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Opinion of the Court

92 C. Cls.

conveyed. The court recognized that the intention of the parties must govern and proceeded quite at length to discuss the evidence as to what that intention was. It concluded that it was not the intention of the parties to reserve to the Creek Nation title to the river beds of the streams, or to any of its lands, but that it was intended to convey title to the adjoining landowners to the thread of the stream. If this was the intention of the parties, plaintiff's present case, of course, fails.

We are entirely satisfied with the discussion of this question by the Eighth Circuit Court of Appeals in the case of United States v. Hayes, supra. We agree with that court that there was no evidence before it of any intention on the part of the Nation to reserve to itself title to any of its lands, but that, on the contrary, it was the evident intention of all parties that all of its lands should be disposed of and that the Nation should go out of existence and its citizens should become citizens of the United States.

But the plaintiff says the additional proof introduced for the first time in this case shows that this was not the intention of the parties. This proof is that riparian rights were not discussed when the allotments were made. That the title of a riparian owner is presumed to extend to the thread of a nonnavigable stream, we have no doubt, was not mentioned, because the river beds, in the light of what was then known, were valueless, except to the adjoining landowner, and no thought would have been given to it; or, if thought of, it would never have been assumed that the Nation meant to reserve it. Had this matter been mentioned, we cannot conceive that it would have made the slightest difference to the Nation or its members whether the title stopped at low watermark or went to the thread of the stream.

The fact that it was not discussed is the strongest indication that there was no intention on the part of the grantor to reserve title to it. Would it not be supposed that when the allottee received his patent to the land he took it for granted that he received with it the right to use the adjoining river,. that he should have the right of ingress and egress thereby, that he might water his stock therein, and otherwise use and

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enjoy it? Did the Creek Nation intend to deprive him thereof, as it would have been able to do had it retained title to the river? We can think of no reason why it should have.

The other fact, that it was the intention that an allottee should receive only 160 acres of a value of $6.50 per acre, and that if the river beds were included he would receive more than his share in value, does not evidence an intention to exclude the river beds, because it was not then known the river beds were of any value. Their inclusion would not have given to the allottee a greater value than 160 acres at $6.50 per acre. There is nothing in the agreements to indicate an allottee should receive 160 acres and no more. If his 160 acres did not have a value of 160 times $6.50, he was to be given additional acreage or money to make up the deficiency.

We find nothing in the evidence to indicate that the Nation intended to reserve title to the river beds. We do not mean to indicate that if there had been such an intention the plaintiff would be entitled to recover. We hold merely that in the absence of such an intention, it is clearly not entitled to judgment. Plaintiff's petition must therefore be dismissed. It is so ordered.

LITTLETON, Judge; GREEN, Judge; and WHALEY, Chief Justice, concur.

C. M. McCLUNG & COMPANY v. THE UNITED

STATES

[No. 44738. Decided November 12, 1940. Plaintiff's motion for new trial overruled February 3, 1941]

On the Proofs

Processing tax under Agricultural Adjustment Act.-Where plaintiff, a Tennessee corporation engaged in the wholesale hardware business, has failed to establish to the satisfaction of the Court, by proper evidence, that it did not pass on the burden of the amount of the processing tax levied under the Agricultural Adjustment Act, it is held there can be no recovery under section 902 of the Revenue Act of 1936.

291825-41-CC-vol. 92--20

92 C. Cls.

Reporter's Statement of the Case

The Reporter's statement of the case:

Mr. George E. H. Goodner, for the plaintiff. Mr. Scott P. Crampton was on the briefs.

Mr. Hubert L. Will, with whom was Mr. Assistant Attorney General Samuel O. Clark, Jr., for the defendant. Messrs. Robert N. Anderson, Fred K. Dyar, and Guy Patten were on the brief.

The court made special findings of fact as follows:

1. Plaintiff, a Tennessee corporation, with its principal place of business at Knoxville, Tennessee, is engaged in the wholesale hardware business. On August 30, 1933, it filed with the proper Collector of Internal Revenue a tentative floor stocks tax return, and on October 27, 1933, it filed its completed return, with an inventory of articles on hand for sale or other disposition on August 1, 1933, which had been processed wholly or in chief value from cotton. It paid the tax shown thereon to be due in the amount of $808.88 in three installments.

2. In due course, on November 10, 1936, plaintiff filed a claim for refund of these taxes, alleging that they had been illegally collected because the Act under which they had been collected was unconstitutional. On June 30, 1937, in compliance with the Revenue Act of 1936, it filed a further claim for refund, in which it asserted that it had borne the burden of the tax and had not passed it on directly or indirectly, by increasing the price on articles sold so as to include the floor stocks tax, or otherwise.

This claim was rejected by the Commissioner of Internal Revenue because the evidence submitted was insufficient to show that the plaintiff had not passed on the burden of the amount of the tax.

3. Prior to this suit, plaintiff had destroyed its sales records for 1933. However, the proof showed that the selling price of all its merchandise was fixed by adding 17 percent to the cost thereof to it, with occasional adjustments to meet competition. This applied to its stock on hand on August 1, 1933, as well as merchandise thereafter purchased. The price charged for the merchandise on hand on August 1, 1933, was not increased specifically to include the floor stocks tax,

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nor was it increased at all until additional merchandise had been purchased to replace merchandise sold from this stock on hand on August 1, 1933. However, the cost to plaintiff of the merchandise purchased after August 1, 1933 included the processing tax, and in fixing its selling price for this merchandise the plaintiff added to this cost its customary 17 percent to cover expenses and profit. Thereafter all articles left over from the August 1, 1933 inventory were sold at this new price.

What part of the August 1, 1933 inventory had been sold prior to the making of new purchases which included the processing tax, and what part plaintiff sold after new purchases were made, plaintiff was unable to show.

4. Plaintiff in no case billed its customers with the floor stocks tax as a separate item, nor did it add to its selling price a specific amount to cover either the processing or the floor stocks tax. It did not have any side agreements with any of its customers to be relieved of the burden of the tax. It shifted the burden of the tax, if at all, only by charging its customers a price which included an amount equal to the floor stocks tax, which amount had been paid by it on merchandise purchased after August 1, 1933.

5. Plaintiff is the sole owner of the claim sued upon and has never assigned, sold, or transferred any part thereof or any interest therein to any other person or persons.

The court decided that the plaintiff was not entitled to

recover.

WHITAKER, Judge, delivered the opinion of the court:

This is a suit to recover floor stocks tax. The principal issue raised is whether or not the plaintiff has shown that it bore the burden of the amount of the tax. This is the only question we think it necessary to consider.

Section 902 of the Revenue Act of 1936 (49 Stat. 1648) provides in part as follows:

of any

No refund shall be made or allowed amount paid by or collected from any claimant as tax under the Agricultural Adjustment Act, unless the claimant establishes * * to the satisfaction of the trial court

*

Opinion of the Court

92 C. Cls.

(a) That he bore the burden of such amount and has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly, (1) through inclusion of such amount by the claimant in

the price of any article with respect to which a tax was
imposed under the provisions of such Act,
(3) in any manner whatsoever;

* *

or

We think it clear from a reading of this section that plaintiff must show as a prerequisite to recovery that it bore the burden of the amount of the tax and has not shifted that burden directly or indirectly. Plaintiff must not only show that it did not pass the tax on as a tax, but it must go further and show that it did not recoup the amount of the tax by adding it to the price of the goods sold or in any other way.

The cases of Ismert-Hincke Milling Co. v. United States, 90 C. Cls. 27; Lash's Products Co. v. United States, 278 U. S. 175; Continental Baking Co. v. Suckow Milling Co., 101 F. (2d) 337; Casey Jones, Inc., v. Texas Textile Mills, 87 F. (2d) 454 Johnson v. Scott Milling Co., 21 F. Supp. 847; Oswald Jaeger Baking Co. v. Commissioner, 108 F. (2d) 375; and the other cases cited in plaintiff's supplemental brief on this question are not in point. In none of those cases was there involved the question here presented. In the Ismert-Hincke Milling Co. case, supra, there was no question as to whether or not the burden of the tax had been passed on; it was conceded that it had been. So in the cases of Continental Baking Co. v. Suckow Milling Co., supra, and Casey Jones, Inc., v. Texas Textile Mills, supra. In the case of Lash's Products Company, supra, the purchase price of the goods included the tax, but the court held that the seller had not "passed the tax on," that what the purchaser had paid was nothing more than the price of the goods to him, and that he had not paid the tax, although the tax was included in the purchase price. The question here, however, is not who paid the floor stocks tax, but whether or not the plaintiff passed on the amount of the tax. If the plaintiff included the amount of the tax in the selling price of its articles, it passed on the amount of it, whether or not it passed on the tax itself. While the seller would still be the taxpayer, and while only it and it alone had paid the tax, nevertheless it would have passed on the amount of the tax if it included it in the selling

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