Source: https://supreme.justia.com/cases/federal/us/370/1/
Timestamp: 2019-04-18 14:58:27+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 370 › Enochs v. Williams Packing & Nav. Co., Inc.
Enochs v. Williams Packing & Navigation Co., Inc.
Respondent, which is in the business of providing fishing trawlers to commercial fishermen, sued in a Federal District Court to enjoin the collection of social security and unemployment taxes claimed by petitioner to be past due. Although petitioner adduced evidence in support of his claim that there was an employment relationship, the District Court found that such taxes were not, in fact, payable and that their collection would destroy respondent's business; and it permanently enjoined their collection.
Held: the suit for injunction was barred by § 7421(a) of the Internal Revenue Code of 1954, and a judgment sustaining the injunction is reversed. Miller v. Standard Nut Margarine Co., 284 U. S. 498, distinguished. Pp. 370 U. S. 1-8.
"Except as provided in sections 6212(a) and (c), and 6213(a), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court."
The exception for Tax Court proceedings created by §§ 6212(a) and (c) and 6213(a) was not applicable, because that body is without jurisdiction over taxes of the sort here in issue. Nevertheless, on July 14, 1959, the court, relying upon Miller v. Standard Nut Margarine Co., 284 U. S. 498, permanently enjoined collection of the taxes on the ground that they were not, in fact, payable, and because collection would destroy respondent's business. 176 F.Supp. 168. On June 14, 1961, the Court of Appeals for the Fifth Circuit affirmed, one judge dissenting. 291 F.2d 402. We granted certiorari to determine whether the case came within the scope of this Court's holding in Nut Margarine, which indicated that § 7421(a) was not, in the "special and extraordinary facts and circumstances"
of that case, [Footnote 1] intended to apply. [Footnote 2] 368 U.S. 937.
"degrees of control, opportunities for profit or loss, investment in facilities, permanency of relation and skill required . . . are important for decision [under these statutes]."
and the fishermen was not ordinarily of short duration. The catch was generally sold to Williams, which, in turn, resold it to the DeJean Packing Co., a partnership closely allied to Williams both by reason of integrated operation and substantially identical ownership. The proceeds, after the deduction of expenses, were divided among the captain, the crew, and the boat. Williams received an additional share if it supplied the nets and rigging. It extended credit to the captains and made it possible for them to obtain credit elsewhere, and if a trip was unsuccessful and if the captain or crew members no longer continued to operate a boat, Williams absorbed the loss.
With respect to the existence of a recognized right of control by the employer, as might be expected, the testimony was in conflict. Petitioner introduced evidence to show that Williams could effectively refuse ice to boats, and thus determine whether they would go out, that the boats' times of return were sometimes directed by the respondent corporation, that it could dictate the nature of the catch, and that permission was needed to sell the catch to someone other than respondent. And petitioner pointed out that both respondent and its fishermen had, for other purposes, represented that an employer-employee relationship existed. [Footnote 4] On the other hand, the District Court here found, and the respondent now asserts, that the corporation was wholly without any right of control.
Attempting to establish a basis for equitable jurisdiction, the corporation maintains that it will be thrown into bankruptcy if required to pay the entire assessment of $41,568.57. It is undisputed that Williams itself is without available funds in this amount, but the Government suggests that respondent has denuded itself of assets in anticipation of its tax liability, that DeJean's assets should be considered as belonging to respondent, and that, in any event, the respondent corporation may pay the assessment for a single quarter and then sue for a refund.
"[a] valid oleomargarine tax could by no legal possibility have been assessed against [the manufacturer], and therefore the reasons underlying (§ 7421(a)) apply, if at all, with little force. [Footnote 5] "
Noting that collection of the tax "would destroy its business, ruin it financially, and inflict loss for which it would have no remedy at law," the Court held that an injunction could properly issue. Id. at 284 U. S. 510-511. The courts below seem to have found that Nut Margarine decides that § 7421(a) does not bar suit for an injunction against the collection of taxes not due if the legal remedy is inadequate. We cannot agree.
the taxpayer would suffer irreparable injury if collection were effected.
The manifest purpose of § 7421(a) is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund. In this manner, the United States is assured of prompt collection of its lawful revenue. [Footnote 6] Nevertheless, if it is clear that under no circumstances could the Government ultimately prevail, the central purpose of the Act is inapplicable and, under the Nut Margarine case, the attempted collection may be enjoined if equity jurisdiction otherwise exists. In such a situation, the exaction is merely in "the guise of a tax." Id. at 284 U. S. 509.
objective of the Act -- protection of the collector from litigation pending a suit for refund. And to permit even the maintenance of a suit in which an injunction could issue only after the taxpayer's nonliability had been conclusively established might "in every practical sense operate to suspend collection of the . . . taxes until the litigation is ended." Great Lakes Dredge & Dock Co. v. Huffman, 319 U. S. 293, 319 U. S. 299. Thus, in general, the Act prohibits suits for injunctions barring the collection of federal taxes when the collecting officers have made the assessment and claim that it is valid. Snyder v. Marks, 109 U. S. 189, 109 U. S. 194.
The record before us clearly reveals that the Government's claim of liability was not without foundation. Therefore, we reverse the judgment of the Court of Appeals and remand the case to the District Court with directions to dismiss the complaint.
See also Hill v. Wallace, 259 U. S. 44, 259 U. S. 62; Allen v. Regents, 304 U. S. 439, 304 U. S. 449.
See § 1410, 1939 Code, and § 3111, 1954 Code (social security taxes); § 1600, 1939 Code, and § 3301, 1954 Code (unemployment taxes).
Presumably the exceptions for fishing operations created by §§ 1426(b)(15) and 1607(c)(17) of the 1939 Code and by § 3306(c)(17) of the 1954 Code do not apply because the vessels here involved were of more than 10 net tons.
For instance, during World War II, respondent represented that the fishermen were employees for the purpose of securing occupational deferments for them. And, in the course of a prior antitrust litigation, instituted against a union to which respondent's fishermen belonged, the union defended against the charge of price-fixing on the ground that its members were employees. The Government, curiously, successfully maintained that an employment relationship did not exist. See Gulf Coast Shrimpers & Oystermans Assn. v. United States, 236 F.2d 658 (C.A.5th Cir. 1956).
Id. at 284 U. S. 510.
"[A]ll substances heretofore known as oleomargarine, oleo, oleomargarine oil, butterine, lardine, suine, and neutral; all mixtures and compounds of oleomargarine, oleo, oleomargarine oil, butterine, lardine, suine, and neutral; all lard extracts and tallow extracts; and all mixtures and compounds of tallow, beef fat, suet, lard, lard oil, vegetable oil annotto [a coloring material], and other coloring matter, intestinal fat, and offal fat made in imitation or semblance of butter, or when so made, calculated or intended to be sold as butter or for butter."
24 Stat. 209. The assessment was based on the argument that the statutory reference to "vegetable oil annotto" was meant to bring products made with vegetable oil within the definition. The Court held that the Act was obviously designed to include only vegetable oil coloring used in conjunction with animal fat products; in fact, after the tax year involved, the statute had been amended to bring vegetable oil products within the definition. See 46 Stat. 1022.
"The existing practice of the Federal courts in entertaining tax injunction suits against State officers makes it possible for foreign corporations doing business in such States to withhold from them and their governmental subdivisions, taxes in such vast amounts, and for such long periods of time as to seriously disrupt State and county finances. The pressing needs of these States for this tax money is so great that, in many instances, they have been compelled to compromise these suits, as a result of which substantial portions of the tax have been lost to the States without a judicial examination into the real merits of the controversy."
Williams Packing & Navigation Company, Inc.

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