Case Name: FISHER FLOURING MILLS CO. v. VIERHUS; CENTENNIAL FLOURING MILLS CO. v. SAME; RITZVILLE FLOURING MILLS v. SAME
Court: United States Court of Appeals for the Ninth Circuit
Jurisdiction: United States
Decision Date: 1935-08-15
Citations: 78 F.2d 889
Docket Number: Nos. 7938, 7940, 7939
Parties: FISHER FLOURING MILLS CO. v. VIERHUS. CENTENNIAL FLOURING MILLS CO. v. SAME. RITZVILLE FLOURING MILLS v. SAME.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 78
Pages: 889–897

Head Matter:
FISHER FLOURING MILLS CO. v. VIERHUS. CENTENNIAL FLOURING MILLS CO. v. SAME. RITZVILLE FLOURING MILLS v. SAME.
Nos. 7938, 7940, 7939.
Circuit Court of Appeals, Ninth Circuit.
Aug. 15, 1935.
Supplemental Opinion, Aug. 27, 1935.
DENMAN, Circuit Judge, dissenting.
A brief opinion of the majority being delivered from the bench. DENMAN, Circuit Judge, filed a dissent. This was followed by tire written opinion of the majority. Circuit Judge DENMAN then filed an amplification of his dissent.
Venables, Graham & FIowe and Mc-Micken, Ramsey, Rupp & Schweppe, both of Seattle, Wash., for appellant Fisher Flouring Mills Co.
Shorts & .Hartson, 'Wakefield & Witherspoon, and McMicken, Ramsey, Rupp & Schweppe, all of Seattle, Wash., for appellants Ritzville Flouring Mills and Centennial Flouring Mills Co.
J. Charles Dennis, U. S. Atty., and Owen P. Hughes, Asst. U. S. Atty., and Thomas R. Winter, Sp. Atty., Bureau of Internal Revenue, all of Seattle, Wash., for appellee.
Before GARRECHT, DENMAN, and MATHEWS, Circuit Judges.

Opinion:
GARRECHT, Circuit Judge.
A verified application for a temporary injunction pending appeal has been filed in this court by each of the appellants herein. The applications are identical in form and are here being considered jointly.
On July 1, 1935, separate bills of complaint and petitions for declaratory judgments were filed in these causes in the District Court of the United States for the Western District of Washington, Southern Division, by the appellants, for the purpose of enjoining the collection of processing taxes under the terms of the Agricultural Adjustment Act, 48 Stat. 31, c. 25, as amended, 7 USCA § 601 et seq., and for a declaration, under the Federal Declaratory Judgment Act (28 USCA § 400), that the processing taxes arc illegal and unconstitutional in the respects set forth in the bills and petitions.
On July 11, 1935, the court below rendered an oral opinion, stating that it would enter an order denying the requested restraining order and injunction, temporary and permanent, and declining to'render a decree declaratory of the constitutionality or unconstilutionality of the Agricultural Adjustment Act. Thereafter the appellee interposed a motion to dismiss the hills of complaint and the petitions. On July 19, 1935, the lower court entered a final order dismissing the hills and the petitions for declaratory judgments.
Immediately following the order of dismissal, each of the appellants sought to obtain from the Bureau of Internal Revenue an extension of time for paying the processing taxes herein involved. On August 7, 1935, the Bureau formally notified the appellants in writing that such extension of time would not be granted, and demanded payment of the June installment of the taxes not later than August 16, 1935, at which time penalties would commence to attach. Appeals to this court were thereafter perfected, and the present applications for temporary injunctions were filed.
We are not at this time passing upon the constitutionality of the Agricultural Adjustment Act, but are confining our decision solely to the question of the propriety of issuing temporary injunctions pending appeal.
Section 3224 of the Revised Statutes, 26 USCA § 154, provides as follows:
"No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court."
The principal reason for such a provision, as the Supreme Court has pointed out, "is that, as courts are without authority to appoition or equalize taxes or to make assessments, such suits would enable those. liable for taxes in some amount to delay payment or possibly to escape their lawful burden, and so to interfere with and thwart the collection of 'revenues for the support of the government." Miller v. Standard Nut Margarine Co., 284 U. S. 498, 509, 52 S. Ct. 260, 263, 76 L. Ed. 422.
However, as the Supreme Court in this opinion has indicated that certain extraordinary and exceptional circumstances may render the statute inapplicable, it therefore becomes necessary for us to inquire whether the circumstances alleged by the appellants in these cases are of that extraordinary and exceptional character which, under the decisions of the Supreme Court, would justify us in disregarding or refusing to apply section 3224 (26 USCA § 154).
In the first place, the mere allegation that a taxing statute is unconstitutional does not remove a case from the purview of section 3224. This is graphically illustrated by two Supreme Court decisions delivered by the same Justice, dealing with the same tax, and handed down the same day. In Bailey v. Drexel Furniture Company, 259 U. S. 20, 44, 42 S. Ct. 449, 66 L. Ed. 817, 21 A. L. R. 1432, Mr. Chief Justice Taft held tin: Federal Child Labor Tax Law to be unconstitutional. In Bailey v. George, 259 U. S. 16, 20, 42 S. Ct. 419, 66 L. Ed. 816, he reversed a decree of the District Court permanently enjoining a collector of internal revenue from collecting a tax assessed under the same Child Labor Tax Law. In the latter case, the Chief Justice, with reference to section 3224, said:
"The averment that1 a taxing statute is unconstitutional does not take this case out of the section. There must be some extraordinary and exceptional circumstance not here averred or shown to make the provisions of the section inapplicable. Dodge v. Brady, 240 U. S. 122, 126, 36 S. Ct. 277, 60 L. Ed. 560. In spite of their averment, the complainants did not exhaust all their legal remedies. They might have paid the amount assessed under protest and then brought suit against the collector to recover the amount paid with interest."
So in the instant case, the remedy at law there suggested by Mr. Chief Justice Taft is open to the appellants.
It is hornbook law that suits in equity cannot be sustained in any case where a plain, adequate, and complete remedy at law may be had. This fundamental principle is embodied in an enactment by Congress. 28 USCA § 384. Each of the appellants, however, seeks to avoid the application of this rule by setting out the following allegations in its application for a temporary injunction pending appeal:
"The appellant has no adequate remedy at law:
"(a) In that Congress is on the point of passing a law which destroys any adequate remedy for recovering the said tax, in the event of its payment; that the pend-ency of said litigation, which will deny to appellant the right to recover any processing tax unconstitutionally exacted, constitutes a real and imminent threat of irreparable loss.
"(b) In that, unless the appellant pays said processing taxes, it and its officers will be subject to heavy criminal penalties provided for in the' Act in addition to the monetary penalty provided for nonpayment of said taxes.
"(c) In that appellant's customers have stated that they will refuse to pay the amount of said tax to the appellant, and that therefore appellant, in the event said tax is invalid, will be unable to collect the same from its customers and will lose the' entire amount thereof without any chance of reimbursement.
"(d) In that, in any event, the appellant .will be obliged to wage a multiplicity of suits against its said customers for the collection of said taxes, and that appellant, as a consequence, will lose many of its said customers with no possibility of redress for such loss."
We will briefly consider each allegation seriatim.
(a) It would be a strange procedure for a court of chancery to measure the adequacy of a remedy at law, not by what the law is at the time the equity suit is filed, but by certain nebulous conjectures of what the law may be at some future time. "Jurisdiction is determined as of the time the suit was commenced." Pacific Telephone & Telegraph Co. v. City of Seattle (D. C.) 14 F.(2d) 877, 879. "Equity acts in the present tense." Continental Securities Co. v. Interborough R. T. Co. (D. C.) 207 F. 467, 471, affirmed 221 F. 44 (C. C. A. 2). The appellants had at the time of the commencement of these suits, and still have, a plain, adequate, and complete remedy.at law. They can pay the tax and sue to recover at law. Equity is not to be frightened into assuming jurisdiction by the bugaboo of dire prophecies of what the law may be in the future. "To grant an" injunction in anticipation of a possible injury to .arise under a law that may never be passed, is, to say the least, unusual. What complainant's rights may 'be, and what relief should be afforded him in the event of the passage of such a law as he contemplates, cannot now be anticipated." Ryan v. Williams (C. C.) 100 F. 172, 175. It would be an unwarranted encroachment by the judiciary upon the legislative branch of the government "should the court attempt a race of diligence with Congress to defeat the applicability of an Act to a pending case." La Croix v. United States (D. C. W. D. Tenn.) decided July 27, 1935, reported in 11 F. Supp. 817. We are unanimously of the opinion that this court should not be governed or influenced in its action by speculations or predictions regarding future congressional enactments.
(b) The provision for "heavy criminal penalties" for nonpayment of the taxes in question is not an unusual one in tax legislation. Punishment can be avoided by paying the tax and then suing for a refund.
(c) Appellants' petitions show that heretofore they have passed on the tax to their customers who they claim have now notified them that, if the tax is held invalid the customers will not pay such part of the purchase price of the processed product as 'reflects the tax, and by reason thereof appellants will be unable to collect these accounts. It is not claimed .that appellants have promised their customers any rebate or refund in case the tax is held invalid or that the obligation of such customers to pay for flour purchased from appellants is in any way contingent upon the validity of the tax. Regardless of the ultimate fate of the processing tax, appellants have and will have the right to collect the full purchase price of all flour sold by them. Moreover, these contentions may all be answered by .pointing out that, if the tax in question is eventually declared invalid, there will be no occasion for the appellants to demand that their customers reimburse them for the tax, as to any sales made thereafter. As to sales theretofore made, even if the customers refuse to pay the amount of the tax, as averred, the appellants will stand no loss, for they will be entitled to sue for a refund.
(d) The ' mere fact that the appellants' customers may 'refuse to pay that portion of the purchase price of flour ascribablc to such tax, if the tax is upheld, is not sufficient ground for a court of equity to enjoin the collection of the tax from appellants. The tax is against appellants directly, and, if they choose to pass it on to customers who refuse to pay and litigation results, such will not constitute a "multiplicity of suits" in the equity sense.
In their brief before this court, the appellants also rely upon the following paragraph in the bills of complaint filed by them in the court below:
"Plaintiff has been notified by several of its customers during the week immediately preceding this action, who have purchased large quantities of flour which has been processed during the month of May, 1935, and either delivered to said customers or is in transit, and for which purchases plaintiff has not received payment from said customers, that said customers will not pay plaintiff that part of the purchase price of said processed flour which reflects the processing tax thereon, if the Agricultural Adjustment Act, and/or those provisions relating to processing taxes, are declared invalid and unconstitutional by the courts, and said customers have notified plaintiff and demanded that plaintiff do not pay the processing taxes on said purchased flour; that if plaintiff pays said processing taxes for the month of May, 1935, and subsequent months as said processing taxes accrue, and other milling companies engaged in processing wheat do not pay such processing taxes, and in so doing are upheld by the courts, plaintiff will lose said and other customers."
It is clear from the bills of complaint filed in the court below and from the applications for temporary injunctions filed in this court that the appellants are now adding the amount of the processing taxes to their selling price, and that they intend to continue to do so. In their brief, the appellants assert that "milling companies which have not paid the tax by reason of an injunctive order will be in a position to pay to their customers the withheld tax, even though they are presently collecting in the purchase price of flour the amount of the tax." There is nothing in the pleadings or the briefs before us to indicate that the appellants would not likewise "presently collect" the amount of the tax from their customers, even if we were to grant a temporary injunction. Quite the contrary is inferable from the appellants' statements. This would result in the unjust enrichment of the appellants.
It has been suggested that there accrues to the appellants each month a right of demand and suit in the event that the tax be improperly assessed, or in the event that the taxing statute is declared to be unconstitutional. From this it is argued that a multiplicity of suits against the government would result. There is no reference to this point in the pleadings or in the briefs, nor do we believe that it is well taken. There is no need for the appellants to sue each month to recover the taxes in question, in the event the statute is declared unconstitutional. Under the provisions of Rev. St. § 3226, as amended by Revenue Act 1932, § 1103 (a), 26 USCA § 156, the taxpayer is allowed two years from the date of the mailing of the disallowance notice by the Commissioner within which to institute a suit for such refund or credit. According to 26 USCA § 157, all claims for refunds must be presented to the Commissioner within four years next after the payment of the tax in question. In other words, the taxpayer is given a maximum of more than six years from the date of payment within which to file his suit. lie need not sue for the taxes monthly, but may seek to recover a lump sum.
The appellants also rely upon the following paragraph in their applications before this court:
"That throughout the United States many suits in equity have been instituted by millers and milling companies situated identically with the applicant herein; that in a very great majority of such cases, more than eighty in number, United States District Courts have granted temporary injunctive relief during the pendency of the causes in said District Courts," etc.
From the foregoing, the appellants argue that, unless they are granted the relief sought, they will be placed at a "tremendous disadvantage" in the sale of flour. In other words, the appellants' argument amounts to this: The fact that other milling companies have been awarded injunctive relief in the same situation should compel this court to award to the appellants similar relief, in order te equalize competitive conditions, regardless of whether or not we believe such injunctive relief warranted under federal statutes or under the principles of equity. We do npt believe that such equalization of competitive conditions, under such circumstances, is one of the duties of a court of chancery.
The majority of the court are of the opinion that, under the showing made in these applications, we are not justified in disregarding the provisions of section 3224 of the Revised Statutes, supra.
Accordingly, the applications for temporary injunctions pending appeal are denied.