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July 22, 1957

SCHENLEY DISTILLERS, Inc. and Joseph S. Finch and Company, Plaintiffs,
The UNITED STATES of America, Defendant

The opinion of the court was delivered by: MCILVAINE

The taxpayers, Schenley Distillers, Inc., hereinafter referred to as Schenley, and Joseph S. Finch and Company, hereinafter referred to as Finch, filed a complaint against the United States of America for refund of internal revenue taxes paid on distilled spirits withdrawn from an internal revenue bonded warehouse from November 1, 1951, to September 30, 1955, in the Pittsburgh, Pennsylvania, Internal Revenue District. Their claim is in two counts.

In the first count, Finch seeks a refund of $ 137,151 plus interest, which is the $ 10.50 per proof gallon distilled spirits tax as to 13,062 proof gallons of distilled spirits which allegedly evaporated after tax payment and prior to bottling.

 They alleged that the spirits involved in this claim were stored in the Internal Revenue Bonded Warehouse No. 4 at Schenley, Pennsylvania, of which Finch was the proprietor at the time of payment, and that the tax was paid by the taxpayer as warehouse proprietor.

 Finch alleges that at the time it paid the tax on these spirits it had no market for them, that the tax on the distilled spirits was paid, and the spirits were withdrawn from the internal revenue bonded warehouse when they reached or were immediately approaching the age of 8 years in bond due to the provisions of law and regulations which require tax payment and withdrawal of distilled spirits within 8 years of original entry for deposit in an internal revenue bonded warehouse. It is alleged that at the time the spirits were tax-paid and withdrawn there was no market for them, and that they evaporated while being held in barrels after tax payment and before bottling. Therefore, the plaintiffs claim that they are entitled to a refund of the $ 137,151.

 In the second count, it is alleged that the distilled spirits tax of $ 10.50 was paid on 26,110,000 proof gallons of distilled spirits of which 25,985,849 of the said gallons were owned by Finch and tax was paid by Finch. As to this amount, Finch claims a refund of $ 1.50 per gallon. Finch, in the alternative, in its capacity of warehouseman demands judgment in respect to 25,790,705 gallons on which the internal revenue tax was paid; and Schenley in its capacity as warehouseman demands judgment against the defendant in respect to 195,144 gallons on which the tax was paid. Finch as warehouseman also claims a refund as to 124,151 gallons on which the tax was paid. The basis for its claim for refund is that plaintiffs allege that when the spirits were distilled the rate of tax was $ 9 per gallon and after they had been distilled the rate was increased $ 1.50 per gallon to an aggregate of $ 10.50 per gallon. The plaintiffs allege these claims for refund are subject to certain adjustments.

 The plaintiffs also allege in their complaint that they made timely claims for refund in accordance with the law and, therefore, are entitled to maintain this suit. The Government does not seriously contest these facts, and having filed a motion to dismiss the plaintiffs' complaint, must be deemed to have admitted them for the purposes of this motion. However, the plaintiffs in their complaint also make allegations that the tax is unconstitutional, being an unapportioned tax, and list their reasons therefor in Paragraphs 20 through 29 of their complaint. They allege that the force-out provision of the law is a violation of due process as seen by Paragraphs 30 through 33 of their complaint. In Paragraphs 34 through 43, the plaintiffs set forth circumstances indicating that there has been an oversupply of distilled spirits and state the problems involved in the manufacture of distilled spirits that have been encountered since and during World War II and the Korean conflict. In Paragraphs 44 through 58, Finch alleges that it faced disastrous alternatives, and alleges what it did, and the costs it incurred complying with the internal revenue laws. In Paragraphs 59 through 66, plaintiffs allege that the force-out provision has caused disastrous consequences to them and up to the present time. In Paragraphs 67 through 76, they allege that more disastrous consequences will result in the immediate and indefinite future as a result of the force-out provision. In Paragraphs 77 through 80, they allege that they are at a competitive disadvantage with foreign producers who compete in the markets in the United States. In Paragraphs 81 through 97, the plaintiffs allege that the Treasury is losing revenue because of this force-out provision.

 The Government has filed a motion to dismiss the complaint and in the alternative a motion to strike. The Government urges this Court to dismiss the complaint on the grounds that the complaint fails to state a claim on which relief can be granted, that the tax statutes are constitutional and valid, and that the plaintiffs are estopped from attacking the constitutionality of the statutes because they have obtained and enjoyed provisions granted with respect to the distilled spirits bonding provisions under the statutes. It also urges dismissal because Finch, it claims, is not entitled to a refund because it paid the taxes only as a warehouseman, and finally urges that the complaint be dismissed because the plaintiffs have disregarded Rule 8(a)(2) of the Federal Rules of Civil Procedure, 28 U.S.C. because they allege immaterial, impertinent, and redundant matter which cannot readily be separated from the necessary and proper allegations in the refund suit.

 The complaint filed in this case consists of 107 numbered paragraphs covering 40 legal-sized pages. The Government urges that it should not be required to file an answer to such a lengthy complaint because it complains that three-fourths of the complaint contains irrelevant, immaterial, and argumentive matters. The Government points out that Rule 8(a) of the Federal Rules of Civil Procedure requires that a complaint contain a short and plain statement of the claim showing that the pleader is entitled to relief. Certainly this complaint is not a short statement of the claim. However, the plaintiffs vigorously maintain that what they have pleaded is necessary for the determination of the issue. The Government urges that the entire complaint be stricken for the failure of the plaintiffs to comply with the requirements of Rule 8(a).

 Professor Moore points out that:

 'That is a 'short and plain' statement depends, of course, on the circumstances of the case. A complaint for conversion, or to recover on a note, can be stated in half a page. An anti-trust action, or an action to enjoin enforcement of an unconstitutional statute, or an interpleader action, or a stockholder's suit may require more particularity.' 2 Moore's Federal Practice, § 8.13, p. 1653.

 Thus, it appears to this Court that what constitutes a 'short and plain' statement must be determined by the type of case, the relief sought, and the situation of the parties. Each complaint must be evaluated individually.

 The Government in its brief points out that the courts are somewhat reluctant to grant motions which have the effect of delaying proceedings. This is probably true, and in view of the decision that we are reaching in this case we find it unnecessary to rule on the question of whether the complaint contains a short and plain statement of the claim showing that the pleader is entitled to relief for to do so in this case would cause considerable delay in a matter which is of utmost importance both to the plaintiffs and to the Government, both of whom desire the Court to meet the constitutional question involved. See Transcript of Argument on Motion to Dismiss, held June 19, 1957, p. 3.

 The Government also urges that the Court dismiss the complaint as to Finch because it is not entitled to a refund having paid the tax only as a warehouseman. However, in the complaint it appears that Finch owned approximately 99% of the distilled spirits, that all of the spirits were stored in its warehouse, and it paid the taxes on them. Therefore, Finch was not only the warehouseman, but also the owner of the distilled spirits. So whether they have paid the taxes as warehouseman, or as owners, they paid taxes on whiskey which they owned and which was in their possession. Whether the warehouseman paid the tax in this case, or the owner paid the tax, the tax was paid by Finch who was one and the same. Accordingly, the complaint cannot be dismissed on this ground.

 The Government then urges that the plaintiffs are estopped from attacking the constitutionality of the statutes because they have obtained and are enjoying privileges with respect to the distilled spirits bonding provisions. *fn1"

 While it is true as an abstract principle of law that one who has obtained certain benefits and privileges under a statute is estopped thereafter from attacking the statute as being unconstitutional, see Callanan Road Co. v. United States, 1953, 345 U.S. 507, 73 S. Ct. 803, 97 L. Ed. 1206; United States v. City and County of San Francisco, 1940, 310 U.S. 16, 60 S. Ct. 749, 84 L. Ed. 1050; St. Louis Malleable Casting Co. v. Prendergast Co., 1923, 260 U.S. 469, 43 S. Ct. 178, 67 L. Ed. 351, we do not feel that that principle of law is applicable in this case. In the cases relied upon by the Government, the one attacking the constitutionality of the statute obtains something under the statute which he otherwise could not have obtained had there not been a statute. For instance, in the Callanan case a certificate of public convenience and necessity was permitted to be transferred. In the San Francisco case, the federal government granted certain privileges to the City of San Francisco, and the city wanted to keep the privileges and have the act declared unconstitutional. Whereas in the St. Louis case the taxpayers took advantage of the sewer system set up but did not want to pay for it. The facts of the cases which have set forth the principle on which the Government rely are clearly distinguishable from the instant case wherein the taxpayer has complied with the law, paid the taxes due in accordance with the law, and is suing for a refund in accordance with the law. While it is true there are advantages to plaintiff under this statute, certainly a mere extension of time for payment of a tax is not a benefit or privilege that forever bars a taxpayer from seeking a refund. To hold otherwise would mean that every taxpayer who asks for an extension under any tax law passed by Congress allowing for such request would do so at the peril of not being able to claim a refund if the act was declared unconstitutional. Under our society as it exists today, extensions are a commonplace if not a necessity. Taxes affect almost every member of the public. To attribute to every taxpayer the ability of a constitutional lawyer would be unrealistic. Therefore, we do not feel that the taxpayers are estopped.

 We are, therefore, compelled to meet the question raised as to whether or not the force-out provision is constitutional. We are not unmindful of the rules which would require us to avoid passing on a constitutional question. A clear statement as to these is annunciated by Mr. Justice Brandeis in his concurring opinion in Ashwander v. Tennessee Valley Authority, 1936, 297 U.S. 288, 56 S. Ct. 466, 80 L. Ed. 688.

 The Government in the argument of this case stated that:

 'the constitutional question of the statute is a question of law and in the plaintiffs' briefs they do not take exception to that. It appears to us, therefore, that this case should be decided on the motion to dismiss.' Transcript of Argument, Morning Session, June 19, 1957, p. 3.

 'that if the Court should in this case hold that it is -- that the force out provision is a constitutional levy and does not violate either the due process clause or the unapportioned tax upon the ownership of property, I imagine that our complaint should be dismissed.' Transcript of Argument, Afternoon Session, June 19, 1957, p. 11.

 Turning then to the first count in the complaint, the plaintiffs urge that the tax levied is an unconstitutional property tax in that the tax was exacted solely because the property was in existence on the tax payment date, that it fell solely because it was in existence, and that the tax exacted at the end of 8 years was a direct tax on property unapportioned and, therefore, expressly forbidden. What is forbidden by the Constitution is that, 'No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration hereinbefore directed to be taken.' U.S.Const. art. I, § 9, cl. 4. Therefore, the Constitution prohibits a direct tax unless it is laid in proportion to the census. However, it is significant to note that the Constitution does not tell us what is a direct tax. Therefore, in order to determine what a direct tax is we must look at what the framers of the Constitution were ...

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