U.S. Supreme Court MULFORD v. SMITH, 307 U.S. 38 (1939)

[Page 307 U.S. 38, 43]

reserve supply level. As it was not passed until after November 15, 1937, the Act provided, with respect to the marketing year beginning July 1, 1938, for which the quotas involved in this case were in effect, that the determination and proclamation of the national marketing quota should be made within fifteen days after the statute's approval. [Footnote 4]

Within thirty days after proclamation, the Secretary is to conduct a referendum of the producers of the crop of the preceding year to ascertain whether they favor or oppose the imposition of a quota. If more than one- third oppose, the Secretary is to proclaim the result before January 1st and the quota is not to be effective. [Footnote 5]

[Page 307 U.S. 38, 44]

these farms is to be made on the basis of past marketing, after due allowance for drought, flood, hail, and other abnormal weather conditions, plant bed and other diseases, land, labor, and equipment available for the production of tobacco, crop-rotation practices, and soil and other physical factors affecting production. A limit is fixed below which the adjustment may not reduce the production of a given farm. Allotment to new tobacco farms is to be made on a slightly different basis. [Footnote 6]

Apportionment of the quota amongst individual farms is to be by local committees of farmers according to standards prescribed in the Act, amplified by regulations and instructions issued by the Secretary. Each farmer is to be notified of his marketing quota and the quotas of individual farms are to be kept available for public inspection in the county or district where the farm is located. If the farmer is dissatisfied with his allotment he may have his quota reviewed by a local review committee, and, if dissatisfied with the determination of that committee, he may obtain judicial review.

Section 314 provides that if tobacco in excess of the quota for the farm on which the tobacco is produced is marketed through a warehouseman, the latter must pay to the Secretary a penalty equal to fifty per cent. of the market price of the excess, and may deduct an amount equivalent to the penalty from the price paid the producer. [Footnote 7]

[Page 307 U.S. 38, 45]

Section 376 gives the United States a civil action for the recovery of unpaid penalties. [Footnote 8]

A few days before the 1938 auction sales were to take place, the appellants, who produce flue-cured tobacco in southern Georgia and northern Florida, filed a bill in equity in a Georgia state court against local warehousemen to restrain them from deducting penalties under the Act from the sales price of tobacco to be sold at their auction warehouses on behalf of appellants. The bill alleged that the Act is unconstitutional; that it illegally commands the defendants to deduct penalties, pay them over to the Secretary, who must cover them into the treasury of the United States; that, if the defendants should make the required payments, the amounts paid by them would aggregate so large a sum that they would be unable to satisfy judgments in actions brought to recover the illegal payments. The court granted a preliminary injunction and ordered the defendant warehousemen to pay the amounts of the penalties into the registry of the court. The cause was removed to the United States District Court for the Middle District of Georgia. The District Court continued the injunction, modified the order to require the payments to be made into its registry, the auction sales were held, and payments into the court were made. The United States was permitted to intervene as a defendant. [Footnote 9] The warehousemen and the United States filed answers. The cause was set down before a court

[Page 307 U.S. 38, 46]

consisting of three judges,10 which heard it on a stipulation of facts and entered a decree dismissing the bill. [Footnote 11]

[Page 307 U.S. 38, 47]

actual marketing season opened, the maintenance of actions based upon collection of the penalties would have been a practical impossibility. We are of opinion, therefore, that a case is stated for the interposition of a court of equity.

The appellants plant themselves upon three propositions: (1) that the Act is a statutory plan to control agricultural production and, therefore, beyond the powers delegated to Congress; (2) that the standard for calculating farm quotas is uncertain, vague, and indefinite, resulting in an unconstitutional delegation of legislative power to the Secretary; (3) that, as applied to appellants' 1938 crop, the Act takes their property without due process of law.

First. The statute does not purport to control production. It sets no limit upon the acreage which may be planted or produced and imposes no penalty for the planting and producing of tobacco in excess of the marketing quota. It purports to be solely a regulation of interstate commerce, which it reaches and affects at the throat where tobacco enters the stream of commerce,-the marketing warehouse. [Footnote 15] The record discloses that at least two-thirds of all flue-cured tobacco sold at auction warehouses is sold for immediate shipment to an interstate or foreign destination. In Georgia nearly one hundred per cent. of the tobacco so sold is purchased by extrastate purchasers. In markets where tobacco is sold to both interstate and intrastate purchasers it is not known, when the grower places his tobacco on the warehouse floor for sale, whether it is destined for interstate or intrastate commerce. Regulation to be effective, must, and therefore may constitutionally, apply to all sales. [Footnote 16] This

[Page 307 U.S. 38, 48]

court has recently declared that sales of tobacco by growers through warehousemen to purchasers for removal outside the state constitute interstate commerce. [Footnote 17] Any rule, such as that embodied in the Act, which is intended to foster, protect and conserve that commerce, or to prevent the flow of commerce from working harm to the people of the nation, is within the competence of Congress. Within these limits the exercise of the power, the grant being unlimited in its terms, may lawfully extend to the absolute prohibition of such commerce,18 and a fortiori to limitation of the amount of a given commodity which may be transported in such commerce. The motive of Congress in exerting the power is irrelevant to the validity of the legislation. [Footnote 19]

[Page 307 U.S. 38, 49]

ments so as to allow for specified factors which have abnormally affected the production of the state or the farm in question in the test years. Certainly fairness requires that some such adjustment shall be made. The Congress has indicated in detail the considerations which are to be held in view in making these adjustments, and, in order to protect against arbitrary action, has afforded both administrative and judicial review to correct errors. This is not to confer unrestrained arbitrary power on an executive officer. In this aspect the Act is valid within the decisions of this court respecting delegation to administrative officers. [Footnote 20]

[Page 307 U.S. 38, 57]

If the penalty is imposed for marketing in interstate commerce, it is a regulation not authorized by the commerce clause.

To impose penalties for marketing in excess of quotas not disclosed before planting and cultivation is to deprive plaintiffs of their liberty and property without due process of law.

The judgment of the district court should be reversed.

Mr. Justice McREYNOLDS concurs in this opinion. Footnotes

Footnote 1 52 Stat. 31, as amended March 26, 1938, 52 Stat. 120, April 7, 1938, 52 Stat. 202, May 31, 1938, 52 Stat. 586, and June 20, 1938, 52 Stat. 775, U.S.C. Supp. IV, Title 7, 1281, et seq., 7 U.S.C.A. 1281 et seq.

Footnote 2 Title III, Subtitle B, Marketing Quotas, Part I, marketing quotas- tobacco, 311-314, inclusive, 7 U.S.C.A. 1311-1314. See also 301, 7 U.S.C.A. 1301, Definitions. 361-375, inclusive, 7 U.S.C.A. 1361- 1375, administrative provisions; 388 and 389, 7 U.S.C.A. 1388, 1389, relating to personnel.

Footnote 3 The total supply, the carry-over for a marketing year, the reserve supply level, the normal supply, a normal year's domestic consumption, and a normal year's exports, are defined in Section 301.

Footnote 4 Section 312(d).

Footnote 5 Section 312(c). With respect to 1938 quotas, the proclamation of the result of the referendum was to be made within forty-five days after approval of the Act. Section 312(d).

Footnote 6 Sections 313(b and c).

Footnote 7 If the tobacco is marketed directly to a person outside the United States, the producer is required to pay the penalty. If the tobacco is sold by the grower directly to a purchaser without intervention by the warehouseman or other agent, the buyer is required to pay the penalty, but may deduct an equivalent amount from the purchase price. Sections 314, 372, 373. The penalty is to be three cents per pound if that rate is higher than 50% of the market price. Section 314.

Footnote 8 The Secretary may make regulations necessary for identifying tobacco subject to quotas, Section 375; and requiring the keeping of records and the making of reports. The Act imposes upon handlers other than producers a fine of $500 upon conviction of failure to make any report or keep any record, or for making any false report or record. Section 373 (a) and (b).

Footnote 9 Act of August 24, 1937, c. 754, 1, 50 Stat. 751, U.S.C. Supp. III, Tit. 28, 401, 28 U.S.C.A. 401.

Footnote 10 Ibid, U.S.C. Supp. III, Tit. 28, 380a, 28 U.S.C.A. 380a.

Footnote 11 D.C., 24 F.Supp. 919.

Footnote 12 U.S.C. Tit. 28, 41(1), 28 U.S.C.A. 41(1).

Footnote 13 U.S.C. Tit. 28, 41(8), 28 U.S.C.A. 41(8).

Footnote 14 U.S.C. Tit. 26, 1543, 26 U.S.C.A. 1543.

Footnote 15 Currin v. Wallace, 306 U.S. 1, 59 S.Ct. 379, 83 L.Ed. --; compare Townsend v. Yeomans, 301 U.S. 441, 57 S.Ct. 842.

Footnote 16 The Minnesota Rate Cases, 230›u.S. 352, 33 S.Ct. 729, 48 L.R.A.,N.S., 1151, Ann.Cas.1916A, 18; The Shreveport Case, 234 U.S. 342, 34 S.Ct. 833; Currin v. Wallace, supra.

Footnote 17 Currin v. Wallace, supra; and see Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 290, 42 S.Ct. 106, 108; Shafer v. Farmers' Grain Co., 268 U.S. 189, 198, 45 S.Ct. 481, 484. Compare Lemke v. Farmers' Grain Co., , 42 S.Ct. 244.

Footnote 18 Champion v. Ames, 188 U.S. 321, 23 S.Ct. 321; Hipolite Egg Co. v. United States, 220 U.S. 45, 31 S.Ct. 364; Hoke v. United States, 227 U.S. 308, 33 S.Ct. 281, 43 L.R.A., N.S., 906, Ann.Cas.1913E, 905; Brooks v. United States, 267 U.S. 432, 45 S. Ct. 345, 37 A.L.R. 1407; Gooch v. United States, 297 U.S. 124, 56 S.Ct. 395.

Footnote 19 Story, Commentaries on the Constitution (4th Ed.), Secs. 965, 1079, 1081, 1089.

Footnote 20 United States v. Grimaud, 220›u.S. 506, 31 S.Ct. 480; Avent v. United States, 266 U.S. 127, 45 S.Ct. 34; Hampton, Jr., & Co. v. United States, 276 U.S. 394, 48 S.Ct. 348; New York Central Securities Corp. v. United States, 287 U.S. 12, 53 S.Ct. 45; Currin v. Wallace, supra.

[Footnote *] Lottery Case, Champion v. Ames, 188 U.S. 321, 355 et seq., 23 S.Ct. 321, 326; United States v. Delaware & Hudson Co., 213 U.S. 366, 415, 29 S.Ct. 527, 538; Hipolite Egg Co. v. United States, 220›u.S. 45, 57, 58, 31 S.Ct. 364, 367; Hoke v. United States, , 321-323, 33 S.Ct. 281, 283, 43 L.R.A., N.S., 906, Ann.Cas.1913E, 905; Seven Cases v. United States, 239 U.S. 510, 514, 36 S.Ct. 190, 191, L.R.A.1916D, 164; Caminetti v. United States, 242 U.S. 470, 491, 492 S., 37 S.Ct. 192, 196, L.R.A.1917F, 502, Ann.Cas.1917B, 1168; Hammer v. Dagenhart, , 270 et seq., 38 S.Ct. 529, 530, 3 A.L.R. 649, Ann.Cas.1918E, 724; Brooks v. United States, 267 U.S. 432, 436-438, 45 S.Ct. 345, 346, 37 A.L.R. 1407. See Wilson v. New, 243 U.S. 332, 346, 37 S.Ct. 298, 301, L.R.A.1917E, 938, Ann.Cas.1918A, 1024. Cf. Clark Distilling Co. v. Western Md. Ry. Co., 242 U.S. 311, 325, 37 S.Ct. 180, 185, L.R.A.1917B, 1218, Ann.Cas.1917B, 845; United States v. Hill, , 39 S.Ct. 143; Kentucky Whip & Collar Co. v. I.C.R. Co., 299 U.S. 334, 346 et seq., 57 S.Ct. 277, 379.