U.S. Supreme Court Wm. J. Moxley Corp. v. Hertz, 216 U.S. 344 (1910)
Wm. J. Moxley Corporation v. Hertz
Argued December 13, 14, 1909
Decided February 21, 1910
216 U.S. 344
CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Where the function of a natural ingredient, such as palm oil, used in manufacturing oleomargarine is so slight that it probably would not be used except for its effect in coloring the product so as to look like butter, the product is artificially colored, and subject to the tax of ten cents a pound under par. 8 of the Act of May 9, 1902, Chap. 784, 32 Stat. 193.
As the record in this case shows that the use of palm oil produced only a slight effect other than coloration on the product, it falls under the rule adopted in Cliff v. United States, 195 U. S. 159 , that the use of a natural ingredient must be for something more substantial than coloration in order to relieve the oleomargarine of the tax of ten cents a pound.
A statute may not be evaded, nor it purpose made to yield to what is nonessential, and thus render it a means to accomplish the deception it was meant to prevent.
The facts are stated in the opinion.
MR. JUSTICE McKENNA delivered the opinion of the Court.
The certificate cannot easily be condensed, therefore we give it in full. It is as follows:
"In this case, which has been argued and submitted to this court, questions of law arise concerning which the court desires the instruction and advice of the Supreme Court of the United States."
"The plaintiff in error brought suit (at law) in the trial court to recover the amount paid to the defendant in error, as collector of internal revenue, under constraint, as a tax of ten cents per pound, assessed by the Commissioner of Internal Revenue, for the manufacture by the plaintiff in error of 284,998 pounds of oleomargarine under due authority to engage in such business. Issues were joined and, upon written stipulation by the parties, were submitted to the court for trial without a jury. After hearing the testimony, the trial court made and filed a special finding of facts upon the several issues so submitted, and thereupon judgment was rendered against the plaintiff in error, whereof reversal is sought on writ of error."
"The tax in controversy of ten cents per pound purports to be assessed under the provisions of section 8 of the act of Congress approved May 9, 1902, published as chap. 784, 32
Stat.193, and the present inquiry involves only the following of such finding of facts, viz.: "
"(1) That in June, 1902 after the above-mentioned enactment, the Commissioner of Internal Revenue officially promulgated and published and issued in regular course by the United States Treasury Department, the regulation as to 'artificial coloration,' in language as follows:"
" Regulation as to Artificial Coloration "
" If, in the production of oleomargarine, the mixtures of compounds set out in the law of 1886 are used, and these compounds are all free from artificial coloration, and no artificial coloration is produced by the addition of coloring matter as an independent and separate ingredient, a tax of one-fourth of 1 cent per pound only will be collected, although the finished product may look like butter of some shade of yellow. For example, if butter that has been artificially colored is used as a component part of the finished product oleomargarine (and that finished product looks like butter of any shade of yellow), as the oleomargarine is not free from artificial coloration, the tax of ten cents per pound will be assessed and collected. But if butter is absolutely free from artificial coloration or cottonseed oil free from artificial coloration, or any other of the mixtures or compounds legally used in the manufacture of the finished product oleomargarine has naturally a shade of yellow in no way produced by artificial coloration, and through the use of one or more of these unartificially colored legal component parts of oleomargarine the finished product should look like butter of any shade of yellow, this product will be subject to a tax of only one-fourth of 1 cent per pound, as it is absolutely free from artificial coloration that has caused it to look like butter of any shade of yellow."
"Which said 'Regulation as to Artificial Coloration' thenceforth continued to be the regulation of the commissioner's office when the oleomargarine hereinafter referred to was made and sold by the plaintiff. "
"(2) The rulings and assessments in question by the Commissioner of Internal Revenue were made in 1903."
"(3) The oleomargarine, on account of which said assessment was levied by said Commissioner of Internal Revenue, and said reduced amount thereof was required by him to be paid by said plaintiff, was composed of oleo oil, lard, milk, cream, salt, and two vegetable oils commonly known as cottonseed oil and palm oil, and of nothing else. The proportion of palm oil present in said oleomargarine was about one half of one percent (1/2%) of the total volume of said oleomargarine. Palm oil is a pure vegetable oil derived from the fruit of palm trees, which grow in certain parts of Africa, and has about the consistence of pure butter. Palm oil consists almost entirely of palmatine and olein, which are the chief constituents of pure butter. Palm oil is perfectly wholesome, is readily digested, and has long been used as an article of food in countries where it is produced. Palm oil was successfully employed in oleomargarine prior to May, 1902, and is a proper constituent of oleomargarine. The oleomargarine involved in this suit looked like butter of a shade of yellow, and such resemblance to butter of a shade of yellow was caused by the presence of the palm oil used in said oleomargarine, and the levy of said assessment by said Commissioner of Internal Revenue was based upon and because of such resemblance to butter of a shade of yellow, resulting from such use of palm oil in said oleomargarine. In addition to coloring the oleomargarine in resemblance to butter, the palm oil probably gives to the oleomargarine slightly better grain of texture, causing it to act more like butter in the frying pan, and it also caused said oleomargarine to have a better physiological effect upon the persons who ate it; but such function of the palm oil, other than as coloring matter, was slight, and but for the coloring imparted to the oleomargarine would not probably have been actually used in its manufacture."
"Upon the foregoing facts, distinguishing the case from that presented in Cliff v. United States, 195 U. S. 159 , as we
understand the facts there reported, the questions of law concerning which this court desires the instruction and advice of the Supreme Court are these:"
"First. With the oleomargarine caused 'to look like butter' by the use of natural palm oil as one of the ingredients -- 'a pure vegetable oil,' named in the statute as an ingredient of oleomargarine -- which not only gives the coloration sought for the finished product, but otherwise (in some degree) improves the texture, quality, and healthfulness of the oleomargarine, can such use be denominated 'artificial coloration,' within the terms and meaning of the statute referred to, fixing the rate of taxation?"
"Second. For the purpose of assessing the statutory tax on the oleomargarine described in the first question, is the rate of taxation dependent, either (1) upon the ratio which the quantity of palm oil used bears to the other ingredients or (2) the extent or ratio of other benefits than that of coloration given by the palm oil?"
"Third. Can the fact that the manufacturer intended and used the palm oil for coloration of the oleomargarine enter into the determination of the amount taxable under the statute?"
It, as it will be observed, is implied in the certificate, and it is also contended at bar, that the facts of this case distinguish it from Cliff v. United States, supra. What the decision was in that case therefore becomes the first subject of inquiry. And an element of that inquiry is the act of Congress under which the tax in controversy was imposed, of which §§ 2 and 8 are only necessary to quote (24 Stat. 209, chap. 840, Aug. 2, 1886):
"SEC. 2. That, for the purposes of this act, certain manufactured substances, certain extracts, and certain mixtures and compounds, including such mixtures and compounds with butter, shall be known and designated as 'oleomargarine,' namely, all 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, anotto, 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."
"SEC. 8. That upon oleomargarine which shall be manufactured and sold, or removed for consumption or use, there shall be assessed and collected a tax of 2 cents per pound, to be paid by the manufacturer thereof, and any fractional part of a pound in a package shall be taxed as a pound: provided, when oleomargarine is free from artificial coloration that causes it to look like butter of any shade of yellow, said tax shall be one-fourth of one cent per pound [italics ours]."
The defendant in that case was charged with having knowingly purchased and received for sale oleomargarine which had not been properly stamped according to law. It was shown that out of 160 ounces of which the compound was composed, only one and one-half ounces were palm oil, and the following ruling of the Commissioner was introduced in evidence:
"This office rules that, where so minute and infinitesimal a quantity of a vegetable oil is used in the manufacture of oleomargarine as is proposed to be used in palm oil, and through its use the finished product looks like butter of any shade of yellow, it cannot be considered that the oil is used with the purpose or intention of being a bona fide constituent part or element of the product, but is used solely for the purpose of producing or imparting a yellow color to the oleomargarine, and therefore that the oleomargarine so colored is not free from artificial coloration, and becomes subject to the tax of ten cents per pound."
The contention was that Congress having, in § 2, defined oleomargarine to consist of certain substances, the color
which resulted from the use of such substances, or any of them, was a natural, not an artificial, coloration. The contention, and the argument of counsel to support it was given at length, so that its full extent and strength should be shown. Among other things, this was said:
"Howsoever minute may be the quantity of palm oil used, it is nonetheless a vegetable oil, a statutory, or, so to speak, a natural, ingredient of oleomargarine, and displaces in the finished product an equal volume of some other statutory ingredient of oleomargarine, as, for instance, cottonseed oil."
And it was argued that the statute conferred
"no power upon the Commissioner to prescribe the formula for the manufacture of oleomargarine, or the proportion of the different ingredients, or to exclude any ingredient except upon the ground of its being deleterious to health."
The argument could not be misunderstood or evaded. It asserted the purity of the oleomargarine under the law, and that its color came from its purity, not from any illegal addition to it. The contention therefore was direct, and unqualified by any consideration of the relative quantity of the ingredients. Its force was recognized, but it was nevertheless rejected, and in reply it was pointed out that the statute was not enacted to permit the manufacture of oleomargarine, but to prevent its sale "as and for butter." And it was decided
"that, when any substance, although named as a possible ingredient of oleomargarine, substantially serves only the function of coloring the mass, and so as to cause the product to 'look like butter of any shade of yellow,' it is an artificial coloration."
It was stated that palm oil is a vegetable oil, and one of the substances authorized to be used by § 2 in the composition of oleomargarine. But this, it was added, did not exempt the product from the higher tax if the palm oil or any other "statutory ingredient," to use the phrase of counsel, was used only for coloring. The statute was carefully analyzed, and the words, "and other coloring matter" in § 2 were declared to have an obvious purpose. "It was to prevent," it was said,
"excluding from the operation of the statute
anything in its nature oleomargarine [that is, to exempt from the higher tax anything in its nature oleomargarine] by the addition of a substance not in reality an ingredient, but serving substantially only the purpose of coloring the product to cause it to look like butter."
And it was further said:
"the fact that one of the ingredients of this compound is palm oil does not show that such oil does anything else than color the product composed of other ingredients, and if it does substantially only this, it is rightfully styled an artificial coloration."
This language brings us to the point of distinction between that case and the case at bar. It is put beyond controversy that oleomargarine may be subject to the higher tax though its color result from a "statutory ingredient." To relieve from such consequence, the ingredient must be there in substantial quantity -- in quantity substantial enough to contribute to the product something more than color. And this, it is insisted, the palm oil does in the case at bar, and the case is therefore, it is further insisted, distinguished from the Cliff case. The contention is that the defendant in the Cliff case
"stood upon the narrow proposition that palm oil being a vegetable oil, and therefore being a statutory ingredient of oleomargarine, it made no difference whether the amount of it used was small or large or whether the sole purpose of its use was to impart the desired color; coloration due to its use was not, within the meaning of the statute, 'artificial coloration.'"
It is further urged that "Cliff made no effort whatever to show what, if any, were the effects of palm oil upon the oleomargarine other than giving color to it," but admitted, for the purpose of the case, "that the sole and only function of the palm oil was to make the oleomargarine look like butter of a shade of yellow.'"
He did not show, as he might have shown, it is further urged,
"what are found as facts in this case -- namely, that palm oil, in its nature, is suitable for food; that, for many years prior to 1902, it had been used for food, and that, when
so used, it was found healthful and digestible, and that palm oil had been successfully used in oleomargarine prior to May 9, 1902, the date of the passage of the amendment which, for the first time, made the tax upon oleomargarine that is free from artificial coloration smaller than the tax upon oleomargarine that is not free from artificial coloration. Prior to May 9, 1902, all oleomargarine was taxed under the original oleomargarine law passed in 1886 at the rate of two cents per pound, regardless of whether it was free or not free from artificial coloration."
Are these contentions sustained by the facts certified? Do they show that the palm oil has substantially any other purpose than to color the product? It is certified that palm oil is a purely vegetable oil, "is perfectly wholesome, is readily digested, and has long been used as an article of food in countries where it is produced." These are useful qualities, undoubtedly, and the extent of their contribution by the presence of one-half of one percent of palm oil is attempted to be estimated. It is the ingredient, the certificate says, that gives to the oleomargarine a "shade of yellow" and makes it resemble butter -- that is, enables it to seem what it is not, and so far at least, to defeat the purpose of the law against coloration. And the certificate further recites that,
"in addition to coloring the oleomargarine in resemblance to butter, the palm oil probably gives to the oleomargarine slightly better grain of texture, causing it to act more like butter in the frying pan, and it also caused said oleomargarine to have a better physiological effect upon the persons who ate it; but such function of the palm oil, other than as coloring matter, was slight, and, but for the coloring imparted to the oleomargarine, would not probably been used in its manufacture."
We do not think these facts take the case out of the ruling in the Cliff case. There is no more substantial contribution of character to the compound in this case than in that. The amount of palm oil used in that case was something greater than in this, and the purpose of its use was the same. It, of
course, added whatever qualities it possessed and could exist in a fraction of one percent of the product of which it made a part. This did not need explicit statement, and it gains nothing now by explicit statement. What effect is claimed for it? It gives, it is said, a slightly better grain of texture, a better physiological effect upon those who eat it. But those effects are "slight," it is certified. What is meant by "slight?" It is the word of a rather indeterminate meaning. It usually implies unimportance or insignificance, and is practically given that meaning in the certificate. The palm oil, it is certified, contributes so little to the value or quality of the oleomargarine that, but for its coloring power, it would not be used. It may be, as counsel says, that the motive of its use cannot make it illegal, and that one cannot become an offender against the law by doing what it permits. But the question here is not what the law permits. That was decided in the Cliff case. The question here is whether we shall exaggerate a slight use of a "statutory ingredient" into a substantial use of it, and by doing so bring its use within the permission of the statute and relieve the product of which it is a "slight" part from a tax of ten cents.
We have so far considered this case on the authority of the Cliff case, deeming it unnecessary to repeat the reasoning of the latter, as though the question was res integra. It may be well, however, to develop the argument of counsel somewhat further. It is presented in a summary way in the following syllogism:
"First premise: color due to the use of an authorized food ingredient, not artificially colored, is not artificial coloration ( McCray case)."
"Second premise: palm oil, being a vegetable oil, suitable for food, and its nature such as to make oleomargarine suitable for food, and being itself not artificially colored, is an authorized food ingredient ( Cliff case)."
"Conclusion: therefore color due to the use of palm oil is not artificial coloration. "
The premises and conclusions are assumed by ignoring, not by following, the cases cited to support them. The error arises by making the term "authorized food ingredient" unqualified, and by disregarding what the Cliff case makes essential. The quality of suitableness for food of an ingredient is made determinative, and wholly determinative, disregarding its quantity, its relation and proportion to other ingredients, and this, counsel indeed contends for, and is the proposition presented in the second question certified. But the contention contravenes the rule in the Cliff case, where the distinction was made between the mere addition of an authorized food ingredient and its service in the compound for something more substantial than coloration. We now repeat it. Any other rule would give too easy a way to evade the statute, and make its purpose yield not to what is essential to the manufacture of oleomargarine, but what is nonessential, and render a law which was intended to prevent deception an easy means to accomplish it.
We are not called upon to consider whether the first premise of counsel's syllogism is sustained by McCray v. United States, supra, but we are concerned to say, to meet a contention of counsel, that it will not be put into antagonism with the Cliff case by the meaning we have given the latter. On the contrary, the cases support each other. In both, this Court declined to follow arguments based upon the mere letter of the statute, in destruction of its manifest intention. The contention in the McCray case was that butter, whether artificially colored or not, was an authorized ingredient of oleomargarine, and, when added to oleomargarine, made it free from artificial coloration. This was pronounced an "obvious non sequitur. " The product, it was said, would be "oleomargarine," but it would not be "oleomargarine free from artificial coloration within the intendment of the proviso" of § 2.
It follows from these views that the first question certified must be answered in the affirmative; the second and third questions do not call for specific answers on this record.