LOCATION: Superior Court of Bibb County
DOCKET NO.: 436
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Seventh Circuit
CITATION: 363 US 709 (1960)
ARGUED: May 16, 1960
DECIDED: Jun 20, 1960
Facts of the case
Media for Cory Corporation v. Sauber
Audio Transcription for Oral Argument - May 16, 1960 in Cory Corporation v. Sauber
Number 436, Cory Corporation et al. Petitioners, versus Ernest J. Sauber.
Edwin A. Rothschild:
Mr. Chief Justice, may it please the Court.
This is an excise tax case which involves more than a question of revenue.
It involves questions, which, I think, touch on the integrity of the process of judicial review.In fact, one of the principal questions raised is what questions are before this Court.
The taxpayers, whom I represent, recovered a refund judgment in the District Court for the Northern District of Illinois on excise tax assessed and paid on to our conditioning units.
This was a test case.
The Government appealed and obtained the reversal of the District Court on issues of law and fact which were not presented to the trial court.
And we applied for certiorari and raised the questions that appear in our petition for certiorari.
There were five of them.
And the Government responded to that petition saying that the Court of Appeals was right.
Between the time of the filing of the Government's brief in opposition to certiorari and the filing of its brief on the merits, 12 days ago, the Government changed its position again and admitted error in the basic rationale of the Court of Appeals but, nevertheless, seeks to salvage the reversal of the District Court.
On no grounds, they were not presented either to the District Court or to the Court of Appeals.
And I think that the record shows an -- a trial de novo in the Court of Appeals in an attempt to obtain a new trial de novo in this Court after the certiorari papers were filed.
The facts are simple.
Taxpayers file suit in the District Court, as I stated, for the refund of excise tax paid on the sales of two air conditioners sold in 1954 and 1955.
And by stipulation with the Government, these refund suits were test suits to determine the applicability of the excise tax to more than 50,000 similar units on which excise taxes had been assessed but not paid.
The statutes Section 3405 (c) of the 1939 Code and Section 4111 of the 1954 Code impose a -- this impose excise taxes on various types of household type equipment impose a 10% tax on the sale of self-contained air conditioning units.
And until 12 days ago, when the Government's brief on the merits was filed, both parties agreed that this tax applied only to units of a household type.
Now, since 1948 and until really, until a few months ago and a new regulation was issued in response to the decision of the Court of Appeals, the Internal Revenue Service has consistently administered the tax under published revenue rulings which provide that the -- and I'm quoting from the ruling now, "type of self-contained air conditioning units subject to tax" is the unit of certain specified physical characteristics, window type and such, that has a total motor horsepower of less than 1 horsepower, and the parties have stipulated that consistently since 1948, this tax has had been administered so that the Commissioner has not know -- as it consistently exempted air conditioners with a motor horsepower of 1 horsepower or more.
Now, at the trial and incidentally, the only issue raised by the pleadings was the question of horsepower, that is whether the units of the taxpayer were 1 horsepower or less than 1 horsepower.
And there are only two standards for determining what horsepower is.
One is the actual horsepower that you can measure under standard operating conditions when the machine is in operation, and the other is the rated horsepower of the electric motor which drives the compressor which runs the air conditioning unit.
The rated horsepower means the rating standards published by the National Electrical Manufacturers Association have published standards for the guidance of their members in rating and putting horsepower ratings on the electric motors which drive the compressors and the air conditioners.
Charles E. Whittaker:
By that, do you mean a label or some kind on the motor?
Edwin A. Rothschild:
Well, the -- the label is what I would call nominal horsepower reading.
In other words, each motor manufacturer who makes an electric motor assigns to it a nominal horsepower rating.
Now, he can, if he -- and he is more or less expected to follow the industrial standards, the NEMA rating standards but he doesn't have to.
And in this case, he didn't.
In other words, perhaps, I can explain it just by referring to the facts of this case.