Penalties incurred under the Agricultural Adjustment Act of
1938, as amended, for marketing cotton in excess of farm marketing
quotas fixed pursuant thereto, do not bear interest for the period
between the date the penalties became due and the date judgment is
entered therefor. Pp.
332 U. S.
373-376.
158 F.2d 835 reversed.
The District Court rendered judgment for penalties incurred
under the Agricultural Adjustment Act of 1938, as amended, plus
interest from the dates the penalties became due to the date of
judgment. The Circuit Court of Appeals affirmed. 158 F.2d 835. This
Court granted certiorari. 331 U.S. 799.
Reversed, p.
332 U. S.
376.
Page 332 U. S. 372
MR. JUSTICE BLACK delivered the opinion of the Court.
In the years 1940, 1941, and 1942, the petitioner produced on
his farms and sold more cotton than the quota allotted him under
authority of Part IV of the Agricultural Adjustment Act of 1938 as
amended. 52 Stat. 31, 55-60, 55 Stat. 203, 7 U.S.C. § 1281
et
seq. The United States filed this suit against petitioner to
recover money "penalties" to which § 348 [
Footnote 1] of the Act makes noncooperating farms
"subject" who market cotton from their farms in excess of their
quota. The District Court rendered judgment for $7,039.52 in
penalties plus interest at 6% from the various dates the penalties
became due to the date of judgment. The Sixth Circuit Court of
Appeals affirmed. 158 F.2d 835. The Fifth Circuit had previously
decided that no interest is allowable on such penalties prior to
judgment.
United States v. West Texas
Page 332 U. S. 373
Cottonoil Co., 155 F.2d 463. We therefore granted
certiorari limited to this single question. 331 U.S. 799.
Since penalties under the Agricultural Adjustment Act are
imposed under an Act of Congress, they bear interest only if and to
the extent such interest is required by federal law.
Brooklyn
Savings Bank v. O'Neil, 324 U. S. 697,
324 U. S.
714-716;
Royal Indemnity Co. v. United States,
313 U. S. 289,
313 U. S.
295-297. There is no language in the Agricultural
Adjustment Act or in any other act of Congress which specifically
allows or forbids interest on penalties such as these prior to
judgment. [
Footnote 2] But the
failure to mention interest in statutes which create obligations
has not been interpreted by this Court as manifesting an
unequivocal congressional purpose that the obligation shall not
bear interest.
Billings v. United States, 232 U.
S. 261,
232 U. S.
284-288. For, in the absence of an unequivocal
prohibition of interest on such obligations, this Court has
fashioned rules which granted or denied interest on particular
statutory obligations by an appraisal of the congressional purpose
in imposing them and in the light of general principles deemed
relevant by the Court.
See, e.g., Royal Indemnity Co. v. United
States, supra; Board of Comm'rs v. United States, 308 U.
S. 343.
As our prior cases show, a persuasive consideration in
determining whether such obligations shall bear interest is the
relative equities between the beneficiaries of the obligation and
those upon whom it has been imposed. And this Court has generally
weighed these relative equities in accordance with the historic
judicial principle that one for whose financial advantage an
obligation was assumed or imposed, and who has suffered actual
money damages by another's breach of that obligation, should be
fairly compensated for the loss thereby sustained.
See,
Page 332 U. S. 374
e.g., Brooklyn Savings Bank v. O'Neil, supra; United States
v. North Carolina, 136 U. S. 211,
136 U. S. 216;
Funkhouser v. J. B. Preston Co., 290 U.
S. 163,
290 U. S.
168.
The contention is hardly supportable that the Federal Government
suffers money damages or loss, in the common law sense, to be
compensated for by interest, when one convicted of a crime fails
promptly to pay a money fine assessed against him. The underlying
theory of that penalty is that it is a punishment or deterrent, and
not a revenue-raising device; unlike a tax, it does not rest on the
basic necessity of the Government to collect a carefully estimated
sum of money by a particular date in order to meet its anticipated
expenditures. For the foregoing reasons, this Court's holding that
a criminal penalty does not bear interest,
Pierce v. United
States, 255 U. S. 398,
255 U. S.
405-406, is consistent with its holding that the
Government does suffer recoverable damages if a taxpayer fails to
pay taxes when due, and is therefore equitably entitled to
interest.
Billings v. United States, supra. Furthermore,
denial of interest on criminal penalties might well be rested on
judicial unwillingness to expand punishment fixed for a criminal
act beyond that which the plain language of the statute
authorizes.
Viewed in light of these principles, we think that the question
of interest on the penalties provided in the Agricultural
Adjustment Act on noncooperators should be governed by the rule
previously applied by this Court to criminal fines. Although
Congress neither wholly prohibited nor made it a crime for a farmer
to market cotton in excess of his quota, still it imposed sanctions
upon noncooperators analogous to those of the criminal law. The
purpose of Congress in requiring payment of penalties into the
Federal Treasury for marketing above the allotted amount was not to
raise revenue for the Government's financial advantage, but to
deter farmers from planting and marketing more than their quotas.
In fact, the whole
Page 332 U. S. 375
philosophy of the Agricultural Adjustment Act is based on the
theory that the public will be benefited, not damaged, if farmers
produce and market within these quotas, thereby avoiding the
payment of penalties. The framework of the Act itself, both as
originally passed and as amended, and the reports of the
congressional committees that drafted it, show a prime purpose to
limit national and individual farm production and marketing to the
quotas allotted, and show that the penalties were solely intended
to deter farmers from exceeding those quotas. [
Footnote 3] After careful consideration, the
original 1938 Act was amended in 1941 for the express purpose of
making the farmers' penalties higher, because the prior penalties
had not, in practice, proved a severe enough sanction to reduce
production the desired amount. The House committee said in its
report on the 1941 amendment:
"As in the case of corn and wheat, it appears that the present
rate of penalty [for cotton] is too low to result in the desired
adjustment of the amount to be marketed during the marketing year.
[
Footnote 4]"
And, with reference to wheat and corn, the committee had
reported:
"With the higher penalties, it is expected that growers
generally will store the farm marketing excesses, rather than pay
the penalty and place the commodity on the market at the time when
it is not needed. [
Footnote
5]"
In addition to these high penalties, the Act, as originally
passed and as amended, wholly deprived noncooperators like
petitioner of substantial benefits authorized by the
Page 332 U. S. 376
Soil Conservation Act and of a large part of the loan value
provided by the Government for cotton farmers who did not exceed
their quota. [
Footnote 6] We
are unable to say that it would be consistent with the
congressional purpose for the courts to add interest to these very
substantial penalties already imposed upon noncooperating farmers.
[
Footnote 7]
Reversed.
[
Footnote 1]
Section 348 of the 1938 Act reads as follows:
"Any farmer who, while farm marketing quotas are in effect,
markets cotton in excess of the farm marketing quota for the
marketing year for the farm on which such cotton was produced shall
be subject to the following penalties with respect to the excess so
marketed: 2 cents per pound if marketed during the first marketing
year when farm marketing quotas are in effect, and 3 cents per
pound if marketed during any subsequent year, except that the
penalty shall be 2 cents per pound if cotton of the crop subject to
penalty in the first year is marketed subject to penalty in any
subsequent year."
52 Stat. 59, 7 U.S.C. § 1348.
The 1941 amendment required computation of the penalty on the
following basis:
"Notwithstanding the provisions of the Agricultural Adjustment
Act of 1938, as amended (hereinafter referred to as the Act)
--"
"
* * * *"
"(9) The marketing penalty for cotton and rice produced in the
calendar year in which any marketing year begins (if beginning with
or after the 1941-1942 marketing year) shall be at a rate equal to
50 percentum of the basic rate of the loan for cooperators for such
marketing year under section 302 of the Act and this
resolution."
55 Stat. 203, 205, 7 U.S.C. Supp. V, § 1330(9).
[
Footnote 2]
28 U.S.C. § 811, does allow interest on district court judgments
in all civil cases where interest would be allowed by the law of
the state in which the court is held.
[
Footnote 3]
Sen.Rep. No. 1295, 75th Cong., 2d Sess. 6 (1937); H.R. Rep. No.
1645, 75th Cong., 2d Sess. 1, 36 (1937); H.R. Rep. No. 1767, 75th
Cong., 3d Sess. 90 (1938); H.R. Rep. No. 364, 77th Cong., 1st Sess.
3 (1941).
[
Footnote 4]
H.R.Rep. No. 364, 77th Cong., 1st Sess. 3 (1941).
[
Footnote 5]
Id. at 2.
[
Footnote 6]
§§ 302(c), 349 of the Agricultural Adjustment Act of 1938, 52
Stat. 43, 59, 7 U.S.C. § 1302(c), 1349, 1349.
[
Footnote 7]
See, as to penalties in general,
Helwig v. United
States, 188 U. S. 605;
United States v. Chouteau, 102 U.
S. 603;
Sunshine Anthracite Coal Co. v. Adkins,
310 U. S. 381,
310 U. S. 401;
Helvering v. Mitchell, 303 U. S. 391;
United States v. Childs, 266 U. S. 304;
Rodgers v. United States, 138 F.2d 992. For decisions of
state courts which grant interest on statutory obligations but
disallow interest on statutory penalties,
see cases
collected in Note 27 Ann.Cas.1913B, 853, 855, 856; Note 28
L.R.A.(N.S.) 1, 74, 75 (1910); 1 Sutherland, Damages, § 330
(1916).
MR. JUSTICE BURTON, dissenting.
The sums due to the Government are fixed obligations with fixed
times of payment. They are debts incidental to the lawful conduct
of business, and not penalties imposed for violations of law.
Accordingly, the debtor should pay, and the Government should
collect, interest on them, as on other debts to the Government, to
compensate for delays in their payment. The Agricultural Adjustment
Act expressly fixed the amount and time for payment of the sums in
question, although it did not expressly mention the accrual or
denial of interest on delayed payments. However, the federal rule
is well established that, without express statutory reference to
the subject of interest, interest is due to the Government on
unpaid statutory debts after they have become due in fixed amounts
as fixed times, such as those for customs duties and taxes.
Page 332 U. S. 377
"Thus, as to the necessity for a statute, it was long ago here
decided, in view of the true conception of interest, that a statute
was not necessary to compel its payment where, in accordance with
the principles of equity and justice in the enforcement of an
obligation, interest should be allowed."
Billings v. United States, 232 U.
S. 261,
232 U. S. 286.
[
Footnote 2/1]
This statement was made by Chief Justice White, speaking for the
Court, in a case upholding the collection of interest on a tax
payable to the United States under a statute that contained no
reference to the accrual of interest.
The requirement that interest be paid to the Government upon the
debts due to it under the Agricultural Adjustment Act not only is
"in accordance with the principles of equity and justice" called
for by the general rule just stated, but the accrual of interest in
favor of the Government under that Act also is thoroughly
consistent with, and helpful to, the accomplishment of its purpose
of price and crop control. The disallowance of such interest is
equally inconsistent with, and a limitation upon, the
accomplishment of that purpose.
Page 332 U. S. 378
The defaulted payments on which interest is claimed here became
due because of the petitioner's sales of cotton in excess of his
statutory quota, and such payments are referred to in the Act as
"penalties." However, the context shows that, instead of being
criminal penalties imposed for violations of the law, they are
"marketing penalties" consisting of governmental charges added to
the pre-sale expenses of the seller, especially to help keep prices
and sales in line with the economic program of the Government.
Satisfaction of these charges is made a condition of the seller's
legal right to sell his excess cotton at a particular time. They
are the very opposite of penalties imposed for making illegal
sales. They are lawful "ordinary and necessary" business expenses
incidental to his sales. They are deductible from his taxable
income, whereas criminal penalties are not deductible from taxable
income. [
Footnote 2/2] These
"marketing penalties" are also unlike
Page 332 U. S. 379
criminal penalties in that they may be paid in advance,
deposited in escrow, or security given for their payment. When that
is done, the seller may, in his usual manner, dispose of the excess
quota cotton to which the payments relate. Cotton marketing quota
regulations, 1942-43, § 722.440(c), 7 Fed.Reg. 4369;
id.,
§ 722.453, 7 Fed.Reg. 4374. These debts are more comparable to
customs duties than to criminal penalties. [
Footnote 2/3] Apparently, these charges are collectible
by the Government only by civil proceedings, and liability for them
need not be established beyond a reasonable doubt.
Usher v.
United States, 146 F.2d 369, 371.
The payments are imposed in part for revenue purposes, although
especially as a means of inducing cotton owners to control their
sales of cotton in interstate and foreign commerce in accordance
with the economic policies of the Government. During its
consideration of the Agricultural Adjustment Act, Congress declined
to adopt a proposal to treat such sales as in violation of law,
[
Footnote 2/4] and
Page 332 U. S. 380
adopted instead the policy recognizing such sales as lawful
sales conditioned upon payment to the Government of the charges
here being considered. Financial burdens which may be postponed
without the payment of interest are much less burdensome than those
that are not postponable, or that are subject to the accrual of
interest during their postponement. The omission of the usual
interest charge on postponed marketing penalties therefore
decreases the force of the Act as a deterring factor, and runs
counter to the special purpose of the Act.
For these reasons, the judgment of the Circuit Court of Appeals,
affirming that of the District Court allowing interest from the
date of default, should have been affirmed.
MR. JUSTICE RUTLEDGE joins in this dissent.
[
Footnote 2/1]
"The conflict between the systems is pronounced and fundamental.
In the one, the state rule, except as to contract; no interest
without statute in the United States rule; interest in all cases
were equitably due unless forbidden by statute. In one, no suit for
taxes as a debt without express statutory authority; in the other,
the right to sue for taxes as for a debt in every case where not
prohibited by statute."
"From this review, it results that the doctrine as to
nonliability to pay interest for taxes which have become due which
prevails in the state courts is absolutely in conflict with the
doctrine applied to the same subject in this court, and cannot now
be made the rule without repudiating settled principles which have
been here applied for many years in various aspects, and without in
effect disregarding the sanction either expressly or impliedly
given by Congress to such rules. . . . Under this condition, we can
see no ground for departing from the rule which the cases enforced.
. . ."
Billings v. United States, supra, 232 U.S. at
232 U. S.
287-288.
[
Footnote 2/2]
"Although the amounts paid by the producer are designated as
penalties in the statute and regulations referred to above, it
appears that the purpose of the statute is to place a charge
against the producer on the sale of the commodity which was
produced in excess of the quota. The statute does not prohibit
producers from producing the commodity, but merely places a charge
on the excess of the quota produced and marketed. The so-called
penalties are not paid for the violation of, or noncompliance with,
a statute or regulation or for any illegal act, but are paid for
the purpose of legalizing the marketing of the excess production,
which with this condition the statute sanctions, and are therefore
made in compliance with the statute. It is accordingly the view of
this office that the so-called penalties are deductible from gross
income under section 23(a) of the Internal Revenue Code in
computing net income as ordinary and necessary expenses incurred in
carrying on a trade or business."
I.T. 3530, 1942-1 Cum.Bull. 43, 45-46.
Payments in the nature of penalties for the violation of federal
or state statutes in the ordinary use of that term are not
deductible.
Commissioner v. Longhorn Portland Cement Co.,
148 F.2d 276;
Burroughs Bldg. Material Co. v.
Commissioner, 47 F.2d 178;
Great Northern R. Co. v.
Commissioner, 40 F.2d 372.
[
Footnote 2/3]
Customs duties are personal debts to the United States.
Meredith v. United
States, 13 Pet. 486,
38 U. S. 493.
Interest is collectible on the debt to the Government arising out
of the imposition of customs duties.
United States v. Mexican
International R. Co., 154 F. 519. It is common knowledge that,
while some customs duties or tariffs may have been levied "for
revenue only," many have been enacted as "protective tariffs" in
which a primary interest of the Government was as under the
Agricultural Adjustment Act, to restrict the flooding of the market
with certain goods at a certain time. The collection of interest on
delayed payments of customs duties would bear a similar relation of
helpfulness to the Government's economic and financial policies as
would the collection of interest on defaulted market penalties. The
Government, under the Agricultural Adjustment Act, not only seeks
to restrict excess quota sales, but it also seeks to add to its
current cash resources from which it proposes to make the loans to
cooperating producers which are authorized by the Act.
[
Footnote 2/4]
§ 33, H.R. 8505, 75th Cong., 2d Sess. (1937), as passed by the
Senate but later rejected.