Opinion
No. 1144.
March 10, 1941.
Defrees, Buckingham, Jones Hoffman, of Chicago, Ill., for plaintiff.
J. Albert Woll, U.S. Dist. Atty., of Chicago, Ill., for defendant.
Action by the Cudahy Packing Company against the United States of America to recover "floor stock taxes" collected from the plaintiff. On motion for summary judgment for plaintiff.
Judgment for plaintiff.
This cause coming on to be heard on the motion of plaintiff for a summary judgment pursuant to Rule 56 of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c:
From the bill of complaint, the answer of the defendant thereto, the affidavits of John F. Gearen, Jr., Patrick A. Woods and F. W. Hoffman filed by the plaintiff in support of said motion for summary judgment and the affidavits of Percy Young, Murray T. Morgan and Murray F. Snider filed by the defendant in opposition to said motion for summary judgment, the court now makes the following findings of fact:
(1) The plaintiff is now, and for many years prior to 1933 has been, a corporation organized under the laws of the State of Maine, having an office and place of business in Chicago, Illinois.
(2) Plaintiff is, and for many years prior to 1933 has been, engaged in the business, among other things, of selling products, produced and processed by it in whole or in part or in chief value from hogs. During that time plaintiff maintained certain establishments used in whole or in part for the processing of hogs, and for the storage and preparation for sale of such products, which establishments are, for brevity, referred to as "plants", and which were and are located in various states of the United States. Plaintiff, during that time, also maintained other establishments herein, for brevity, called "branch houses". These branch houses were numerous and situated respectively in many states and territories of the United States. On November 5, 1933, in each and all of said plants, and in each and all of said branch houses, and in transit from plants to branch houses, there were on hand, stocks of said products, owned by plaintiff, and which products had been theretofore processed, in whole or in part, or in chief value from hogs. Also, there was similarly on hand, and owned by plaintiff, at each of said places, stocks of articles, theretofore processed by others, from wheat, field corn, cotton, sugar and jute.
(3) Under the Agricultural Adjustment Act, 7 U.S.C.A. § 601 et seq., approved and effective May 12, 1933, and under the determinations and orders of the Secretary of Agriculture, the Commissioner of Internal Revenue assessed and collected from the plaintiff, under the provisions of Section 16 of said Agricultural Adjustment Act, the sum of $308,182.08 as "tax on floor stocks" on account of articles then owned and held by plaintiff which had been theretofore processed wholly or in chief value from cotton, wheat, field corn, jute, sugar and hogs, which said sum was paid by the Collector into the United States Treasury.
(4) The products upon which the said "floor stock taxes" above described, were levied, and which had been theretofore derived from hogs, were owned by plaintiff, as aforesaid.
On November 5, 1933, some of them (a minor portion) were "green products" or "primary products", viz., products which resulted from the "first processing" of hogs by plaintiff, or by others. Most of them were "intermediate products", viz., products in the course of being subjected to further and additional processings by plaintiff en route to becoming "ultimate products".
Some of them were "ultimate products", viz., those which by a "first processing", and through a series of further and additional processing operations by plaintiff, or by others, had reached the state of ultimate, salable products.
The products upon which the said "floor stock taxes" were levied, and which had been theretofore derived, by a series of processing operations, by others, from wheat, field corn, and sugar, were owned by plaintiff, but were not held for sale in their then form. They were afterwards mingled with products derived from hogs, in the successive and numerous processing operations of plaintiff hereinafter described.
The products upon which said "floor stock taxes" were levied, and which had been theretofore derived by a series of processing operations, by others, from cotton and jute, were owned by plaintiff; but were not held for sale in their then form. They were being used, or were afterwards used, either (a) as garments for workers in plaintiff's employ; or (b) as wrappers for ultimate products derived wholly or in part from hogs.
(5) On November 30, 1935, plaintiff filed with the Collector of Internal Revenue a formal claim for refund of said $308,182.08, which claim, on December 31, 1935, was disallowed by the Commissioner of Internal Revenue.
(6) On January 6, 1936, the Supreme Court of the United States in the case of United States v. Butler, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477, 102 A.L.R. 914, adjudged that the Agricultural Adjustment Act was unconstitutional and void and that all the taxes therein provided for were illegal and void and had been collected wrongfully and illegally.
(7) On June 15, 1936, plaintiff filed its complaint in the District Court of the United States for the Northern District of Illinois, Eastern Division, entitled Cudahy Packing Company, Plaintiff, v. Carter H. Harrison, Collector of Internal Revenue, Defendant, praying judgment against the defendant in the sum of $308,182.08, which said suit, on motion of the defendant, was dismissed, 18 F. Supp. 250, by reason of the enactment of Sections 902, 903, 904 and 905 of Title 7 of the Revenue Act of 1936, 49 Stat. pp. 1747, 1748, 7 U.S.C.A. §§ 644-647.
(8) On to wit June 28, 1937, plaintiff again filed with the Collector its claim for refund to it of said $308,182.08. Said claim was filed in accordance with Section 902 of Title VII of the "Revenue Act of 1936" upon the forms furnished for that purpose by the Commissioner, and in all respects according to the Regulations of the Treasury then in force.
(9) Thereupon, Commissioner sent his accountants and agents to the principal office of plaintiff at Chicago, Illinois, and to various other plants, branch houses, and offices of plaintiff throughout the United States, and there made extended examinations of the books, records and accounts of plaintiff, as to all the records and facts, bearing upon the payment by plaintiff of said "floor stock taxes" and upon plaintiff's claim for refund thereof.
After said examinations were made, a number of hearings were held in the office of the Commissioner of Internal Revenue at Washington, D.C., upon the merits of said claims. These were attended by the Commissioner, and by various of his assistants. Officers and attorneys of plaintiff also attended said hearings, and presented evidence and arguments on said claim.
At said hearings, which were held in the years 1938 and 1939, there was full agreement between the Commissioner and his representatives, and the plaintiff and its representatives, that the said amount of money ($308,182.08) was in fact paid by plaintiff.
(10) Plaintiff's claim was filed with the Collector of Internal Revenue prior to July 1, 1937, and more than 29 months before the date of filing the complaint in this action. No decision by the Commissioner has been rendered upon said claim.
(11) For many years before the effective date of A.A.A., and continually since, and now, the business, and business operation, and system, of plaintiff, in so far as hog operations are concerned, was and is as follows:
Plaintiff is engaged in business as a meat packer. Included in its business of meat packing is the business of pork packing, which includes the "slaughter of hogs for market" (first processing of hogs); successive processings of the "primary products" resulting from such first processing; and the distribution and sale of the "ultimate products" of such successive processings.
Plaintiff operates certain plants, which plants are located in Omaha, Nebraska; Kansas City, Kansas; Sioux City, Iowa; Wichita, Kansas; St. Paul, Minnesota; Salt Lake City, Utah; Denver, Colorado; Los Angeles, California; and San Diego, California. In the operating system of plaintiff, live hogs are purchased, brought into these plants and there slaughtered for market. As part of said operation, the hog carcasses are cut up, or segregated, into separate products, immediately resulting from said slaughter, which immediate products are called "primary products" or "green products", being the products produced by the first processing of hogs. These primary products are very numerous, are varied in character, and are varied in the relative amounts derived from a hog, or from any number of hogs; but the aggregate weight of all primary products derived from any number of hogs is always less than the live weight of the hogs, from the slaughter of which such primary products are produced.
The accounting records of plaintiff have always been kept on "units" of 100 pounds of live weight of the hogs at the time of slaughter. In the operation of slaughtering, much of this weight always disappears, so that only a portion of said live weight is ever obtained in the resulting primary products. This net weight is called the "yield", and it varies from week to week, according to the size and structure of the hogs slaughtered in that week.
For its three fiscal years beginning November 1, 1933, in six plants of plaintiff the years' total of hog operations was as follows:
Year ending Year ending Year ending 10-31-34 10-31-35 10-31-36 ---------------------------------------------------------------------- Total hog slaughter ....... 2,322,878 1,262,648 1,560,602 Live weight ............... 546,188,890 286,382,365 377,521,545 Weight of yield realized .. 410,907,902 216,678,765 291,993,469 Including edible .......... 377,044,202 198,636,677 268,587,124 Inedible .................. 33,863,700 18,042,088 23,406,335
In addition to the "primary products" produced by plaintiff in its own "first processing", plaintiff also frequently, in the regular course of its business, buys from other packers, "primary products", sometimes called "green products", as, for illustration, hams, shoulders, bellies and the like. These purchases of "primary products" from other packers (usually smaller packers with limited facilities for further processing) constitute a substantial portion of plaintiff's hog business. All "primary products" — both those resulting from plaintiff's first processing, and those already first processed by others, and purchased by plaintiff — are then indiscriminately, and without separation one from the other, subjected by plaintiff to further processing (beyond the first processing) by which further processing, such primary products are prepared for sale in their ultimate form. These further processed products are finally sold by plaintiff in their ultimate form, and are herein called "ultimate products".
In such further processing, the primary products produced by plaintiff's own first processing, and the primary products purchased from others, are not kept separate, but are thrown in together. Except as to occasional and infrequent instances in which a relatively small amount of immediately marketed fresh pork, constituting a negligible portion of said "primary products", is sold, there is no practical method by which it can be known or established by evidence, whether any ultimate product was originally derived from a hog first processed by plaintiff, or from a hog first processed by some one else; nor can it be known or shown that any given ultimate product resulted from the hogs "first processed" in any given week, or in any given month.
Except as just mentioned,
Plaintiff does not sell primary products.
Plaintiff sells ultimate products through its branch houses located in many cities in many states, to which it ships products in cars; and through its car routes, truck routes, and direct car-lot sales, in such states and many others, and through export channels.
These sales by plaintiff of ultimate products are made to thousands of customers, in dozens of cities and states, and in foreign countries, over widely separated areas, at different times, and in varying quantities.
The ultimate products which are finally sold by plaintiff consist of fresh meat, cured, refined or packaged hog products, and inedible products.
The great bulk of the ultimate products are not sold as fresh meat, but consist of highly finished refined or packaged products, which have been developed by plaintiff from primary products over a long period, by means of many and varied successive processings, such as freezing, curing, smoking, re-trimming, slicing, salting, packaging, cooking, canning, and the like.
These ultimate products are about 150 in number. Among the edible ultimate products (to name only a few) are hams, smoked, boiled, baked, canned, etc.; bacon, smoked, sliced, boxed, canned, etc.; lard, in bulk, in packages, and in cans; canned pork of all kinds; sausage of many mixtures and kinds; pickled pigs feet; salt pork; and pharmaceutical products.
Also among inedible ultimate products are tankage, animal foods, glue, hair, bristles, grease, fertilizer, and the like.
During the successive processings, many of the primary products are mingled, in varying proportions, with other materials, such as cereals and sugar (taxable under A.A.A.) and with other materials not taxable under A.A.A., such as salt, vinegar, nitrates, spices, gelatin, beef material, sheep material, beef casings, sheep casings, cottonseed oil, and other non-taxable materials; and many are canvassed, boxed, canned or otherwise packaged, and are finally sold in widely varying forms, units and quantities. For example, plaintiff manufactures annually many millions of pounds of sausages of varying compositions.
In the further processing above described, by reason of smoking, drying, evaporation or moisture, and other causes, a further shrinkage in weight occurs varying from 5 per cent to 40 per cent, on different finally processed products.
Some of these further processings (beyond the first processing) are carried on at the packing plants of plaintiff, and some are carried on at the branch houses to which primary products, or products in some intermediate state of successive processings, have been shipped, or have been there purchased.
Also, at the branch houses, purchases of ultimate products are made daily — some as fresh meat, some in a state of intermediate processing, and some as highly finished and many times processed ultimate products, and all these are an unseparated and indistinguishable part of plaintiff's final sales.
These purchased by branch houses for sale by plaintiff are a substantial portion of plaintiff's sales and business.
Illustratively, in plaintiff's fiscal year 1935, plaintiff paid out for live hogs about $24,000,000 and paid out for primary products, intermediate products, and highly refined ultimate products, derived from the slaughter of hogs by others, approximately $11,000,000.
By reason of the facts above stated the great bulk of the primary products from hogs slaughtered by the plaintiff are sold as ultimate products many weeks or months after the week in which the hogs from which they were obtained were slaughtered.
The primary products in the course of processing shrink in weight in varying amounts in successive processings, and have no ascertainable relation to, or identity with, the weight or kind of the many finally sold ultimate products.
The books, records and accounts of the plaintiff reflecting aforesaid operations have been kept at all times in the same manner and with the same system, unchanged in substance.
The books, records and accounts of plaintiff show the lump amounts received by it in the ultimate sale of all ultimate products, generally; but do not show what price or what amount was received by plaintiff, on the sale of those particular ultimate products, which finally resulted from the primary product of any given week, or of any given month.
Said books, records and accounts do not trace and preserve, and never have traced and preserved, the identity in weight or in money, of the primary products of any week, or of any month, through successive processings, to the ultimate sale of the finally processed products.
The sales of ultimate products are made at widely differing times, at widely separated branch houses, car routes, truck routes, and direct car-lot sales, and in foreign trade, in millions of separate transactions, involving separate quantities, to many thousands of purchasers.
Such sales are necessarily lumped in accounting, and include without distinction (a) sales of ultimate products which began with plaintiff's own slaughter, and which became ultimate products through plaintiff's own successive processings, as well as (b) ultimate products purchased by plaintiff from others, and (c) primary products purchased from others as primary products, and (by plaintiff's successive processings) ripened into ultimate products.
The books, records and accounts of plaintiff do not show or reflect any identity or connection in either weight or realized sale price, between (a) any 100 pound unit of live hog weight, or any aggregate of primary products directly resulting therefrom, in any given week, or any given month; and (b) any ultimate product, or any given quantity of any such ultimate product, finally sold by plaintiff in any one particular sale transaction, or in any number of particular sale transactions.
(12) All purchases of hogs were made at a flat purchase price; live hogs were purchased by plaintiff during the whole period for each of said plants; such purchases were made either directly from the producer, or from dealers who had purchased from the producer, or at public or other markets to which live hogs had been sent for sale.
The price which plaintiff paid for live hogs in any of these events was established in the open market by the competitive bidding of plaintiff and many other buyers. The supply of live hogs in all these markets varied from day to day, and was controlled by the number the producers elected to market on that day.
Owing to fluctuations in supply and demand, the market price which plaintiff paid for live hogs varied materially from day to day, and from hour to hour, and varied also between different markets, due to the relative supply and demand in each particular market. Plaintiff had no control over the number of hogs coming to market, or the demand for hogs by other processors. The market price paid for hogs was at all times determined by forces completely outside its control.
In none of its said live hog purchases did plaintiff allocate, designate, or set aside any amount of tax, of any kind, as such, upon its invoices, or in relation to any such purchase transaction; there was at no time any contract, understanding, or agreement, express or implied, between (a) plaintiff and (b) any vendor from whom plaintiff bought hogs, as to any amount of taxes (whether processing taxes, floor stock taxes, or any kind of taxes), included in or deducted from the price paid for hogs; and no such amount was ever included in, or deducted from, the purchase price, in any purchase of hogs.
The price which plaintiff paid for hogs at all times was paid by plaintiff and accepted by the vendor, for such hogs, as the flat purchase price paid to obtain the hogs, and for nothing else. Plaintiff under the purchasing conditions above described was never able to, and in fact did not, allocate any particular amount of processing, floor stock, or other, tax paid, to any particular quantity of hogs purchased by plaintiff. As to purchases by plaintiff of hog products (not first processed by plaintiff) from others, there was at no time any contract, understanding or agreement, express or implied, between (a) plaintiff and (b) any vendor from whom plaintiff purchased such hog products, as to any amount of processing taxes, floor stock taxes, or other taxes included in, or deducted from, the price paid for such hog products; no such amount was ever included in, or deducted from, the purchase price, in any such purchase, excepting only a relatively small amount of hog products processed by others, and purchased by plaintiff for export, and to which excepted hog products no demand or claim for refund of processing taxes or floor stock taxes was or is made by plaintiff. Such purchase price was paid by plaintiff to procure the products, and for no other purpose whatever.
(13) Plaintiff's ultimate products, both those produced by it, and those purchased by it, during the whole period, were sold in the open market in active competition with other foods (many not subject to processing tax or floor stock tax) and in active competition with other vendors selling the same kind of ultimate products.
The sale price that plaintiff realized for any ultimate products, in any of said markets, was determined solely by the supply and demand conditions in that particular market at that particular time, for that ultimate product, and also for other foods competing with that ultimate product. Plaintiff had no control over any of said market prices, and actually sold all its ultimate products for what sale prices they would bring in the open market.
Plaintiff at no time had any contract, understanding or agreement, express or implied, with any purchaser of any ultimate product, concerning any amount included in, added to, or related to, the sale price of any such ultimate product, for, or on account, of, or as, a processing tax or as a floor stock tax. All sales by plaintiff of ultimate products were made at flat sales prices. There never was any contract, understanding, or agreement of any kind between plaintiff and any vendee of any ultimate product, concerning processing taxes, or floor stock taxes, or allocating any portion of any sale price received, to processing taxes, or to floor stock taxes, or in any way recognizing processing taxes or floor stock taxes in connection with any sale; except only as to a few invoices to charitable organizations, in which the total processing tax and floor stock tax involved was $34,951.75, and a few invoices to governmental agencies, for a refund of which no demand or claim is included in plaintiff's claim in this suit.
In plaintiff's business system, and in its system of accounting, and in its books, records and accounts, all processing taxes and floor stock taxes paid by plaintiff were considered, treated and accounted for, as an expense of operation, and an element of cost, processing taxes and floor stock taxes paid by plaintiff were considered, treated and accounted, in the books, records and accounts of plaintiff, as elements of cost, and as expenses which, in the aggregate, went into the gross operating cost to it, of all (but not of any particular) its ultimate products.
In its accounting processing taxes and floor stock taxes were considered, treated and accounted for, exactly as were other general items of cost, such as the purchase price of hogs; the purchase price of primary products; intermediate products, and ultimate products, from other first processors; purchase price of oils, processing ingredients, feed, cans, packages and supplies; various federal, state and local taxes, including taxes on real estate, and on personal property; cost of labor, expenditures for freight, and for car rent, salaries, power, water, heat, light, icing and reicing repairs, insurance, teaming and auto expense, storage expense, manufacturing expense, advertising expense, brokerage, traveling expense, telegraph and telephone, stationery and postage, legal expense, rent payments, and many other items of cost, none of which were allocated to any particular sale, or to any sale transaction.
None of these items, and none of these amounts, and no processing tax, or floor stock tax, was ever allocated to, or apportioned to, any sales, or to any number of sales, of any ultimate product, or stated on any sale invoice, or in any manner added, as a separate item, to the sale price of any ultimate product, in any sale transaction; or ever included in any identifiable manner in any such sales price, or in any sales transaction; or ever collected as a separate or identified item, from any vendee, in any sales transaction, except only as to the few sales to charitable organizations and governmental agencies above referred to.
(14) By its printed brief filed with the court, the plaintiff concedes that, in view of the affidavit of Murray F. Snider, the sum of $24,595.65 should be deducted from plaintiff's claim as an off-set.
Upon the above and foregoing findings of fact, the court states the following conclusions of law:
(1) The court has jurisdiction of the subject matter and of the parties.
(2) The amount of the "floor stock tax", in the sum of $308,182.08, was illegally levied, assessed and collected from the plaintiff.
(3) The claim filed by plaintiff with the Collector of Internal Revenue was filed in accordance with the provisions of Section 902 of Title VII of the "Revenue Act of 1936" and with the regulations promulgated by the Commissioner.
(4) In the alternative, if the claim so filed was not in all respects in conformity with said act and said regulations, yet the Commissioner by hearing and considering the claim on its merits waived any deficiency as to form.
(5) The "burden of the tax" was borne initially by the plaintiff when, and because, it paid such tax with its own money.
(6) The plaintiff has not, within the meaning of Section 902 of Title VII of the Revenue Act of 1936, been relieved of such burden nor reimbursed therefor, nor shifted such burden, directly or indirectly, through any means or method mentioned in said Section 902, or through any means or method whatever.
(7) The plaintiff is entitled to recover from the defendant the sum of $283,586.43 with interest.
The court has made and filed formal findings of fact and conclusions of law. The findings of fact are substantially the facts averred in plaintiff's complaint. It is true that the answer raised two issues of fact:
(1) The truth or lack of truth of the allegations of Paragraph 16 of the complaint, which allegations the answer specifically and unqualifiedly denies; and
(2) The truth or lack of truth of the allegations of Paragraphs 9, 18, 19 and 20, which the answer states that the defendant has no knowledge or information of the truth of such allegations.
The averments of the complaint and the denials in the answer create the issues above referred to. All other averments of plaintiff's complaint are admitted. The office of affidavits in support of and in opposition to the motion for summary judgment is to prove or disprove the controverted issues of fact. Under Rule 56 of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, the affidavits and counter-affidavits take the place of evidence produced at the trial and are admissible to prove or disprove the allegations of the paragraphs of the complaint which are in issue on the pleadings, and are not admissible or competent to prove or disprove any facts not in issue. The evidence must be addressed to the issues.
Paragraph 16 of the complaint alleges in substance that after the claim was filed on June 28, 1937, Commissioners, auditors and representatives came to plaintiff's offices and plants and there made extended examinations of the books, records and practices of the plaintiff; that thereafter the Commissioner held numerous hearings and conferences at Washington in which he and his subordinates, and the agents of the plaintiff, discussed and considered the claim on its merits, both factual and legal.
This averment of the complaint is amply supported by the affidavits filed on behalf of the plaintiff in support of its motion for summary judgment. These affidavits state at great length and in detail the investigations, audits and hearings relative to this claim. Both prior to and after the filing of the claim, auditors from the Treasury Department made complete, thorough and detailed investigation of the books, records and accounts of the plaintiff with reference to the claim for "Floor Stock Taxes". Several formal hearings were had at which both facts and law were presented and discussed. The evidence is inescapable that the Commissioner considered the claim on its merits, but made no formal ruling thereon. No counter affidavit denies any of the detailed and relevant facts set forth in plaintiff's affidavits. Paragraph 16 must, therefore, be established as a true statement of the facts.
With reference to Paragraphs 9, 18, 19 and 20, the affidavits filed on behalf of plaintiff are detailed and complete. The affidavits filed on behalf of the defendant, as to these paragraphs, do not challenge the truth of the averments by any relevant and competent evidence.
The court, therefore, concludes that plaintiff's complaint stands proved as to facts.
Some objection is made that the claim as filed was not strictly in compliance with the law and the regulations. The court is of opinion that the claim as filed is without technical deficiency, but if the court should be in error in this conclusion, yet the Commissioner, having examined the facts, considered the claim on its merits, held numerous hearings on the facts, and heard extended arguments on the law, waived any objections to the form of the claim. W. C. Tucker v. Acel C. Alexander, Collector, 275 U.S. 228, 48 S.Ct. 45, 72 L.Ed. 253; United States v. Elgin National Watch Co., 7 Cir., 66 F.2d 344.
The money collected by the defendant from the plaintiff as "floor stock taxes" was illegally exacted. The defendant had no shadow of right to collect this money. United States v. Butler, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477, 102 A.L.R. 914.
Under the statutes in force at the time the illegal exaction was made and the money received by the defendant (Sections 3226 and 3228, R.S., 26 U.S.C.A. Int.Rev. Code, §§ 3772, 3312, "there accrued to the taxpayer when he paid the tax a right to have it refunded without any showing as to whether he bore the burden of the tax or shifted it to the purchaser". United States v. Jefferson Electric Co., 291 U.S. 386, 54 S.Ct. 443, 448, 78 L.Ed. 859.
After the right to a refund of the amount of money so illegally exacted had accrued under the Revised Statutes then in force (Sections 3226 and 3228), the Congress, without impairing the right to a refund, conditioned its allowance, by Section 902 of Title VII of the "Revenue Act of 1936", as follows:
"No refund shall be made or allowed, in pursuance of court decisions or otherwise, of any amount paid by or collected from any claimant as tax under the Agricultural Adjustment Act [this chapter], unless the claimant establishes to the satisfaction of the Commissioner in accordance with regulations prescribed by him, with the approval of the Secretary, or to the satisfaction of the trial court, or the Board of Review, in cases provided for under section 906 [648 of this title], as the case may be —
"(a) That he bore the burden of such amount and has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly (1) through inclusion of such amount by the claimant, or by any person directly or indirectly under his control, or having control over him, or subject to the same common control, in the price of any article with respect to which a tax was imposed under the provisions of such Act [this chapter], or in the price of any article processed from any commodity with respect to which a tax was imposed under such Act [this chapter], or in any charge or fee for services or processing; (2) through reduction of the price paid for any such commodity; or (3) in any manner whatsoever; and that no understanding or agreement, written or oral, exists whereby he may be relieved of the burden of such amount, be reimbursed therefor, or may shift the burden thereof."
Under this statute, plaintiff in order to become entitled to a refund of the amount of the illegal exaction, must establish to the satisfaction of the Commissioner, or of the trial court, two propositions:
(1) That it bore the burden of the amount collected from it as a tax under the Agricultural Adjustment Act; and
(2) That it has not shifted such burden in one or more of the ways specified in the statute.
Plaintiff, in this case, did bear the burden of the amount illegally imposed as a tax. It paid the tax. Anniston Mfg. Co. v. Davis, 301 U.S. 337, 57 S.Ct. 816, 81 L.Ed. 1143.
The remaining question is, has the plaintiff proved to the satisfaction of the trial court that it has not shifted the amount of such burden or relieved itself thereof?
The law did not shift the burden from the plaintiff to someone else. The burden could be shifted only by some act of the plaintiff. The statute enumerates the methods by which plaintiff could shift the burden:
(1) Through the inclusion of such amount by the plaintiff
(a) in the sale price of the article with respect to which a tax was imposed, or
(b) in the price of any article processed from any commodity with respect to which a tax was imposed, or
(c) in any charge or fee for servicing or processing;
(2) Through the reduction of the price paid for any commodity; and
(3) In any manner whatsoever.
The plaintiff did not sell the articles with respect to which a tax was imposed at a given sales price for the article so sold and, separate and distinguished from the sales price, collect from the vendee, as a tax, the amount of any tax. Neither did the plaintiff assure to itself the amount of the tax through the reduction of the price paid for any commodity.
But the defendant contends that Section 902, properly construed, means that the plaintiff must prove that it bore the economic burden of the tax. This contention cannot be admitted. The statute does not use the term "economic burden". The term "economic burden", or incidence of a tax, is known to the science of economics. It signifies the intangible, unascertainable result borne by everybody when a tax is imposed on anybody. It is purely a speculative abstraction. Generally speaking, all tax burdens are passed on and shifted ultimately and cumulatively to the ultimate consumer, once or ten times removed. A court, however, must have a tangible factual basis on which to predicate its judgment. Its conclusions and judgments must not rest on speculation or surmise.
The statute uses legal terminology in dealing with a legal concept. It contemplates that the plaintiff must prove to the satisfaction of the trial court that in a legal sense it has not shifted or relieved itself of the burden of the amount of the tax.
The trial court is of the opinion that the plaintiff has met and sustained that burden. By reference to the detailed findings of fact it will be observed that the business of plaintiff is most complicated and complex. The articles bought and sold by the plaintiff were bought and sold in a highly competitive market. The prices which plaintiff paid and received for its products were determined by the supply and demand of the market. As stated in the findings of fact: "The sale price that plaintiff realized for any ultimate products, in any of said markets, was determined solely by the supply and demand conditions in that particular market at that particular time, for that ultimate product, and also for other foods competing with that ultimate product. Plaintiff had no control over any of said market prices, and actually sold all its ultimate products, for what sale price they would bring in the open market."
It is fair to conclude from the findings of fact that plaintiff absorbed the amount of tax paid by it in the sales price received for the various articles. The respective buyers paid the market prices for the articles. The "floor stock tax" was not billed as a separate article. The tax was not separate and apart from the contract price at which the articles were sold. The tax is said "to be buried in the price". It is a mere item of expense, like any other tax, or any other expense, which may enter into the cost of a product — but is buried in a flat sales price. It cannot be said that the burden of the amount of the illegal exaction was shifted to the vendee when the tax was absorbed in the price and was not a separate item thereof. The court is of opinion that the following cases, among others, support the conclusion which the court has reached: Lash's Products Co. v. United States, 278 U.S. 175, 49 S.Ct. 100, 73 L.Ed. 251; United States v. Jefferson Electric Mfg. Co., 291 U.S. 386, 54 S.Ct. 443, 78 L.Ed. 859; Johnson v. Inglehart Bros., Inc., 7 Cir., 95 F.2d 4; Heckman Co. v. Dawes Sons Company, 56 App. D.C. 213, 12 F.2d 154; Wayne County Produce Co. v. Duffy-Mott Co., 244 N.Y. 351, 155 N.E. 669; Continental Baking Company v. Suckow Milling Company, 7 Cir., 101 F.2d 337; Casey Jones v. Texas Textile Mills, Inc., 5 Cir., 87 F.2d 454.
The court is of opinion, under the facts found, that the plaintiff "bore the burden" and did not "shift the burden" within the meaning of Section 902.
Judgment may be entered for the plaintiff on the findings of fact and conclusions of law.