District of Columbia does not embrace

the properties taxed as the Court below held.

The Court below held that petitioner-association had es-

tablished a commercial domicile in the District of Columbia

and was engaged in business there. (R. 160.) The peti-

tioner waived any doubt in favor of the taxing authorities

of the District and paid the ad valorem tax on property

having a physical situs in the District, namely, bank de-

posits, other intangibles and tangible personal property.

(R. 6,7.) Whether it was liable to do so is not in question

here.

Since, as we believe and as Chief Justice Groner pointed

out in his dissent, petitioner-association at all times acted

as agent for its farmer-members, it had no moneys, credits,

etc., belonging to it as a corporate entity subject to taxation

under said statute (Title 20, Part V, Sections 752, et seq.,

Code of the District of Columbia, 1929), irrespective of

whether it had established a commercial domicile or was

engaged in business in the Distriet of Columbia within the

meaning of the terms ‘‘resident’’ or ‘engaged in business”

as used in the taxing statute in question.

Il.

A. The Fifth Amendment to the Constitution and Clause

3, Section 8 of Article I Inhibits the Application of

Title 20, Part V, Section 752, et seq., and Title 20,

Supp. III, Sections 970 to 970(15), Incl., Code of the Dis-

trict of Columbia, 1929 to Petitioner-Association in the

Manner Held by the Court Below.

1. The extra-territorial application given these statutes by

the Court below to petitioner-association is in direct

conflict with the 5th Amendment to the Constitution,

The Court below held that ‘‘as the taxes here in question

were imposed by Congress, cases holding state taxation in-

valid as in derogation of the power of Congress are not in

point. Various contentions of petitioner with regard to

the validity of tax legislation for the District of Columbia

are met by Neild vy. District of Columbia, 71 App. D. C. 306,

110 Fed. (2nd) 246.’’ (R. 164.)

Since the expression of the Court below quoted supra, ap-

pears generally applicable to contentions of petitioner be-

low respecting both the ad valorem property tax and the

business privilege tax, it is important to consider the rea-

soning of the United States Court of Appeals for the Dis-

trict of Columbia in the Neild case, supra.

That ease involved the authority of Congress to impose

an excise tax on one transacting business within the Dis-

trict of Columbia based upon gross sales of its property

within the District. When challenged as constituting an

unlawful burden on interstate commerce under the federal

Constitution, the United States Court of Appeals for the

District of Columbia took the position that Congress, in

enacting the legislation, acted pursuant to Clause 17, Sec-

tion 8, Article 1 of the Constitution and not in pursuance

of its power to regulate commerce under Clause 3 of the

same section and article, namely, the constitutional authori-

zation to legislate for the District of Columbia. Parenthet-

ically it stated that the legislation was entirely within con-

stitutional limits if it be regarded as an exercise of the con-

gressional power under Clause 3, the commerce clause. The

Court’s theory as to the latter was that the commerce

clause operates as a limitation solely upon the states and

constitutes no bar to the action of Congress in any event.

As to the legislation being an exercise of the power to legis-

late for the District, exclusive to Congress, the Court’s

theory was that it (Congress) possesses full and unlimited

jurisdiction to provide for the general welfare of the citi-

zeus Within the District by any and every act of legislation

which it may deem conducive to that end; that when it

legislates for the District, it acts as a legislature of national

character exercising complete legislative control as con-

trasted with the limited power of a state legislature; that it

may exercise within the District substantially the powers

which the legislature of a state may exercise within the

state, but it may also exercise general legislative powers

as for example, the power granted by the commerce clause;

that when it so acts it is free of the restraints which are im-

posed by the Constitution upon the states—250, 251 of 110

Fed. (2nd).

It may well be that when Congress exercises general

legislative powers within the District, including the power

granted by the commerce clause, it is free of the restraints

which are imposed upon the states by the Constitution.

But this is not to say that when Congress so acts it is un-

fettered by restraints imposed upon it, by other provisos

of the same Constitution, namely, the Ist to the 10th

Amendments to the Constitution. That it is subject to such

restraints was held in, among other decisions, Wight v. Da-

vidson, 181 U. S. 371, 384, 80 L. ed. 1402, 21 S. Ct. 960;

O'Donoghue v. United States, 289 U.S. 516, 539, 542, 545-

547, 77 L. ed. 1356, 53S. Ct. 740; United States v. Moreland,

258 U.S. 433, 66 L. ed. 700, 42 S. Ct. 368, 24 A. L. R. 992;

See also: United States v. Mattingly, 52 App. D. C. 188,

285 Fed. 922, and see footnotes 9 and 10 to reported ease

of Neild v. District of Columbia, 71 App. D. C. 306, 110 Fed.

(2nd) 246, 250; Sims v. Rives, 66 App. D. C. 24, 84 Fed.

(2nd) 871, certiorari denied, 298 U. S. 682, 80 L. ed. 1402,

56 S. Ct. 960.

Thus, the Congress, in respect to general legislation or

when legislating for the District of Columbia is subject to

the restraints, among others, of the 5th Amendment to the

Constitution which inhibits the denial of due process and

the taking of private property for public use without just

compensation, Though the measure of restraint under the

5th Amendment is not as broad as the measure of restraint

on the States under the Fourteenth Amendment, neverthe-

less the restraint is there and an Act of Congress if gross

enough, may be sufficiently discriminatory as to be ‘‘equiv-

alent to confiscation and subject under the Fifth Amend-

ment to challenge and annulment.’? Stewart Machine Co.

y, Davis, 301 U. 8. 548, 585, 81 L. ed. 1279, 57 S. Ct. 883,

109 A. L. R. 1293; Heiner v. Donnan, 285 U.S. 314, 326, 76

L. ed. 772, 52 S. Ct. 358, 361; Coolidge v. Long, 282 U.S.

582, 596, 75 L. ed. 562, 51 8. Ct. 306; Nichols v. Coolidge,

974 U. 8. 531, 542, 71 L. ed, 1184, 47 S. Ct. 710; Brushaber

v. Union Pac. R. Co., 240 U. S. 1, 24-25, 60 L. ed. 493, 36 8S.

(‘t. 236; First National Bank of Boston v. Comm. of Int.

Rev. (C. C. A.) 63 Fed. (2nd) 685, 692; Wight v. Davidson,

supra, pp. 384-387.

While decisions of this Court striking down state taxing

statutes as in derogation of the 14th Amendment to the

Constitution, or the commerce clause, may not be strictly

applicable to the case at bar, it is submitted, that the prin-

ciples announced in those decisions are generally applicable,

except, perhaps, to the extent that those decisions turn on

the ‘“‘equal protection of the laws’’ clause of the 14th

Amendment. Independent of those decisions, however, an

Act of Congress may be palpably unconstitutional by virtue

of constitutional restraints which do apply to it and the test

is frequently the same as that applied to state enactments

under the 14th Amendment. ‘‘The restraint imposed upon

legislation by the due process clauses of the two [5th and

14th] amendments is the same.”’ Heimer vy. Donnan, supra,

p. 326.

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2. It is not beyond comprehension that constitutional re-

straints encompass Acts of Congress, when legislating

for the District of Columbia, which burden commerce

emanating from within-out, of, or without-im to, the

District of Columbia.

This proposition, we believe, has never been passed upon

directly by this Court, although it was alluded to and passed

over in Stoutenberg v. Hennick, 129 U.S. 141, 148, 32 L. ed.

687, 9S. Ct. 256, but it was there said at p, 147-148:

“The act of the Legislative Assembly under which

Hennick was convicted * * * was manifestly regarded

as a regulation of a purely municipal character, as is

perfectly obvious, upon the principle of noscitur a

socias, if the clause be taken as it should be, in connec-

tion with the other clauses and parts of the act. But it

is indistinguishable from that held void in Robbins v.

Shelby Taxing District, 120 U. S. 489, and Asher vy.

Texas, 128 U.S. 129, as being a regulation of interstate

commerce, so far as applicable to persons soliciting, as

Hennick was, the sale of goods on behalf of individuals

or firms doing busmess outside the District. (Italies

supplied)

««* * * The business * * * falls * * * within the domain

of the great distinct, substantive power to regulate

commerce, the exercise of which cannot be treated as a

mere matter of local concern, and committed to those

immediately interested in the affairs of a particular

locality.

“Tt is forcibly argued that it is beyond the power of

Congress to pass a law of the character in question

solely for the District of Columbia, because whenever

Congress acts upon the subject, the regulations it es-

tablishes must constitute a system applicable to the

whole country; but the disposition of this case calls for

no expression of opinion upon that point.’’

Cf. Washington, Alexandria and Mt. Vernon Rail-

way Co. v. Downey, 236 U. S. 190, 59 L. ed. 533, 35 S.

Ct. 406, dismissing appeal, Same, 40 App. D. C. 147.

ua iio NeAS STF 36 SoG YN ROR ERAET EA ALI OE REN LANG PONTE MENT AN CR COAL A MCDB Rphee TER Ww

The question ts of such peculiar significance im the case

at bar that your amicus curiae feels that it should be passed

upon directly by this Court.

It ‘‘the power of Congress legislating as a local legisla-

ture for the District, to levy taxes for District purposes

only, {is limited] in like manner as the legislature of a state

may tax the people of a state for state purposes wie was

Gibbons Vv. District of Columbia, 116 U. 8S. 404, 407, 29 L.

ed. 680, 6S. Ct. 427; Loughborough v. Blake, 5 Wheat. 317,

318, 5 L. ed. 98; Mattingly v. District of Columbia, 97 U.S.

687, 690, 24 L. ed. 1098, a fortiori, when so acting, it is lim-

ited by similar constitutional restraints in burdening inter-

state commerce, as are the states.

3. Whether the statutes in question be challenged as viola-

tive of the 5th Amendment or the commerce clause,

their application by the Court below is contrary to the

prior decisions of this Court in Stoutenberg v. Hennick,

129 U. S. 141, and Cohens v. Virginia, 19 U. S. (6

Wheat.) 264, 5 L. ed. 257, and the prior decision of the

Court below in Beitzell v. District of Columbia, 21 App.

D.C. 49.

If, as the Court below held im Neild v. District of Colum-

bia, supra, reiterated in its decision in this case (R. 164),

Congress, in enacting the act imposing a tax on the privi-

lege of doing business in the District was exercising the

power to legislate for the District of Columbia, then the

effect of its ruling in the instant case is believed to be con-

trary to the decisions of this Court in Cohens v. Virginia,

supra; Stoutenberg v. Hennick, supra, and contrary like-

wise to its own decision in Beitzell vy. District of Columbia,

supra, in which latter case the rule announced by the Court

was held improperly applied by the Court below in Col-

gate Palmolive Pect Co, v. District of Columbia, App. D. C.,

110 Fed. (2nd) 264, 265.

By applying the rule of the Neild case to all of the con-

tentions of the petitioner below in respect to the constitu-

‘a

2 ou

‘

“ae

tional validity of these taxing statutes, we submit, that the

effect of its ruling as to the ad valorem property tax and

the business privilege tax alike is contrary to the above

cited decisions.

If the holding of the Court below be not contrary to these

decisions then the Acts here brought into question cannot

have the extra-territorial effect which the Court gave to

them. If the intention of Congress as expressed in these

statutes, on the other hand, is that they should have the

extra-territorial effect given to them by the Court below,

then, it is submitted, both statutes are contrary to the inhi-

bitions of the Constitution as expressed in the 5th Amend-

ment and Article 1, Section 8, Clause 3 of the Constitution.

On the theory that the Congress was legislating locally

for the District of Columbia in the enactment of the stat-

utes here in question, the application of those statutes by

the Court below is contrary to the pronouncements of this

Court in the following, among other decisions, and each of

which admittedly involved state statutes and their test of

constitutionality under the commerce clause and 14th

Amendment of the Constitution, viz., Alpha Portland Ce-

ment Co. v. Commonwealth of Massachusetts, 268 U.S. 208,

69 L. ed. 916, 45 S. Ct. 477; J. D. Adams Manufacturing

Company v. Storen, 304 U.S. 307, 82 L. ed. 1865, 58'S, Ct.

913; Safe Deposit and Trust Company of Baltimore v. Com-

monwealth of Virginia, 280 U.S. 88, 74 L. ed. 180, 50.8, Ct.

59; Union Refrigerator Transit Co. v. Commonwealth of

Kentucky, 199 U.S. 194, 50 L. ed. 150, 26.8. Ct. 36; Robbins

v. Shelby County Taxing District, 120 U.S. 489, 30 L, ed.

694, 7S. Ct. 628; Stockard v. Morgan, 185 U.S. 27, 46 L. ed.

785, 22S. Ct. 576; Asher v. Texas, 128 U.S. 129, 32 L. ed.

368, 9S. Ct. 1; State Tax on Foreign Held Bonds, 82. U.S.

(15 Wall.) 300, 21 L. ed. 179.

We do not believe that the restraints imposed upon the

state government, in its sphere, or the federal government

in its sphere, by the same Constitution, were intended to

apply with less rigidity in the latter instance, when Con-

gress is legislating locally for the District, than to the for-

mer When a state legislature is legislating for the state.

The Court below having determined that the revolving

fund and the accounts receivable from dealers were the

property of petitioner-association and not its farmer-mem

bers, then conclude that these items were taxable as the

property of petitioner-association, though a foreign corpo-

ration, on the basis of its having established a ‘commercial

domicile’? in the District of Columbia, and was engaged in

lusiness there,—relying on the decision of this Court in

Wheeling Steel Corporation v. Fox, 298 U.S. 193, 208-211,

a) L. ed. 1143, 56.8. Ct. 773, and on its own prior decision in

Hazen v. National Rifle Association of Ane rica, Lne., 69

App. D.C. 339, 101 Fed. (2nd) 452,

In the Wheeling case, supra, however, no similar ques-

tions were presented as were here and which are drawn into

question by the Petition for Writ of Certiorari, namely,

(1) Is petitioner-association a proprietary corporation en-

waged, as such, in business in the Distriet of Columbia and

has, therefore, a commercial domicile in the Distriet within

the purview of Title 20, Part V, Section 752, et seq., Code

of the Distriet of Columbia, 1929 and (2) was it the owner

of the property sought to be taxed by the District of Colum-

bia under the cited statute?

The Court below so held and it is upon the correctness of

that holding that the possible application of Wheeling Steel

Corporation v. Fox, supra, rests.

That the bulk of the securities subjected to taxation and

comprising a part of the revolving fund had a_ physical

situs outside the District of Columbia is clear from the ree-

ord (R. 4,5, 59, et seq.). Therefore, to hold such securities

taxable by the District of Columbia, the Court below, in

view of its determination that petitioner-association was

the owner of them, applied the rule that intangibles may ac-

quire a situs for taxation other than at the domicile of their

owner if they have become integral parts of some local bus-

‘mess. This it did to answer the contention that petitioner-

association in any event was a foreign corporation. Wheel-

ing Steel Corporation v. Fox, supra, p. 211; Farmers Loan

PAPI TONELLI TET ANE A eH Pit MA ESET AK APES RS AAD DONO YATE ILA OLE RT IPE AIDES SEMEN RIE TD DREN SOTA

and Trust Co. v. Minn., 280 U.S. 204, 74 L. ed. 371, 508. Ct,

98.

It is submitted that there is no basis in the instant case

to apply this recognized exception to the rule of mobilia

sequuntur persona, These securities were not property

within the District of Columbia. Llence, they had no legal

situs for taxation by District taxing authorities, being

owned by non-residents and being located outside the geo-

graphical boundaries of the District. Safe Deposit and

Trust Company v. Virginia, 280 U.S. 88, 81, 74 1. ed. 180, 50

S. Ct. 59. Assuming that such intangibles may be properly

taxed at the domicile of their owners there ‘tis no sufficient

reason for saving that they are not entitled to enjoy an in-

munity against taxation at more than one place similar to

that accorded to tangibles * * *"? Farmers Loan and Trust

Company v. Minnesota, supra, p. 212. The case of Wheel-

ing Steel Corporation v. Fox, supra, is not in point,

Nor, do we believe the accounts receivable from dealers,

had a taxable situs in the District. They constitute debts,

as we contend, owing to the farmer-members of petitioner-

association and collectible by it as their agent. They did

not, as the Board of Tax Appeals found, arise out of, and

were necessarily used as an integral part of the business of

the Association. (R. 64.) Such indebtedness did not have

its origin in the course of business conducted by the cor-

= porate entity in the District of Columbia. These obliga-

tions of dealers to pay for milk delivered by its members do

not represent returns to the corporate entity on any busi-

ness if conducted in the District of Columbia. We believe

the applicable rule is that announced in the decisions of this

Court, admittedly later qualified, in State Tax on Foreign-

Held Bonds, 82 U.S. (15 Wall.) 300, 820, 21 L. ed. 179; as

restated in Kirtland vy. Hotchkiss, 100 U.S. 491, 498, 25 L.

ed. 598; quoted with approval in Blodgett vy. Silberman, 277

U.S. 1, 15, 72 L. ed. 749, 48'S. Ct. 410, to the effect that ‘‘all

the property there can be in the nature of things in debts of

corporations, belongs to the creditors, to whom they are

payable, and follows their domicile, wherever that may be.

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Their debts can have no locality separate and apart from

the parties to whom they are due.’’ See, also: Farmers’

Loan and Trust Co, vy. Minnesota, supra, pp. 212, 213.

For the sake of as much brevity as possible other ques-

tions presented by the Petition for Writ of Certiorari, be-

ing fully treated therein and in Petitioner’s Supporting

Brief, are not considered herein by amicus curiae,

CONCLUSION.

Your amicus curiae is here by sufferance of this Court

and the parties to this cause. It submits that the express

holdings of the Court below and the implications to which

that decision may lead, if permitted to stand, creates many

uncertainties as to the legal status of farmers’ cooperative

associations. As a Federation of such associations, it is

vitally interested in preserving the legal concept of agri

cultural cooperation expressed in the statutes of the United

States and the several states. It believes that concept to

be endangered by the decision below. And, aside and

apart, from that question, here presented, it believes that

the application of the taxing statutes involved is repugnant

fo certain constitutional guarantees and the prior decisions

of this Court applying those guarantees to particular

statutes and circumstances. Your amicus curiae submits

that the Petition for Writ of Certiorari to the United States

Court of Appeals for the District of Columbia, should be

vranted.,

Respectfully submitted,

Cuan tes W. Winson,

Attorney for Amicus Curiae.

July 17, 1941.

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