Before MAJOR, Chief Judge, and KERNER and LINDLEY, Circuit Judges.
This suit was instituted by the plaintiff to recover taxes paid the defendant in 1946 under the Federal Insurance Contributions Act, 26 U.S.C.A. § 1400 et seq., and under the Federal Unemployment Tax Act, 26 U.S.C.A. § 1600 et seq., for the years 1941 to 1943, inclusive. The District Court after a trial without a jury made findings of fact, entered its conclusions of law and a judgment denying recovery. From this judgment plaintiff appeals.
The sole question involved is whether plaintiff's employees were engaged in "agricultural labor," which is similarly defined in each of said Acts. If plaintiff's employees were so engaged, then the tax under each Act was illegally assessed and collected and plaintiff is entitled to recover. If they were not so engaged, as the lower court found, the judgment denying recovery is proper and must be affirmed.
Sec. 1426(h), as amended by the Social Security Act enactments of 1939, defines "agricultural labor" under four categories. Par. (h) (4) is the one about which the instant controversy revolves. So far as here material, it provides:
"The term 'agricultural labor' includes all services performed - * * *
"(4) In handling, planting, drying, packing, packaging, processing, freezing, grading, storing, or delivering to storage or to market * * * any agricultural or horticultural commodity; but only if such service is performed as an incident to ordinary farming operations or, in the case of fruits and vegetables, as an incident to the preparation of such fruits or vegetables for market. The provisions of this paragraph shall not be deemed to be applicable with respect to service performed * * * in connection with any agricultural or horticultural commodity after its delivery to a terminal market for distribution for consumption."
Thus, it will be observed that the enumerated services are exempt from taxation if "performed as an incident to ordinary farming operations", unless such services are performed after the "delivery [of an agricultural commodity] to a terminal market for distribution for consumption."
There is no serious dispute as to the evidentiary facts either as found by the District Court or as testified to by the witnesses. Plaintiff is an agricultural cooperative association organized and existing under the laws of the State of Illinois, Ill. Rev. Stats. 1947, Ch. 32, §§ 440-473. It has a membership of approximately 12,000 farmers. The sole purpose of its existence is to produce an adequate annual supply of high quality hybrid corn seed for its members, to be used by them in the production of the next ensuing commercial corn crop. The production of hybrid seed corn requires years of supervised effort, which begins with the initial planting of several strains of corn, technically called "inbreds," whose desirable characteristics are ultimately combined in the hybrid seed, and which ends with the labeling and storing of the packaged hybrid seed at plaintiff's plant. Inbreds and sigle crosses, the foundation stocks of hybrid seed corn, are grown by plaintiff with its own forces and equipment upon widely dispersed and isolated tracts of land, especially selected and rented for that purpose. This developing process requires from seven to ten years. The sole utility of hybrid corn is for seed to be used by the farmer who produces the commercial crop. Plaintiff had nothing to do with the latter. Hybrid seed corn must be purchased each year by the farmer engaged in producing the commercial crop.
To secure an adequate annual supply of hybrid corn seed for its member growers of commercial corn, plaintiff each year enters into contracts with selected farmers to grow corn which subsequently becomes the hybrid seed required for the next commercial crop. As the court found, "To that end, the plaintiff contracted each year with a small number of farmers who agreed to grow corn seed under the conditions and for the compensation provided by written contracts between each of them and plaintiff."
After the corn was grown and harvested, it was received in the form of ear corn at plaintiff's plant at Piper City, Illinois, where it was sorted, shelled, dried, graded, tested, treated with a fungicide, packaged and labeled. Without this service, the corn would have been worthless for the purpose for which it was intended, that is, as hybrid seed to be used in the production of a commercial crop. No question is raised but that the services rendered on the farm in the production of the ear corn were agricultural labor; in fact, the court found that such services were performed as an incident to ordinary farming operations. The services rendered by employees of the plaintiff at its plant, necessary to the completion of the process of producing hybrid corn for its members, are those in dispute and which the court concluded were not agricultural labor within the terms of the statute. This determination was predicated upon the finding that "The plaintiff was the terminal market for the seed corn delivered to its plant" and that "The processing operations in issue were performed after delivery of the seed corn to a terminal market for distribution for consumption." Thus, under these findings, the services in dispute are removed from what otherwise would constitute agricultural labor as defined in Par. (h) (4) above quoted.
The court in its conclusions of law stated in almost identical language as it had in its findings of fact that the plaintiff was a terminal market for the corn delivered to its plant, and that plaintiff's processing operations were performed after such delivery to a terminal market for distribution and consumption.
In Burger et ux. v. Social Security Board, d.c., 66 F. Supp. 619, 622, the court expressed the view that whether the work of the employer constituted "agricultural labor" within the meaning of the Act was one of law, and upon review, the Court of Appeals treated it in the same manner. Miller v. Burger et ux., 9 Cir., 161 F.2d 992, 993. Inasmuch as the evidentiary facts are not in dispute and the question presented requires an interpretation of the statute, we are inclined to the same view. But we do not regard it as of great importance whether the question be considered one of law or of fact. In either event, we find ourselves confronted with a difficult and troublesome problem.
In support of the court's finding upon which its conclusion was predicated, the defendant argues, "As used in the foregoing statutes, a terminal market is the grower's market, the place where or point of time at which the grower of the crop parts with economic interest in and control over its future form or destiny." The rule of Burger, supra, appears to support this rule of statutory interpretation. The question ...