Source: https://openjurist.org/274/us/225
Timestamp: 2019-04-26 11:57:15+00:00

Document:
STONE & DOWNER CO. et al.
This is a proceeding by certiorari to review the judgment of the Court of Customs Appeals in the classification for duty of thirteen importations of wool in the fleece and in the yarn. 12 Ct. Cust. App. 557. The certiorari was granted by this court October 12, 1925, 269 U. S. 542, 46 S. Ct. 20, 70 L. Ed. 402; a certificate of importance by the Attorney General under section 195 of the Judicial Code, as amended by Act Aug. 22, 1914, c. 267, 38 Stat. 703 (Comp. St. § 1186), having been filed in the Court of Customs Appeals before the case was decided in that court.
A similar case between the same parties, involving the same questions and importations of similar merchandise was decided adversely to the government by the Court of Customs Appeals on November 17, 1923. Stone & Downer Co. v. United States, 12 Ct. Cust. App. 62, 45 Treasury Decisions, 167, T. D. 40019. In that case, however, there was no certificate of importance filed by the Attorney General, and no application was made for a writ of certiorari.
We have held that where, in a federal court, a judgment of a state court in a tax case is pleaded in a subsequent tax case arising in a federal court, the estoppel from the judgment of the state court will not be given greater effect that it would have in the state court, and that a judgment not operating as res judicata in suits for taxes for another year in the state court will not be an estoppel in a federal court for subsequent years. Phoenix Fire & Marine Insurance Co. v. Tennessee, 161 U. S. 174, 16 S. Ct. 471, 40 L. Ed. 660; Covington v. First National Bank of Covington, 198 U. S. 100, 25 S. Ct. 562, 49 L. Ed. 963.
The question here differs from that presented in ordinary tax suits, and involves the effect of an adjudication of a peculiar character. Prior to the passage of the McKinley Tariff Administrative Act, approved June 10, 1890 (26 Stat. 131, 136, c. 407, § 12 (Comp. St. § 5593)), litigation over the collection of duties and the classification of importations under tariff acts was carried on by suits against the collectors who imposed the duties and was in the form of an action against the collecting official as an individual. After the judgment was obtained, the collecting officer was relieved from personal obligation and the judgment was paid from the Treasury of the United States. See Rev. Stat. U. S. §§ 3009-3014. In 1890 new machinery was introduced, by which a board of nine general appraisers was created, which, sitting in divisions of three, constituted in a sense administrative courts of appeals to pass on questions of classification and the imposition of duties, and appeals were allowed from it to the proper Circuit Court of the United States, whence upon an allowance of an appeal by the Circuit Court, the cases came to this court. By the Act of 1891, creating Circuit Courts of Appeals (26 Stat. 826, c. 517, § 6), these cases went by appeal to those courts, and then by certiorari to this court. By the Tariff Act of August 5, 1909 (36 Stat. 11, 105, § 29), another change was made, by which appeals from the decisions of the Board of General Appraisers were allowed to a new court created by the act, called the Court of Customs Appeals, and by that act the whole question of classification and refunding of duties was taken out of the jurisdiction of the legular federal judiciary. The classification by the Court of Customs Appeals was made final, and no appeal was granted to this court. This independent plan for the settlement of tariff questions and the complete finality of the decisions of the Court of Customs Appeals in that field of litigation lasted until August, 1914, when by the Act of August 22 of that year (38 Stat. 703, c. 267) a limited review by writ of certiorari was given to this court of judgments of the Court of Customs Appeals in cases in which the construction of the Constitution or any part thereof, or any treaty made pursuant thereto, was drawn in question, and in any other case when the Attorney General of the United States should, before the decision of the Court of Customs Appeals was rendered, file with the court a certificate that the case was of such importance as to render expedient its review by this court. For five years, however, the Board of General Appraisers and the Court of Customs Appeals between them exercised complete jurisdiction in the construction of tariff acts and the determination of the amount due as duties from every importation coming into the country. By the Act of 1909 (36 Stat. 105) the court was given power 'to establish all rules all regulations for the conduct of the business of the court and as may be needful for the uniformity of decisions within its jurisdiction as conferred by law.' It was by the law to exercise exclusive appellate jurisdiction in all cases as to the construction of the law and the facts respecting the classification of merchandise and the rate of duty imposed thereon under such classification, and the fees and charges connected therewith and all appealable questions to the jurisdiction of the Board of General Appraisers and all appealable questions as to the laws and regulations governing the collection of the customs revenues, and the judgment or decrees of said Court of Customs Appeals were made final in all such cases. Page 106. It was thus for five years put in a position where in must not only make its own rules, but it must determine, as a practical matter, what should be the conclusive effect of its own judgments in the determination of questions of fact and statutory construction and classification in subsequent cases brought before them by the same parties and presenting similar issues. In the exercise of this jurisdiction, it established the practice that the finding of fact and the construction of the statute and classification thereunder as against an importer was not res judicata in respect of a subsequent importation involving the same issue of fact and the same question of law.
We think that not only was it within the power of the Court of Customs Appeals to establish the practice, but that it was wise to do so. The effect of adjudicated controversies arising over classification of importations may well be distinguished from the irrevocable effect of ordinary tax litigation tried in the regular courts. There of course should be an end of litigation as well in customs matters as in other tax cases, but circumstances justify limiting the finality of the conclusion in customs controversies to the identical importation. The business of importing is carried on by large houses between whom and the government there are innumerable transactions, as here, for instance, in the enormous importations of wool, and there are constant differences as to proper classifications of similiar importations. The evidence which may be presented in one case may be much varied in the enxt. The importance of a classification and its farreaching effect may not have been fully understood or clearly known when the first litigation was carried through. One large importing house may secure a judgment in its favor from the Customs Court on a question of fact as to the merchandise of a particular importation or a question of construction in the classifying statute. If that house can rely upon a conclusion in early litigation as one which is to remain final as to it, and not to be reheard in any way, while a similar importation made by another importing house may be tried and heard and a different conclusion reached, a most embarrassing situation is presented. The importing house which has by the principle of the thing adjudged obtained a favorable decision permanently binding on the government will be able to import the goods at a much better rate than that enjoyed by other importing houses, its competitors. Such a result would lead to inequality in the administration of the customs law, to discrimination and to great injustice and confusion. In the same way, if the first decision were against a large importing house, and its competitors instituted subsequent litigation on the same issues with new evidence or without it, and succeeded in securing a different conclusion, the first litigant, bound by the judgment against it in favor of the government must permanently do business in importations of the same merchandise at great and inequitable disadvantage with its competitors.
These were doubtless the reasons which actuated the Court of Customs Appeals when the question was first presented to it to hold that the general principle of res judicata should have only limited application to its judgments. These are the reasons, too, why the principle laid down by this court in the decision already referred to, in New Orleans v. Citizens' Bank. 167 U. S. 371, 17 S. Ct. 905, 42 L. Ed. 202, should not apply or control. There the thing adjudged was the existence of an immunity of the property of a bank from taxation due to a contractual obligation of the state or city government to the bank, a personal relation which might without embarrassment and with much more safety be permanently fixed for one taxpayer than a question of fact or law affecting discriminatingly one of a whole class of importers, and giving the exceptional operation in its favor of a general tariff on articles of merchandise largely imported. The fact that objection to the practice has never been made before in the history of this court or in history of the Court of Customs Appeals in 18 years of its life is strong evidence, not only of the wisdom of the practice, but of general acquiescence in its validity. The plea of res judicata cannot be sustained in this case.
In the case between the same parties presenting the same issues in 1923 the Board of General Appraisers by a majority of two to one gave judgment for the government. Stone & Downer Co. v. United States, 43 Treasury Decisions, 141, T. D. 39473. One held that the words 'wool commonly known as clothing wool' must be given their ordinary nontrade meaning of wool used for clothing, and therefore included both carding and combing wools. His view was that evidence of the technical or commercial meaning of clothing wool was not relevant and was excluded by the words 'commonly known as.' The other General Appraiser supporting the government view examined the evidence at length, and found from it that the first great division among wools was between clothing wools and carpet wools, and that, while in the trade clothing wools were divided into and were distinguished commercially as clothing wools and combing wools, the expression 'commonly known as clothing wool,' as testified by competent witnesses of large experience, included wool for clothing, whether treated by the carding or combing process.
In this case, as in every other involving the interpretation of a statute, the intention of Congress is an all-important factor. The greatest light is thrown on that intention in this case by an examination of the existing conditions and the anticipated evils against which by this legislation Congress sought to protect the country.
When the Emergency Tariff Act was passed we had been through the greatest war of history and were attempting to return to peace conditions, and had reached a time in 1920 when business was bad and financial disaster threatened. The result of the congressional elections in November, 1918, was to change the political complexion of the House and Senate. Before that Congress finished its term in the winter of 1920-1921, an emergency tariff bill was introduced to relieve the agricultural depression which was at hand. Such a bill went through Congress, but was vetoed. The national administration changed on the succeeding 4th of March, 1921. With a new Congress and new Executive, another emergency tariff bill like the one already vetoed was introduced. The Committee on Ways and Means of the new House of Representatives in recommending the passage of the bill (1 House Reports, 67th Congress, 1st Session, p. 1), commented on the serious obstacles to the revival of industry in the paralysis of agriculture. It pointed out, that the purchasing power of the farmers had been in large part destroyed and must be restored, and called attention to the fact that we were in the grip of a nation-wide industrial and business depression and that agriculture was hardest hit.
'During the war imports increased in response to increased manufacturing to about 445,893,000 pounds in 1919, and declined to 259,618.000 pounds in 1920.
'(2) Both importation and consumption of wool have decreased since May. However, there has been a large increase for January and February, 1921. Importations in recent months appear to be speculative, in anticipation of tariffs.
'(d) Wool dealers who purchased wool stocks at higher prices than now obtain are in serious financial straits and would be directly benefited. Forced liquidation on the part of wool dealers would make the present bad situation worse and break a trade organization of value to agriculture.
It was asserted in the argument on behalf of the government, and the assertion was acquiesced in by counsel for the importers, that at least half in weight and value of the importations of wool from which clothing is made is combing wool. The contention of the importers in this case, if successful, would therefore bring about the result that half, both in weight and in value of the foreign wool in competition with wool produced in the United States and with the stocks of wool on hand in the United States, would not be kept out of its markets by the emergency tariff at all, and that the swamping of the domestic wool markets to that extent would continue under the free importation of combing wools. More than this, such combing wools as would come in under the emergency tariff, if construed as the government contends, would produce as much revenue as the carding wools, and yet by the importers' construction that revenue would be lost.
From the 500 pages of the evidence, we find that in the custom of the trade the term 'clothing wool' applies to the short staple wool which is suitable for carding, and which goes into what is known as the woolen or felting process for making cloths of that character, and that the term 'combing wool' refers to wool of longer staple, which goes into another process known as combing for making worsted cloths; that in the trade clothing wool and combing wool are thus contrasted; second, that originally the worsted process could not be used with the fine wools, like the merino wools, because the staple was not long enough, but that the development of combing machinery, particularly what is called the French combing process, has enabled manufacturers to comb wool of shorter staple than formerly, and to make it into worsteds, and that, in addition to this, cross-breeding between the merino and other wools has increased the length of the staple and the amount of available combing wools as compared with the carding wools, so that the border line between the use of combing wools for clothing and that of carding wool has changed; that the definitions in the principal dictionaries and encyclopedias set forth the same trade distinction between clothing wool and combing wool as between manufactures of wool and manufactures of worsteds; that both clothing wool and combing wool are largely grown in this country.
The expert witnesses of the importers generally testified that there was no other meaning for clothing wool but carding wool. There was other substantial evidence, however, from expert witnesses for the government of large experience in dealing in wool, who testified that, speaking generally and in ordinary parlance, wools were divided into clothing wools and carpet wools, with reference to their chief use, and that it was only in the trade in the garding and sorting of wools, and in their purchase and sale that the term 'clothing wool' was distinguished from combing wool. The competency and relevancy of such evidence as to the ordinary meaning of language in tariff classifications is sustained by the decision of this court in Robertson v. Salomon, 130 U. S. 412, 415, 9 S. Ct. 559, 32 L. Ed. 995.
The natural and usual meaning of the words 'clothing wool' is wool for clothing. That is what the nonexpert reader of the words would understand, until he was advised of a different meaning by reason of the language of the trade. When, therefore, the words are used, 'commonly known as clothing wools,' the ordinary inference from the collocation of the words is that they refer to wool that is used in making clothing. If Congress had intended that the words 'clothing wool' should have their commercial designation, it would simply have used the words without qualification or it would have said 'commercially known as.' It would not have used the phrase 'commonly known as.' The phrase indicates, not only that clothing wool is used in its ordinary or nonexpert meaning, but is to serve the same purpose as the same phrase in connection with carpet wools is the same clause, by indicating that, while these wools were capable of use for other than clothing and carpets respectively, they were to be classified by reference to their chief use.
In the world view which the committee report shows clearly that the Congress was taking of the wool market, it was not dealing with the processes by which wool was made into cloth, and distinguishing between them. If it had wished to make a distinction based on the process of manufacture rather than on the material which was to be used, it certainly would not have included, as expressly within the operation of paragraph 18, the hair of the camel, the angora goat, and the alpaca, for in preparing those materials for the making of cloth the hair is always combed and never carded. It had chiefly in mind, as shown by the contrast made in paragraph 18, the distinction between wool which was made into carpets and could not be grown in the United States, and wool made into clothing, which could be, and was, grown in the United States and in England, and on the continent, and in South America, Australasia, and South Africa. The world view of the production of wools which affected Congress in enacting this legislation is also revealed in the passage from the Tariff Commission report which we have already quoted when it refers to South America, South Africa, and Australasia as 'the three great exporting regions which supply the deficiencies in production of clothing wools of western Europe and North America.' This use of the words 'clothing wools,' of course, is used only in contrast to the carpet wools, which, together with the clothing wools, embrace the whole world production. We do not find it difficult, therefore, in our interpretation of paragraph 18, to give effect to the evident purpose of Congress.
'The commercial designation, as we have frequently decided, is the first and most important designation to be ascertained in settling the meaning and application of the tariff laws. See Arthur v. Lahey, 96 U. S. 112, 118, (24 L. Ed. 766); Barber v. Schell, 107 U. S. 617, 623 (2 S. Ct. 301, 27 L. Ed. 490); Worthington v. Abbott, 124 U. S. 434, 436 (8 S. Ct. 562, 31 L. Ed. 494); Arthur's Executors v. Butterfield, 125 U. S. 70, 75 (8 S. Ct. 714, 31 L. Ed. 643). But if the commercial designation fails to give an article its proper place in the classifications of the law, then resort must necessarily be had to the common designation.' What we hold here is that Congress, by using the expression 'commonly known as clothing wool,' indicated expressly its intention not to give to the expression 'clothing wool' the commercial designation that it has when used in contrast with combing wool, and that the history of the legislation shows that the trade or commercial meaning is contrary to the purpose of Congress in the enactment of the law. In other words, the authorities upon which the Court of Customs Appeals proceeded, we think, have no application to the interpretation of this act, save as they recognized that in the last analysis effect must be given to the intention of Congress.
It should be noted that the tariff division of wools in 1867 was of three classes: Class 1-Clothing wool, wools which are of merino blood and wools of like character. Class 2-Combing wool, wools which are of the English blood; and the hair of the alpaca, goat and animals. Class 3-Carpet wools and other similar wools. These divisions were continued in the Tariff Act of 1883 (Comp. St. §§ 6172, 6174). In the Tariff Act of 1890 and in the act of 1897 (30 Stat. 151), when the duties on wool were restored after the free wool of the Tariff Act of 1894 (28 Stat. 509), the division was made into three classes, while the tariff divisions between clothing and combing wools were dropped. Again in the act of 1909 there was a division of three classes without reference to the trade division between clothing and combing wools.
There may have been other reasons for this change in the acts of 1890, 1897, and 1909, but there were two, already referred to, which were obvious, one arising from the cross-breeding of sheep, so that the staple in the merino and like wools was lengthened thereby (see paragraph 380 of Schedule K of the McKinley Act, c. 1244, 26 Stat. 595), and the other in the improvement in the combing process, so that short wools of the merino blood, which before could only be carded, and not combed, became combing wools in the trade sense, and could be used for worsteds as well as for woolen cloths. The merino wools were finer wools, and, as they became subject to combing by breeding and mechanical process, their use in making clothing was enlarged and their value was enhanced. See Report of the Tariff Commission on the Wool-Growing Industry 1921, pp. 428, 448. The result of these changes was that the first class of wools in the acts of 1890, 1897, and 1909 included many combing wools, while the first class under the act of 1883 was expressly designated as clothing wools. This is illustrated in this case in which the wools here imported are partly merino wools by the blood and come from South America, and yet 12 of the importations out of 13 are combing wools, while the thirteenth was declared doubtful by the experts, and was held to be a clothing wool by the Court of Customs Appeals.
We think the Klumpp Case very like the one at bar. They both consider the same trade distinction between different clothing wools, growing out of the different processes used in the manufacture of the yarn, and reject its application because of Congress' purpose. In both cases the trade distinctions had ceased to be important from a tariff standpoint, and classification was made on a different basis from that of carding or combed wools or woolen cloth and worsted cloth. The trade distinctions were very important in the transaction of business, but not in the fixing of duties.
Neither in the reliefs presented to us nor in the opinions of the courts below has their ever been a suggestion of a reason why Congress should have distinguished, in its attempt to avoid the demoralization of the wool markets in this country and to increase the revenue, between carding wool and combing wool. The only argument of the Court of Customs Appeals is 'ita lex scripta est,' and the answer to the argument must be that it is not so written, and that the language is easily capable of being construed in accordance with the congressional intention.

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